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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2004 Commission File Number 333-116292 CINEMARK, INC. (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    01-0687923(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)3900 Dallas ParkwaySuite 500Plano, Texas
    
    75093(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (972) 665-1000 Registrants corporate website: www.cinemark.com Securities registered pursuant to Section 12(b) of the Act: None
(Title of Class) Securities registered pursuant to Section 12(g) of the Act: None
(Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ
    
    No o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes o
    
    No þ
 As of February 28, 2005, 27,674,916 shares of Class A common stock were outstanding.




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Table of Contents PART I
    
    
    3Item 1. Business
    
    
    3Item 2. Properties
    
    
    14Item 3. Legal Proceedings
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15PART II
    
    
    15Item 5.
Market for Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
    
    
    15Item 6. Selected Financial Data
    
    
    15Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 8. Financial Statements and Supplementary Data
    
    
    32Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    32Item 9A. Controls and Procedures
    
    
    32PART III
    
    
    33Item 10. Directors and Executive Officers of the Registrant
    
    
    33Item 11. Executive Compensation
    
    
    36Item 12.
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholders Matters
    
    
    42Item 13. Certain Relationships and Related Transactions
    
    
    44Item 14. Principal Accounting Fees and Services
    
    
    47PART IV
    
    
    48Item 15. Exhibits and Financial Statement Schedules
    
    
    48Calculation of Earnings to Fixed ChargesSubsidiariesCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
 2




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Cautionary Statement Regarding Forward-Looking Statements This annual report on Form 10-K includes forward-looking statements based on our current
expectations, assumptions, estimates and projections about our and our subsidiaries business and
industry. We intend that this annual report be governed by the safe harbor provision of the
Private Securities Litigation Reform Act of 1995 (the PSLR Act) with respect to statements that
may be deemed to be forward-looking statements under the PSLR Act. They include statements
relating to:  
    future revenues, expenses and profitability;
    the future development and expected growth of our business;
    projected capital expenditures;
    attendance at movies generally, or in any of the markets in which we operate;
    the number or diversity of popular movies released;
    our ability to successfully license and exhibit popular films;
    competition from other exhibitors; and
    determinations in lawsuits in which we are a defendant. You can identify forward-looking statements by the use of words such as may, should,
will, could, estimates, predicts, potential, continue, anticipates, believes,
plans, expects, future and intends and similar expressions which are intended to identify
forward-looking statements. These statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors, some of which are beyond our control and
difficult to predict and could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. In evaluating these forward-looking statements, you
should carefully consider the risks and uncertainties described in this report. These
forward-looking statements reflect our view only as of the date of this report. Actual results
could differ materially from those indicated by such forward-looking statements due to a number of
factors. All forward-looking statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by this cautionary statement. We undertake no current
obligation to publicly update such forward-looking statements to reflect subsequent events or
circumstances. 
 PART I 
 Item 1. Business The Company Cinemark,
Inc., a Delaware corporation, incorporated on May 16, 2002, is the
parent company of CNMK Holding, Inc., which is the
parent company of Cinemark USA, Inc. We are a holding company with no
business operations or assets other than the capital stock of CNMK
Holding, Inc., which is itself a holding company with no operations
or assets of its own other than the capital stock of Cinemark USA,
Inc. We and our subsidiaries are leaders in the motion picture exhibition industry in terms
of both revenues and the number of screens in operation. As of December 31, 2004, we operated an aggregate of
3,172 screens in 292 theatres located in 32 states, Canada, Mexico, Argentina, Brazil, Chile,
Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. We have 2,832
screens in 254 first run theatres and 340 screens in 38 discount theatres. Our overall ratio of
screens to theatres is 10.9 to 1. Any references to North America or domestic operations contained
in this report refer to the U.S. and Canada. On March 12, 2004, we entered into an agreement and plan of merger with a newly formed
subsidiary of Madison Dearborn Partners, LLC (Madison). The transaction was completed on April
2, 2004, at which time the newly formed subsidiary of Madison was merged with and into us, with our
Company continuing as the surviving corporation. Simultaneously, an affiliate of Madison purchased
shares of common stock and became our controlling stockholder owning approximately 83% of our
capital stock. Lee Roy Mitchell, our Chief Executive Officer, and the Mitchell Special Trust
collectively retained approximately 16% ownership of our capital stock with certain members of
management owning the remaining 1%. Since April 2, 2004, Madison sold approximately 10% of its
stock in our Company to outside investors. As of the date of this report, Madison owned
approximately 75% of our capital stock, outside investors owned approximately 8%, Lee Roy Mitchell
and the Mitchell Special Trust owned approximately 16% and certain members of management owned the
remaining 1%. 3




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Our principal executive offices are at 3900 Dallas Parkway, Suite 500, Plano, Texas 75093.
Our telephone number is (972) 665-1000. We maintain a corporate
website at www.cinemark.com. Our
annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and
any amendments, are available on our website free of charge under the heading Company/Employment 
Investor Relations as soon as practicable after such reports are filed or furnished electronically
to the Securities and Exchange Commission. Copies can also be obtained by mail from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may also obtain information on the operation of the Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330. Description of Business We are one of the leaders in the motion picture exhibition industry, in terms of both revenues
and the number of screens in operation. We believe we operate one of the most modern theatre
circuits in the industry, with 2,088 screens (or 66% of our 3,172 screens) having been built by us
since 1996. We had total revenues of $1,024.2 million, operating income of $121.7 million and net
income of $26.6 million for the year ended December 31, 2004. Our scale and geographic diversity
within North America and Latin America has allowed us to maintain consistent revenue growth. We
have increased total revenues by a compound annual growth rate of 6.8% since the beginning of 2000.
Our North American theatres, located in 32 states and one Canadian province, are primarily located
in mid-sized domestic markets, including suburbs of major metropolitan areas. We believe these
markets are generally less competitive and generate high, stable margins. Our theatres outside of
North America are primarily located in major Latin American metropolitan markets, which we believe
are generally underscreened and have significant growth potential. Domestic Developments During 2004, we opened 11 new theatres with 132 screens and added four screens to existing
theatres. As of December 31, 2004, we operated 2,303 screens in 191 theatres in North America. We
operated 1,963 screens in 153 first run theatres (12.8 screens per theatre) and 340 screens in 38
discount theatres (8.9 screens per theatre). Our overall ratio of screens to theatres in North
America is 12.1 to 1. All but one theatre, with 12 screens located in Vancouver, Canada, are
located in the U.S. Approximately 71% of our first run screens in North America feature stadium
seating. International Developments During 2004, we opened six new theatres with 43 screens. As of December 31, 2004, we operated
869 screens in 101 first run theatres in Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras,
El Salvador, Nicaragua, Costa Rica, Panama and Colombia. All of our international theatres are
first run theatres. Our ratio of screens to theatres in these international markets is 8.6 to 1.
All of our international theatres have been built by us since 1993, which we believe makes our
international operations among the most modern in the international market. Approximately 78% of
our international screens feature stadium seating. Competitive Strategy We believe our operating philosophy provides us with a competitive advantage. We will
continue to focus on the following key components of our business plan. Focus on Less Competitive Domestic Markets and Target Profitable, High Growth International
Markets.We will continue to seek growth opportunities in underserved, mid-sized domestic markets
and major international metropolitan areas, by building or acquiring modern theatres that meet our
strategic, financial and demographic criteria. Maximize Profitability Through Continued Focus on Operational Excellence.We will continue to
focus on achieving operational excellence while controlling theatre operating costs. We believe
that our operating efficiency is evidenced by our high operating margins. 4




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Pursue Additional Revenue Opportunities.We will continue to pursue additional growth
opportunities by developing and expanding other revenue streams such as advertising. We offer
advertisers national, regional and local coverage in a variety of formats to reach our patrons,
which numbered approximately 179.3 million during the year ended December 31, 2004. We continue to
explore additional revenue sources such as digital video monitor advertising, third party branding,
and the use of theatres for non-film events. We have used theatres during non-peak hours for
simulcast concerts, pay-per-view sporting events, corporate meetings and cultural events. Competitive Strengths We believe the following strengths allow us to compete effectively: Strong Balance Sheet with Significant Cash Flow.Our business strategy and disciplined
building program allowed us to generate $121.7 million of operating income for the year ended
December 31, 2004. Focused Philosophy Resulting in Strong Financial Performance.We focus on negotiating
favorable theatre property economics, providing a superior viewing experience and controlling both
corporate and theatre operating costs. As a result of this philosophy, we generated $26.6 million
of net income for the year ended December 31, 2004. Strong Management Team.Led by Mr. Mitchell, our management team has an average of
approximately 21 years of theatre operating experience and a proven track record of superior
performance. The team has successfully navigated us through many industry cycles. Mr. Mitchell
and the other members of our management team retained their positions after the Recapitalization. Selective Building in Less Competitive Domestic Markets and Heavily Populated International
Markets. Less Competitive Domestic Markets: We have historically built modern theatres in mid-sized
U.S. markets, including suburbs of major metropolitan areas, which we believe were underserved. We
believe our targeting of these markets, together with the high quality of our theatre circuit, has
protected us from the negative financial impact of overbuilding and reduces the risk of competition
from new entrants. As the sole exhibitor in approximately 85% of the first run film zones in which
we operate, we have maximum access to film product. This enables us to select the films that we
believe will deliver the highest returns in those markets. Heavily Populated, High Growth International Markets: We have directed our activities in
international markets primarily toward Latin America due to the growth potential in these markets.
We have successfully established a significant presence in most of the major cities in Latin
America with theatres in twelve of the fifteen largest metropolitan areas. We generally fund our
operating and capital expenditures in local currencies, thereby matching our expenses with
revenues. We have also geographically diversified our international portfolio in an effort to
balance risk and become one of the predominant Pan American motion picture exhibition companies. Modern Theatre Circuit.We have built our modern theatre circuit primarily through targeted
worldwide new theatre development, which we believe provides a preferred destination for moviegoers
in our markets. Since 1996, we have built 2,088 screens, or 66% of our total screen count. Our
ratio of screens to theatres is one of the highest in the industry: 12.1 to 1 in North America and
8.6 to 1 internationally. Approximately 71% of our North America first run screens and 78% of our
international screens feature stadium seating. 5




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Motion Picture Industry Overview Domestic Markets The U.S. motion picture exhibition industry has enjoyed revenue growth at a compound annual
growth rate of 6.3% from 1995 to 2004, according to the Motion Picture Association of America. In
2002, single year U.S. motion picture box office revenues exceeded the $9.0 billion mark for the
first time in history, reaching a total of $9.52 billion. U.S. box office revenues for 2004 reached
an all time high at $9.54 billion. The strong U.S. box office performance over the past decade has
been primarily driven by an increase in attendance and steady increases in average ticket prices.
Other factors contributing to the continued success of the industry include a strong movie slate,
the improvement of theatre circuits resulting from the creation of modern multiplex formats, the
screen rationalization during 2001 and 2002, and the improved timing of film releases. During
2004, one film grossed over $400 million, two films grossed over $350 million, two films grossed
over $200 million and 16 films grossed over $100 million in the U.S. The following table represents the results of a survey by Motion Picture Association of
America Worldwide Market Research outlining the historical trends in U.S. theatre attendance,
average ticket prices and box office sales for the last ten years. Year
    

U.S.

Attendance
    

%
Change 
Since 1995
    

Average

Ticket Price
    

%
Change 
Since 1995
    

U.S.
Box Office
 Sales
    

%
Change 
Since 1995(in millions)
    
    
    
    
    
    
    
    
    
    
    
    
    
    ($ in millions)1995
    
    
    1,263
    
    
    
    
    
    
    $
    4.35
    
    
    
    
    
    
    $
    5,493
    
    
    1996
    
    
    1,339
    
    
    
    6.0
    %
    
    $
    4.42
    
    
    
    1.6
    %
    
    $
    5,912
    
    
    
    7.6
    %1997
    
    
    1,388
    
    
    
    9.9
    %
    
    $
    4.59
    
    
    
    5.5
    %
    
    $
    6,366
    
    
    
    15.9
    %1998
    
    
    1,481
    
    
    
    17.3
    %
    
    $
    4.69
    
    
    
    7.8
    %
    
    $
    6,949
    
    
    
    26.5
    %1999
    
    
    1,465
    
    
    
    16.0
    %
    
    $
    5.08
    
    
    
    16.8
    %
    
    $
    7,448
    
    
    
    35.6
    %2000
    
    
    1,421
    
    
    
    12.5
    %
    
    $
    5.39
    
    
    
    23.9
    %
    
    $
    7,661
    
    
    
    39.5
    %2001
    
    
    1,487
    
    
    
    17.7
    %
    
    $
    5.66
    
    
    
    30.1
    %
    
    $
    8,413
    
    
    
    53.2
    %2002
    
    
    1,639
    
    
    
    29.8
    %
    
    $
    5.81
    
    
    
    33.6
    %
    
    $
    9,520
    
    
    
    73.3
    %2003
    
    
    1,574
    
    
    
    24.6
    %
    
    $
    6.03
    
    
    
    38.6
    %
    
    $
    9,489
    
    
    
    72.7
    %2004
    
    
    1,536
    
    
    
    21.6
    %
    
    $
    6.21
    
    
    
    42.8
    %
    
    $
    9,539
    
    
    
    73.7
    %
 International Markets The international motion picture exhibition industry has also grown significantly over the
past several years. According to the Motion Picture Association of America, global box office
revenues increased 48% from $17.0 billion in 2001 to $25.2 billion in 2004. This growth is the
result of the strong box office showings from both local and U.S. film product, ticket price
increases and new theatre construction. Growth in Latin America is expected to be fueled by a combination of continued development of
modern theatres, attractive demographics (i.e., a significant teenage population), strong product
from Hollywood and the emergence of a local film industry. In many Latin American countries the
local film industry had been dormant because of the lack of sufficient theatres to screen the film
product. The development of new modern multiplex theatres has awakened the local film industry and,
in Mexico and Brazil, local film product often plays a significant role in driving attendance
growth. We believe many international markets for theatrical exhibition have historically been
underserved due to antiquated or run-down theatres, among other things, and that international
markets, especially those in Latin America, will continue to experience growth as additional modern
stadium-styled theatres are introduced. 6




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Prior History During 1999 and 2000, the U.S. exhibition industry felt the impact of rapid overbuilding by
the largest industry players, high levels of overall capital expenditures and high leverage. As a
result of the financial burden imposed on theatre operators by these three factors, the industry
entered a period of significant industry rationalization. Many industry players had already begun
the rationalization process in 2000 by closing hundreds of smaller, less profitable theatres. The
pace of theatre closings increased during 2001 as a number of companies took advantage of the
protections provided by the bankruptcy process to reject long-term leases on many underperforming
theatres. According to the Motion Picture Association of America, the total number of screens in
the U.S. reached an all-time high of 37,396 in 2000, and then declined in both 2001 and 2002. There
were 35,786 screens at the end of 2003 and 36,594 screens at the end of 2004. Market Trends We believe the following market trends will drive the continued growth and strength of our
industry: Increased Investment in Film Production and Marketing.Theatrical exhibition is the primary
distribution channel for new motion picture releases. The success of a theatrical release, which
brands a film, is one of the primary factors in determining its success in downstream
distribution channels, such as home video, DVD, and network, syndicated and pay-per-view
television. The growing importance of downstream distribution channels has enabled studios to
increase production and marketing expenditures. Production and marketing costs per new film in the
U.S. have increased by compound annual growth rates of 6.4% and 7.9%, respectively from 1994 to
2004, according to the Motion Picture Association of America. This has led to an increase in
blockbuster features, which attract larger audiences to theatres. Increased Importance of International Markets for Ensuring Box Office Success.International
markets are becoming an increasingly important component of the overall box office revenues
generated by Hollywood films. For example, box office revenues in markets outside of North America
exceeded domestic box office revenues for five of the top ten domestic movies during 2004. With the
continued growth of the international motion picture exhibition industry, the relative contribution
of markets outside North America should become even more significant. Favorable Attendance Trends.Increased movie going frequency and attendance from key
demographic groups have benefited the industry. According to the Motion Picture Association of
America, annual admissions per capita in the U.S. increased from 4.5x to 5.2x, between 1991 and
2004. Additionally, the U.S. teenage segment, defined as 12-17 year olds, represented 19% of
admissions in 2004, up from 14% in 1997. Reduced Seasonality of Revenues.Historically, industry revenues have been highly seasonal,
coinciding with the timing of film releases by the major distributors. The most marketable motion
pictures were generally released during the summer, extending from Memorial Day to Labor Day, and
during the holiday season, extending from Thanksgiving through year-end. However, the seasonality
of motion picture exhibition has become less pronounced in recent years. Studios have begun to
release films more evenly throughout the year, and hit films have emerged during traditionally
weaker periods. This benefits exhibitors by allowing them to more effectively cover their fixed
cost base throughout the year. Convenient and Affordable Form of Out-of-Home Entertainment.Movie-going continues to be one
of the most convenient and affordable forms of out-of-home entertainment, with an average ticket
price in the U.S. of $6.21 in 2004. Average prices for other forms of out-of-home entertainment in
the U.S., including sporting events, theme parks, musical concerts and plays, range from
approximately $20.00 to $66.00 per ticket in 2004. Movie ticket prices have risen at approximately
the rate of inflation, while ticket prices for other forms of out-of-home entertainment have
increased at higher rates. Increasing Other Revenue.Advertising revenues represent a small, but growing portion of
revenues for motion picture exhibitors. The proliferation in broadcast and cable channels, as well
as new recording devices that allow audiences to skip television commercials, has eroded broadcast
medias advertising effectiveness. As a result, 7




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captive and attentive theatre audiences are becoming more attractive to advertisers. The
Cinema Advertising Council, a trade group formed in 2003, reported that spending on theatre
advertising came to $356 million in 2003, up 37% from 2002. Theatre Operations As of December 31, 2004, we operated 3,172 screens in 292 theatres located in 32 states, one
Canadian province and 12 Latin American countries. We operated 2,832 screens in 254 first run
theatres and 340 screens in 38 discount theatres. Our North American theatres, located in 32 states
and one Canadian province, are primarily located in mid-sized U.S. markets, including suburbs of
major metropolitan areas. We believe these markets are generally less competitive and generate
high, stable margins. Our theatres outside of North America are primarily located in major Latin
American metropolitan markets, which we believe have significant growth potential. The following
tables summarize the geographic locations of our theatre circuit as of December 31, 2004. North American Theatres State
    

Total

Theatres
    
    

Total

ScreensTexas
    
    
    61
    
    
    
    798Ohio
    
    
    20
    
    
    
    213California
    
    
    18
    
    
    
    172Utah
    
    
    10
    
    
    
    123Kentucky
    
    
    7
    
    
    
    75Illinois
    
    
    6
    
    
    
    72Oklahoma
    
    
    6
    
    
    
    67Colorado
    
    
    5
    
    
    
    79Louisiana
    
    
    5
    
    
    
    68Indiana
    
    
    5
    
    
    
    46Pennsylvania
    
    
    4
    
    
    
    55Virginia
    
    
    4
    
    
    
    52Oregon
    
    
    4
    
    
    
    50North Carolina
    
    
    4
    
    
    
    41Mississippi
    
    
    3
    
    
    
    41Arkansas
    
    
    3
    
    
    
    30Iowa
    
    
    3
    
    
    
    19Florida
    
    
    2
    
    
    
    40Michigan
    
    
    2
    
    
    
    36Georgia
    
    
    2
    
    
    
    27New York
    
    
    2
    
    
    
    27South Carolina
    
    
    2
    
    
    
    22New Mexico
    
    
    2
    
    
    
    16Arizona
    
    
    2
    
    
    
    14Kansas
    
    
    1
    
    
    
    20New Jersey
    
    
    1
    
    
    
    16Missouri
    
    
    1
    
    
    
    14Tennessee
    
    
    1
    
    
    
    14Wisconsin
    
    
    1
    
    
    
    14Massachusetts
    
    
    1
    
    
    
    12Delaware
    
    
    1
    
    
    
    10Minnesota
    
    
    1
    
    
    
    8Total United States
    
    
    190
    
    
    
    2,291Canada
    
    
    1
    
    
    
    12Total North America
    
    
    191
    
    
    
    2,303
 8




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International Theatres Country
    

Total

Theatres
    
    

Total
 ScreensBrazil
    
    
    34
    
    
    
    295Mexico
    
    
    27
    
    
    
    264Chile
    
    
    12
    
    
    
    91Central America(1)
    
    
    9
    
    
    
    59Argentina
    
    
    8
    
    
    
    73Colombia
    
    
    5
    
    
    
    34Peru
    
    
    3
    
    
    
    30Ecuador
    
    
    3
    
    
    
    23Total
    
    
    101
    
    
    
    869
   (1)
    
    Includes Honduras, El Salvador, Nicaragua, Costa Rica and Panama. We have been successfully introducing American-style modern multiplex theatres to underserved
international markets since 1993. Our activities in international markets have been primarily
directed toward Latin America, where we have successfully established a significant presence in
most of the major cities in Latin America. We presently have theatres
in twelve of the fifteen largest
metropolitan areas in Latin America. We have become one of the predominant Pan American exhibition
companies while balancing our risk through a diversified international portfolio. In addition, we
have achieved significant scale in Mexico and Brazil, the two largest Latin American economies. We believe that Latin America is one of the fastest growing international markets in terms of
box office revenues. Penetration of movie screens per capita in Latin American markets is
substantially lower than in the U.S. and European markets. Our geographic diversity throughout
Latin America has allowed us to maintain consistent revenue and operating margin growth
notwithstanding currency fluctuations that may affect any particular market. We will continue to consider selective opportunities for development of modern multiplex
theatres in underserved international markets, emphasizing Latin America, funded primarily with
cash flow generated in those markets. We are able to mitigate exposure to currency fluctuations by
using local currencies to fund substantially all aspects of our operations, including facility
lease expense. Corporate Operations We maintain a corporate office in Plano, Texas that provides oversight for our domestic and
international theatres. Domestic operations includes theatre operations support, film licensing and
settlements, human resources, legal, finance and accounting, operational audit, theatre maintenance
and construction, internet and information systems, real estate and marketing. Our North American
operations are divided into eleven regions, each of which is headed by a region leader. International operations function relatively autonomously. International personnel in the
corporate office include the International President and directors/vice presidents in charge of
film licensing, marketing, concessions, theatre operations support, theatre maintenance and
construction, real estate, legal, operational audit, information systems and accounting. We have
eight regional offices in Latin America responsible for the local management of operations in 12
individual countries. Each regional office is headed by a general manager and includes personnel
in film licensing, marketing, operations and accounting. We employ three super-regional chief
financial officers in Brazil, Chile and Mexico. The regional offices are staffed with nationals
from the region to overcome cultural and operational barriers. Training is conducted at the
corporate office to establish consistent standards throughout our international operations. 9




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Film Licensing In North America, we license films from film distributors that are owned by major film
production companies or from independent film distributors that distribute films for smaller
production companies. For new release films, film distributors typically establish geographic zones
and offer each available film to one theatre in each zone. The size of a film zone is generally
determined by the population density, demographics and box office potential of a particular market
or region. A film zone can range from a radius of three to five miles in major metropolitan and
suburban areas to up to fifteen miles in small towns. We currently operate theatres in 148 first
run film zones in North America. New film releases are licensed at the discretion of the film
distributors. As the sole exhibitor in approximately 85% of the first run film zones in which we
operate, we have maximum access to film product, which allows us to select those pictures that we
believe will be the most successful in our markets from those offered to us by distributors. We
usually license films on an allocation basis in film zones where we face competition. Films are
released to discount theatres once the attendance levels substantially drop off at the first run
theatres. For discount films, film distributors generally establish availability on a
market-by-market basis after the completion of exhibition at first run theatres and permit each
theatre within a market to exhibit such films without regard to film zones. Unlike our North American operations, distributors in our international markets do not
allocate film to a single theatre in a geographic film zone. Rather, competitive theatres can play
the same films at the same time as other theatres. Our theatre personnel focus on providing
excellent customer service, and we provide a modern facility with the most up-to-date sound
systems, comfortable stadium style seating and other amenities typical of modern American-style
multiplexes which we believe gives us a competitive advantage in markets where there are competing
theatres. Of the 101 theatres we operate in international markets, approximately 85% of those
theatres have no direct competition. In North America, our film rental licenses typically state that rental fees are based on
either mutually agreed upon firm terms established prior to the opening of the picture or on a
mutually agreed upon settlement at the conclusion of the picture run. Under a firm terms formula,
we pay the distributor a specified percentage of box office receipts, which reflects either a
mutually agreed upon aggregate rate for the life of the film or rates that decline over the term of
the run. Firm term film rental fees that decline over the term of the run generally start at 60% or
70% of box office receipts, gradually declining to as low as 30% over a period of four to seven
weeks. The settlement process allows for negotiation of film rental fees upon the conclusion of the
film run based upon how the film performs. In international markets, film rental percentages are
generally lower than in North American markets and gradually decline over a period of several
weeks. We also operate discount theatres in North America, with admissions ranging from $0.50 to $2
per ticket, to serve an alternative market of patrons that extends the life of a film past the
first run screening. By serving this alternative market of patrons in our discount theatres, we
have been able to increase the number of potential customers beyond traditional first run
moviegoers. Our discount theatres offer many of the same amenities as our first run theatres,
including wall-to-wall screens, comfortable seating with cup holder armrests, digital sound and
multiple concession stands. Discount film rental percentages typically begin at 35% of box office
receipts and often decline to 30% after the first week. Film rental costs are accrued based on the applicable box office receipts and either the
mutually agreed upon firm terms established prior to the opening of the picture or estimates of the
final mutually agreed upon settlement, which occurs at the conclusion of the picture run, subject
to the film licensing arrangement. Estimates are based on the expected success of a film over the
length of its run in the theatres. The success of a film can typically be determined a few weeks
after a film is released when initial box office performance of the film is known. Accordingly,
final settlements typically approximate estimates since box office receipts are known at the time
the estimate is made and the expected success of a film over the length of its run in theatres can
typically be estimated early in the films run. The final film settlement amount is negotiated at
the conclusion of the films run based upon how a film actually performs. If actual settlements are
higher than those estimated, additional film rental costs are recorded at that time. Film distribution is highly concentrated in North America, with the major film distributors
accounting for approximately 95% of industry box office revenue during 2004. Our revenue
attributable to any one of these 10




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distributors varies from year to year depending on the number and commercial success of the
films released during any given year. During 2004, no single distributor accounted for more than
14% of U.S. box office receipts. Concessions Concession sales are our second largest revenue source, representing approximately 31% of
total revenues for 2004. Concession sales have a much higher margin than admissions sales. We have
devoted considerable management effort to increase concession sales and improve operating margins.
These efforts include implementation of the following strategies:  
    Optimization of product mix.Concession products are primarily comprised of
various sizes of popcorn, soft drinks and candy. Different varieties and flavors of candy
and soft drinks are offered at theatres based on preferences in that particular geographic
region. Specially priced combo-meals have been implemented for all patrons as well as
movie meals targeted toward children and senior citizens. We periodically introduce new
concession products designed to generate additional concession sales.
    Staff training.Employees are continually trained in suggestive-selling and
upselling techniques. This training occurs through situational role-playing conducted at
our Customer Satisfaction University as well as continued on-the-job training. Individual
theatre managers receive additional compensation based on concession sales at their
theatres and are therefore motivated to maximize concession sales.
    Theatre design.Our theatres are designed to optimize efficiencies at the
concession stands, which include multiple service stations to facilitate serving more
customers quicker. We strategically place large concession stands within theatres to
heighten visibility, reduce the length of concession lines, and improve traffic flow around
the concession stands.
    Cost control.We negotiate prices for concession supplies directly with
concession vendors and manufacturers to obtain bulk rates. Concession supplies are
distributed through a national distribution network. The concession distributor supplies
and distributes inventory to the theatres, which place volume orders directly with the
vendors to replenish stock. The concession distributor is paid a percentage fee for this
service. We believe that utilizing a concession distributor is more cost effective than
operating a concession warehousing network. Marketing In order to attract customers, we rely on newspaper display advertisements, substantially paid
for by film distributors, newspaper directory film schedules, generally paid for by the exhibitor,
and internet advertising which has emerged as a strong media source to inform patrons of film
titles and showtimes. Radio and television advertising spots, generally paid for by film
distributors, are used to promote certain motion pictures and special events. We also exhibit
previews of coming attractions and films presently playing on the other screens which we operate in
the same theatre or market. We have successfully used the internet to provide patrons access to
movie times, the ability to buy and print their tickets at home and purchase gift cards and other
advanced sale-type certificates. The internet is becoming the primary way to check movie showtimes,
replacing the traditional newspaper advertisements. In addition, many newspapers also add an
internet component to their advertising and add movie showtimes to their internet offerings. Over
time, the internet may allow us to reduce our advertising costs associated with newspaper directory
advertisements. Our marketing department also focuses on maximizing revenue generating opportunities, which
include the following:  
    Advertising.We believe the advertising industry recognizes the value of
in-theatre advertising as an important medium due to the demographics of theatre patrons.
The Arbitron Cinema Advertising Study, which was released in 2003, measured consumer
awareness of on-screen advertising in the U.S., and indicated that 86% of all theatre
audiences (representing 40% of the U.S. population) remembered on-screen ads a month after
seeing them. In order to effectively realize and manage this opportunity, we entered into
advertising contracts for rolling stock and screen slide advertising. We deliver
advertising through lights-up on-screen slide advertising in the auditoriums, audio
advertisements paired with music 11




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played throughout the theatre and rolling stock advertisements. We also advertise on digital
lobby monitors located in concessions stands and game rooms. We are also exploring
additional revenue sources such as digital video monitor advertising, third party branding,
and the use of theatres for non-film events. We have used theatres during non-peak hours
for simulcast concerts, pay-per-view sporting events, corporate meetings and cultural
events. We are able to offer advertisers national, regional or local coverage in a variety
of formats to reach our patrons, which numbered approximately 179.3 million during the year
ended December 31, 2004. We currently carry advertising for several large advertisers. We
also generate other revenue from imaging in the lobby, including mini-billboards and
displays, and distributing coupons and samples to patrons passing through the theatre
complex.
    Sales.We have a sales department that oversees the development and
implementation of a comprehensive theatre rental and group sales effort. This department is
responsible for increasing theatre rental income during periods when the theatre is
normally closed and maximizing group film bookings to specialized groups such as schools,
daycare centers and religious organizations. We believe the large lobbies, comfortable
seating, big screens and sound capabilities make our theatres an attractive venue to hold
corporate events, private parties, private screenings and team building meetings and can
generate additional revenues. Our theatres have been used for simulcast concerts,
pay-per-view sporting events, corporate meetings and cultural events. We believe the trend
to use theatre auditoriums for non-film events during non-peak times will increase, which
will add revenue and attract new audiences to our theatres while not significantly
increasing costs. In addition, targeted efforts to sell niche films to particular groups
will also increase overall revenues. Online Sales Our patrons may purchase advance tickets for 128 of our domestic theatres (1,747 screens) and
17 of our international theatres (143 screens) by accessing our corporate website at
www.cinemark.com. Additionally, patrons may purchase advance tickets to our internet-enabled
domestic theatres by accessing Fandangos website at www.fandango.com. Our internet initiatives
help improve customer satisfaction, allowing patrons who purchase tickets over the internet to
often bypass lines at the box office by printing their tickets at home or picking up their tickets
at kiosks in the theatre lobby. Point of Sale Systems We developed our own proprietary point of sale system to further enhance our ability to
maximize revenues, control costs and efficiently manage operations. The system, which is installed
in all of our domestic theatres, provides corporate management with real-time admissions and
concession revenue reports that allow managers to make real-time adjustments to movie schedules,
extend runs or increase the number of screens on which successful movies are being played and
substitute films when gross receipts cease to meet expectations. Real-time seating and box office
information is available to box office personnel, allowing theatre management to avoid overselling
a particular film and providing faster and more accurate responses to customer inquiries regarding
showtimes and available seating. The system tracks concession sales and provides in-theatre
inventory reports allowing for efficient inventory management and control, has multiple language
capabilities, offers numerous ticket pricing options, integrates internet ticket sales and
processes credit card transactions. Barcode scanners, pole displays, touch screens, credit card
readers and other equipment can be integrated with the system to enhance its functions. In our
international theatres we use our system or point of sale systems which have been developed by
third parties for the motion picture industry and which have been certified as compliant with
applicable governmental regulations. Competition We are one of the leading motion picture exhibitors in terms of both revenues and the number
of screens in operation. We compete against local, national and international exhibitors. We are the sole exhibitor in approximately 85% of the first run film zones in which our first
run North American theatres operate. In film zones where there is no direct competition, we select
those films we believe will be the most successful from among those offered to us by film
distributors. Where there is competition, we usually license films based on an allocation process.
We currently operate in 148 first run film zones in North America. Of 12




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the 101 theatres we operate outside of North America, approximately 85% of those theatres have
no direct competition. The principal competitive factors with respect to film licensing are:  
    capacity and location of an exhibitors theatre;
    theatre comfort;
    quality of projection and sound equipment;
    level of customer service; and
    licensing terms. The competition for customers is dependent upon factors such as the availability of popular
films, the location of theatres, the comfort and quality of theatres and ticket prices. Our ticket
prices at first run and discount theatres are competitive with ticket prices of competing theatres. We also face competition from a number of other motion picture exhibition delivery systems,
such as home video, DVD, and network, syndicated and pay-per-view television. We do not believe
that these additional distribution channels have adversely affected theatre attendance; however, we
can give no assurance that existing or future alternative delivery systems will not have an adverse
impact on attendance. We also face competition from other forms of entertainment competing for the
publics leisure time and disposable income. Seasonality Our revenues have historically been seasonal, coinciding with the timing of releases of motion
pictures by the major distributors. Generally, the most successful motion pictures have been
released during the summer, extending from Memorial Day to Labor Day, and during the holiday
season, extending from Thanksgiving through year-end. The unexpected emergence of a blockbuster
film during other periods can alter this seasonality trend. The timing of such film releases can
have a significant effect on our results of operations, and the results of one quarter are not
necessarily indicative of results for the next quarter or for the same period in the following
year. The seasonality of the release of successful films, however, has become less pronounced in
recent years with the release of major motion pictures occurring more evenly throughout the year. Employees We have approximately 8,800 employees in North America, approximately 10% of whom are full
time employees and 90% of whom are part time employees. We have approximately 4,400 employees in
our international markets. Approximately 25 North American employees are represented by unions
under collective bargaining agreements. Some of our international operations utilize union labor.
We regard our relations with our employees to be satisfactory. Regulations The distribution of motion pictures is largely regulated by federal and state antitrust laws
and has been the subject of numerous antitrust cases. We have not been a party to any of such
cases, but the manner in which we can license films from certain major film distributors is subject
to consent decrees resulting from these cases. Consent decrees bind certain major film
distributors and require the films of such distributors to be offered and licensed to exhibitors,
including us, on a theatre-by-theatre and film-by-film basis. Consequently, exhibitors cannot
assure themselves of a supply of films by entering long-term arrangements with major distributors,
but must negotiate for licenses on a film-by-film and theatre-by-theatre basis. We are subject to various general regulations applicable to our operations including the
Americans with Disabilities Act (the ADA). We develop new theatres to be accessible to the
disabled and we believe we are in substantial compliance with current regulations relating to
accommodating the disabled. Although we believe that our theatres comply with the ADA, we are, or
have been, a party to lawsuits which claim that our handicapped seating arrangements do not comply
with the ADA or that we are required to provide captioning for patrons who are deaf or are severely
hearing impaired. See Item 3  Legal Proceedings. Our theatre operations are also subject to federal, state and local laws governing such
matters as wages, working conditions, citizenship, health and sanitation requirements and
licensing. 13




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Financial Information About Geographic Areas We operate in a single business segment as a motion picture exhibitor. We are a multinational
corporation with consolidated operations, as of December 31, 2004, in the U.S., Canada, Mexico,
Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and
Colombia. See Note 18 of the Notes to our Consolidated Financial Statements for information on our
revenues and theatre properties and equipment in the U.S. and Canada, Mexico, Brazil and other
international countries. Available Information We file reports, information statements and other information, including this Annual Report on
Form 10-K, with the Securities and Exchange Commission. Copies of such materials can be accessed
by visiting our corporate website at www.cinemark.com and selecting the link to SEC filings.
Copies can also be obtained by mail from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain
information on the operation of the Public Reference Room by calling the Securities and Exchange
Commission at 1-800-SEC-0330. 
 Item 2. Properties North America As of December 31, 2004, we operated 157 theatres, with 1,795 screens, pursuant to leases and
own the land and building for 34 theatres, with 508 screens, in North America. During 2004, we
opened 11 new theatres with 132 screens and added four screens to existing theatres. Our North
America leases are generally entered into on a long term basis with terms generally ranging from 15
to 25 years. The exercise of available renewal options can generally extend these leases by another
5 to 20 years. As of December 31, 2004, approximately 8% of our theatre leases in North America,
covering 97 screens, had remaining terms, including optional renewal periods, of less than five
years and approximately 80% of our theatre leases in North America, covering 1,487 screens, have
remaining terms, including optional renewal periods, of more than 15 years. The leases generally
provide for a fixed monthly minimum rent payment, with certain leases also subject to additional
percentage rent if a target annual revenue level is achieved. We lease an office building in Plano,
Texas as our corporate office. See Note 17 of our Notes to Consolidated Financial Statements for
information regarding our lease commitments. We periodically review the profitability of each of
our North American theatres, particularly those whose lease terms are nearing expiration, to
determine whether to continue its operations. International As of December 31, 2004, we operated 101 theatres, with 869 screens, internationally, all of
which are leased pursuant to ground or building leases. During 2004, we opened six new theatres
with 43 screens. Our international leases are generally entered into on a long term basis with
terms generally ranging from 10 to 20 years. The leases generally provide for contingent rental
based upon operating results (some of which are subject to an annual minimum). Generally, these
leases include renewal options for various periods at stipulated rates. No international theatre
leases have remaining terms, including optional renewal periods, of less than five years, and
approximately 70% of our international theatre leases, covering 614 screens, have remaining terms,
including optional renewal periods, of more than 15 years. We periodically review the profitability
of each of our international theatres, particularly those whose lease terms are about to expire, to
determine whether to continue its operations. 
 Item 3. Legal Proceedings DOJ Litigation- In March 1999, the Department of Justice (DOJ) filed suit in the U.S. District
Court, Northern District of Ohio, Eastern Division, against Cinemark USA, Inc. alleging certain
violations of the Americans with Disabilities Act of 1990 (the ADA) relating to Cinemark USA,
Inc.s wheelchair seating arrangements and seeking remedial action. An order granting summary
judgment to Cinemark USA, Inc. was issued in November 2001. The Department of Justice appealed the
district courts ruling with the Sixth Circuit Court of Appeals. On November 7, 2003, the Sixth
Circuit Court of Appeals reversed the summary judgment and sent the case back to the district court
for further review without deciding whether wheelchair seating at Cinemark USA, Inc.s theatres
comply with the ADA. The Sixth Circuit Court of Appeals also stated that if the district court
found that the theatres did not comply with the ADA, any remedial action should be prospective
only. Cinemark USA, Inc. and the United States have resolved this lawsuit. A Consent Order was
entered by the U.S. District Court for the Northern District of Ohio, Eastern Division, on November
17, 2004. This Consent Order fully and finally resolves the United States 14




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v. Cinemark USA, Inc.lawsuit, and all claims asserted against Cinemark USA, Inc. in that lawsuit
have been dismissed with prejudice. Under the Consent Order, over the next five years, Cinemark
USA, Inc. will make modifications to wheelchair seating locations in fourteen stadium-style movie
theatres within the Sixth Circuit and elsewhere, and spacing and companion seating modifications in
67 auditoriums at other stadium-styled movie theatres. Upon completion of these modifications, such
theatres will comply with all existing and pending ADA wheelchair seating requirements, and no
further modifications will be necessary to remaining stadium-style movie theatres in the United
States to comply with the wheelchair seating requirements of the ADA. Under the Consent Order, the
DOJ approved the seating plans for nine stadium-styled movie theatres under construction. Cinemark
USA, Inc. and the DOJ have also created a safe harbor framework for Cinemark USA, Inc. to construct
all of its future stadium-style movie theatres. The DOJ has stipulated that all theatres built in
compliance with the Consent Order will comply with the wheelchair seating requirements of the ADA.
Management believes that its obligations under the Consent Order are not material in the aggregate
to its financial position, results of operations and cash flows. Mission, Texas Litigation- In July 2001, Sonia Rivera-Garcia and Valley Association for
Independent Living filed suit in the 93rd Judicial District Court of Hidalgo County,
Texas against Cinemark USA, Inc. alleging certain violations of the Human Resources Code, the Texas Architectural Barriers
Act, the Texas Accessibility Standards and the Deceptive Trade Practices Act relating to
accessibility of movie theatres for patrons using wheelchairs at one theatre in the Mission, Texas
market. The plaintiffs are seeking remedial action and unspecified damages. A jury in a similar
case in Austin, Texas found that Cinemark USA, Inc. did not violate the Human Resources Code, the
Texas Architectural Barriers Act or the Texas Accessibility Standards. The judge in that case
dismissed the claim under the Deceptive Trade Practices Act. Cinemark USA, Inc. has filed an answer
denying the allegations and is vigorously defending this suit. Cinemark USA, Inc. is unable to
predict the outcome of this litigation or the range of potential loss, however, management believes
that based upon current precedent its potential liability with respect to such proceeding is not
material in the aggregate to its financial position, results of operations and cash flows.
Accordingly, Cinemark USA, Inc. has not established a reserve for loss in connection with this
proceeding. From time to time, we are involved in other various legal proceedings arising from the
ordinary course of our business operations, such as personal injury claims, employment matters and
contractual disputes, most of which are covered by insurance. We believe our potential liability
with respect to proceedings currently pending is not material, individually or in the aggregate, to
our financial position, results of operations and cash flows. 
 Item 4. Submission of Matters to a Vote of Security Holders A
majority of our stockholders executed a written consent in lieu of a
stockholders meeting electing Mr. Peter Ezersky to serve as a member
of our Board of Directors. 
 PART II 
 Item 5. Market for
Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities There is no established public trading market for our common stock. As of December 31, 2004
there were 13 holders of record of our common stock. We have not paid dividends on our common stock
and do not expect to pay dividends on our common stock in the foreseeable future. Our senior
discount notes indenture, Cinemark USA, Inc.s senior
subordinated notes indentures and senior secured credit facility, each contain restrictions on our
ability to pay dividends on our common stock. 
 Item 6. Selected Financial Data The following tables set forth our selected consolidated financial and operating data for the
periods and at the dates indicated for each of the five most recent years ended December 31, 2004.
Certain reclassifications have been made to the 2000, 2001, 2002 and 2003 consolidated financial
statements to conform to the 2004 presentation. You should read the selected consolidated
financial and operating data set forth below in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations and with our Consolidated Financial
Statements and related notes and schedules thereto, appearing elsewhere in this report. 15




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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA Year Ended December 31,2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004(In thousands, except theatres and screen data)Statement of Operations Data
(Consolidated)(1):Revenues
    
    $
    786,264
    
    
    $
    853,658
    
    
    $
    935,854
    
    
    $
    950,872
    
    
    $
    1,024,242Theatre operating costs
    
    
    504,519
    
    
    
    531,967
    
    
    
    570,947
    
    
    
    582,574
    
    
    
    618,626Facility lease expense
    
    
    108,489
    
    
    
    114,737
    
    
    
    115,588
    
    
    
    119,517
    
    
    
    126,643General and administrative expenses
    
    
    39,013
    
    
    
    42,597
    
    
    
    47,953
    
    
    
    44,285
    
    
    
    51,672Stock option compensation and change of control
expenses related to the Recapitalization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,995Depreciation and amortization
    
    
    66,111
    
    
    
    73,079
    
    
    
    66,583
    
    
    
    65,085
    
    
    
    67,051Impairment of long-lived assets
    
    
    3,872
    
    
    
    20,723
    
    
    
    3,869
    
    
    
    5,049
    
    
    
    1,667(Gain) loss on sale of assets and other
    
    
    912
    
    
    
    12,408
    
    
    
    470
    
    
    
    (1,202
    )
    
    
    4,851Total costs and expenses
    
    
    722,916
    
    
    
    795,511
    
    
    
    805,410
    
    
    
    815,308
    
    
    
    902,505Operating income
    
    
    63,348
    
    
    
    58,147
    
    
    
    130,444
    
    
    
    135,564
    
    
    
    121,737Interest expense(2)
    
    
    74,037
    
    
    
    70,931
    
    
    
    57,793
    
    
    
    54,163
    
    
    
    72,942Income (loss) from continuing operations before
cumulative effect of an accounting change
    
    
    (10,423
    )
    
    
    (3,462
    )
    
    
    40,407
    
    
    
    47,389
    
    
    
    23,041Income (loss) from discontinued operations, net
of taxes
    
    
    
    
    
    
    (559
    )
    
    
    (1,542
    )
    
    
    (2,740
    )
    
    
    3,584Net income (loss)(3)
    
    $
    (10,423
    )
    
    $
    (4,021
    )
    
    $
    35,476
    
    
    $
    44,650
    
    
    $
    26,625Other Financial Data (Consolidated):Ratio of earnings to fixed charges(4)
    
    
    
    
    
    
    
    
    
    
    1.75x
    
    
    
    1.80x
    
    
    
    1.36xCash flow provided by (used for):Operating activities
    
    $
    54,796
    
    
    $
    87,122
    
    
    $
    150,119
    
    
    $
    135,522
    
    
    $
    123,087Investing activities
    
    
    (94,886
    )
    
    
    (33,799
    )
    
    
    (34,750
    )
    
    
    (47,151
    )
    
    
    (116,947
    )Financing activities
    
    
    51,280
    
    
    
    (21,513
    )
    
    
    (96,140
    )
    
    
    (45,738
    )
    
    
    (14,444
    )Capital expenditures
    
    
    113,081
    
    
    
    40,352
    
    
    
    38,032
    
    
    
    51,002
    
    
    
    81,008Balance Sheet Data (Consolidated):Cash and cash equivalents
    
    $
    19,840
    
    
    $
    50,199
    
    
    $
    63,719
    
    
    $
    107,322
    
    
    $
    100,248Theatre properties and equipment, net
    
    
    950,135
    
    
    
    866,406
    
    
    
    791,731
    
    
    
    775,880
    
    
    
    785,595Total assets
    
    
    1,060,576
    
    
    
    996,544
    
    
    
    916,814
    
    
    
    960,736
    
    
    
    1,016,757Total long-term debt, including current portion.
    
    
    810,323
    
    
    
    780,956
    
    
    
    692,587
    
    
    
    658,431
    
    
    
    1,013,675Stockholders equity (deficiency)
    
    
    48,910
    
    
    
    25,337
    
    
    
    27,664
    
    
    
    76,947
    
    
    
    (202,724
    )Operating Data:North
America(5)(7)Theatres operated (at period end)
    
    
    190
    
    
    
    188
    
    
    
    188
    
    
    
    189
    
    
    
    191Screens operated (at period end)
    
    
    2,217
    
    
    
    2,217
    
    
    
    2,215
    
    
    
    2,244
    
    
    
    2,303Total attendance(1)
    
    
    92,425
    
    
    
    100,022
    
    
    
    111,959
    
    
    
    112,581
    
    
    
    113,646
 16




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Year Ended December 31,2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004(In thousands, except theatres and screen data)International(6)Theatres operated (at period end)
    
    
    80
    
    
    
    88
    
    
    
    92
    
    
    
    97
    
    
    
    101Screens operated (at period end)
    
    
    695
    
    
    
    783
    
    
    
    816
    
    
    
    852
    
    
    
    869Total attendance(1)
    
    
    46,152
    
    
    
    53,853
    
    
    
    60,109
    
    
    
    60,553
    
    
    
    65,695Worldwide(5)(6)(7)Theatres operated (at period end)
    
    
    270
    
    
    
    276
    
    
    
    280
    
    
    
    286
    
    
    
    292Screens operated (at period end)
    
    
    2,912
    
    
    
    3,000
    
    
    
    3,031
    
    
    
    3,096
    
    
    
    3,172Total attendance(1)
    
    
    138,577
    
    
    
    153,875
    
    
    
    172,068
    
    
    
    173,134
    
    
    
    179,341
   (1)
    
    Statement of Operations Data and attendance data exclude the results of the two United
Kingdom theatres and the eleven Interstate theatres for all periods presented as these
theatres were sold during 2004. The results of operations for these theatres are presented as
discontinued operations. (See Note 5 to the consolidated financial statements.)(2)
    
    Includes amortization of debt issue costs and excludes capitalized interest for all
periods presented.(3)
    
    In 2002, a cumulative effect of a change in accounting principle charge of $3.4 million (net
of tax benefit) was recorded as a transitional impairment adjustment in connection with the
adoption of Statement of Financial Accounting Standards No. 142 requiring that goodwill and
other intangible assets with indefinite useful lives no longer be amortized but instead be
tested for impairment at least annually.(4)
    
    For the purposes of calculating the ratio of earnings to fixed charges, earnings consist of
income (loss) from continuing operations before taxes and cumulative effect of an accounting
change plus fixed charges excluding capitalized interest. Fixed charges consist of interest
expense, capitalized interest, amortization of debt issue cost and that portion of rental
expense which we believe to be representative of the interest factor. For the years ended
December 31, 2000 and 2001, earnings were insufficient to cover fixed charges by $10.4 million
and $17.9 million, respectively.(5)
    
    The data as of period end 2000, 2001, 2002, 2003 and 2004 excludes certain theatres operated
by us in North America pursuant to management agreements that are not part of our consolidated
operations.(6)
    
    The data as of period end 2000, 2001, 2002, 2003 and 2004 excludes certain theatres operated
internationally through our affiliates that are not part of our consolidated operations.(7)
    
    Figures for 2003 exclude theatres, screens and attendance for eight theatres and 46 screens
acquired on December 31, 2003, as the results of operations for these theatres are not
included in our 2003 consolidated results of operations. 17




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations The following discussion and analysis should be read in conjunction with our Consolidated
Financial Statements and related notes and schedules included elsewhere in this report. Revenues and Expenses We are one of the leaders in the motion picture exhibition industry, in terms of both revenues
and the number of screens in operation, with theatres in the U.S., Canada, Mexico, Argentina,
Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia.
We generate revenues primarily from box office receipts and concession sales with additional
revenues from screen advertising sales and other revenue streams, such as vendor marketing
programs, pay phones, ATM machines and electronic video games located in some of our theatres.
Our revenues are affected by changes in attendance and average admissions and concession revenues
per patron. Attendance is primarily affected by the quality and quantity of films released by
motion picture studios. Film releases during 2004 included the blockbusters Shrek 2, which
generated domestic box office receipts in excess of $400 million, The Passion of the Christand
Spider-Man 2, which generated domestic box office receipts in excess of $350 million each, and
Harry Potter and the Prisoner of Azkabanand The Incredibles, which generated domestic box office
receipts in excess of $200 million each. Film releases scheduled for 2005 include the highly
anticipated Star Wars: Episode III Revenge of the Sithand other high-profile films such as Harry
Potter and the Goblet of Fire, War of the Worlds, King Kongand Batman Begins. Film rental costs are variable in nature and fluctuate with our admissions revenues. Film
rental costs as a percentage of revenues are generally higher for periods in which successful films
are released. Film rental costs can also vary based on the length of a films run. Generally, a
film that runs for a longer period results in lower film rental costs as a percentage of revenues.
Film rental rates are negotiated on a film-by-film and theatre-by-theatre basis. Advertising
costs, which are expensed as incurred, are primarily fixed at the theatre level as daily movie
directories placed in newspapers represent the largest component of advertising costs. The monthly
cost of these advertisements is based on, among other things, the size of the directory and the
frequency and size of the newspapers circulation. The internet is becoming the primary way to
check movie showtimes, replacing the traditional newspaper advertisements. Concession supplies expense is variable in nature and fluctuates with our concession revenues.
We purchase concession supplies to replace units sold. We negotiate prices for concession supplies
directly with concession vendors and manufacturers to obtain bulk rates. Although salaries and wages include a fixed cost component (i.e. the minimum staffing costs to
operate a theatre facility during non-peak periods), salaries and wages move in relation to
revenues as theatre staffing is adjusted to handle changes in attendance. Facility lease expense is primarily a fixed cost at the theatre level as most of our facility
leases require a fixed monthly minimum rent payment. Certain of our leases are subject to
percentage rent only while others are subject to percentage rent in addition to their fixed monthly
rent if a target annual revenue level is achieved. Facility lease expense as a percentage of
revenues is also affected by the number of leased versus fee owned facilities. Utilities and other costs include certain costs that are fixed such as property taxes, certain
costs which are variable such as liability insurance, and certain costs that possess both fixed and
variable components such as utilities, repairs and maintenance and security services. Critical Accounting Policies We prepare our consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America. As such, we are required to make certain
estimates and assumptions that we believe are reasonable based upon the information available.
These estimates and assumptions affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the periods
presented. The significant accounting policies, which we believe are the most critical to aid in
fully understanding and evaluating our reported consolidated financial results include the
following: 18




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##### Table of Contents



Revenue and Expense Recognition Revenues are recognized when admissions and concession sales are received at the box office
and screen advertising is shown in the theatres. We record proceeds from the sale of gift cards and
other advanced sale-type certificates in current liabilities and recognize admissions and
concession revenue when a holder redeems the card or certificate. We recognize unredeemed gift
cards and other advanced sale-type certificates as revenue only after such a period of time
indicates, based on historical experience, the likelihood of redemption is remote. Film rental costs are accrued based on the applicable box office receipts and either the
mutually agreed upon firm terms established prior to the opening of the picture or estimates of the
final mutually agreed upon settlement, which occurs at the conclusion
of the picture run, subject to
the film licensing arrangement. Estimates are based on the expected success of a film over the
length of its run in the theatres. The success of a film can typically be determined a few weeks
after a film is released when initial box office performance of the film is known. Accordingly,
final settlements typically approximate estimates since box office receipts are known at the time
the estimate is made and the expected success of a film over the length of its run in theatres can
typically be estimated early in the films run. The final film settlement amount is negotiated at
the conclusion of the films run based upon how a film actually performs. If actual settlements are
higher than those estimated, additional film rental costs are recorded at that time. We recognize
advertising costs and any sharing arrangements with film distributors in the same accounting
period. Our advertising costs are expensed as incurred. Impairment of Long-Lived Assets We review long-lived assets for impairment on a quarterly basis or whenever events or changes
in circumstances indicate the carrying amount of the assets may not be fully recoverable. We assess
many factors including the following to determine whether to impair individual theatre assets:  
    actual theatre level cash flows;
    future years budgeted theatre level cash flows;
    theatre property and equipment carrying values;
    goodwill carrying values;
    the age of a recently built theatre;
    competitive theatres in the marketplace;
    the sharing of a market with our other theatres;
    changes in foreign currency exchange rates;
    the impact of recent ticket price changes;
    available lease renewal options; and
    other factors considered relevant in our assessment of impairment of individual theatre assets. Long-lived assets are evaluated for impairment on an individual theatre basis or a group basis
if the group of theatres shares the same marketplace, which we believe is the lowest applicable
level for which there are identifiable cash flows. The evaluation is based on the estimated
undiscounted cash flows from continuing use through the remainder of the theatres useful life. The
remainder of the useful life correlates with the available remaining lease period for leased
properties and a period of twenty years for fee owned properties. If the estimated undiscounted
cash flows are not sufficient to recover a long-lived assets carrying value, we then compare the
carrying value of the asset with its estimated fair value, which is determined based on a multiple
of cash flows. When estimated fair value is determined to be lower than the carrying value of the
long-lived asset, the asset is written down to its estimated fair value. Goodwill Our recorded goodwill was $45.0 million at December 31, 2004. We evaluate goodwill for
impairment annually at fiscal year-end and any time events or circumstances indicate the carrying
amount of the goodwill may not be fully recoverable. We evaluate goodwill for impairment on an
individual theatre basis, which is the lowest level of identifiable cash flows and the level at
which goodwill is recorded. The evaluation is a two-step approach requiring us to compute the fair
value of a reporting unit and compare it with its carrying value. If the carrying value exceeds
fair value, a second step would be performed to measure the potential goodwill impairment. Fair
value is 19




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##### Table of Contents



determined based on a multiple of cash flows. When estimated fair value is determined to be
lower than the carrying value of the asset, the asset is written down to its estimated fair value. Acquisitions We account for acquisitions under the purchase method of accounting. The purchase method
requires that we estimate the fair value of the assets and liabilities acquired and allocate
consideration paid accordingly. For significant acquisitions, we obtain independent third party
valuation studies for certain of the assets and liabilities acquired to assist us in determining
fair value. The estimation of the fair values of the assets and liabilities acquired involves a
number of estimates and assumptions that could differ materially from the actual amounts. We
completed acquisitions in 2003 and 2004 as discussed in Note 4 to our consolidated financial
statements. Income Taxes We use an asset and liability approach to financial accounting and reporting for income taxes.
Deferred income taxes are provided when tax laws and financial accounting standards differ with
respect to the amount of income for a year and the bases of assets and liabilities. A valuation
allowance is recorded to reduce the carrying amount of deferred tax assets unless it is more likely
than not that such assets will be realized. Income taxes are provided on unremitted earnings from
foreign subsidiaries unless such earnings are expected to be indefinitely reinvested. Income taxes
have also been provided for potential tax assessments and the related tax accruals are in the
consolidated balance sheets. To the extent tax accruals differ from actual payments or assessments,
the accruals will be adjusted. 20




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##### Table of Contents



Results of Operations Set forth below is a summary of consolidated operating revenues and expenses, certain income
statement items expressed as a percentage of revenues, average screen count and revenues per
average screen for the three most recent years ended December 31, 2002, 2003 and 2004. Year Ended December 31,2002
    
    
    2003
    
    
    2004Operating Data (in millions)(1):Revenues:Admissions
    
    $
    595.3
    
    
    $
    597.5
    
    
    $
    647.0Concession
    
    
    291.8
    
    
    
    300.6
    
    
    
    321.6Other
    
    
    48.8
    
    
    
    52.8
    
    
    
    55.6Total revenues
    
    $
    935.9
    
    
    $
    950.9
    
    
    $
    1,024.2Cost of operations:Film rentals and advertising
    
    $
    320.7
    
    
    $
    324.9
    
    
    $
    348.8Concession supplies
    
    
    50.4
    
    
    
    49.7
    
    
    
    53.8Salaries and wages
    
    
    96.7

    
    
    
    97.2
    
    
    
    103.1Facility lease expense
    
    
    115.6
    
    
    
    119.5
    
    
    
    126.6Utilities and other
    
    
    103.1
    
    
    
    110.8
    
    
    
    113.0Total cost of operations
    
    $
    686.5
    
    
    $
    702.1
    
    
    $
    745.3Operating data as a percentage of total revenues(1):Revenues:Admissions
    
    
    63.6
    %
    
    
    62.8
    %
    
    
    63.2
    %Concession
    
    
    31.2
    
    
    
    31.6
    
    
    
    31.4Other
    
    
    5.2
    
    
    
    5.6
    
    
    
    5.4Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of operations(2):Film rentals and advertising
    
    
    53.9
    %
    
    
    54.4
    %
    
    
    53.9
    %Concession supplies
    
    
    17.3
    
    
    
    16.5
    
    
    
    16.7Salaries and wages
    
    
    10.3
    
    
    
    10.2
    
    
    
    10.1Facility lease expense
    
    
    12.4
    
    
    
    12.6
    
    
    
    12.4Utilities and other
    
    
    11.0
    
    
    
    11.7
    
    
    
    11.0Total cost of operations
    
    
    73.4
    %
    
    
    73.8
    %
    
    
    72.8
    %Average screen count (month end average)
    
    
    2,998
    
    
    
    3,027
    
    
    
    3,135Revenues per average screen
    
    $
    312,183
    
    
    $
    314,178
    
    
    $
    326,664
   (1)
    
    Certain reclassifications have been made to the 2002 and 2003 consolidated financial
statements to conform to the 2004 presentation. Results exclude the results of our two United
Kingdom theatres and our eleven Interstate theatres sold during 2004. The results of
operations for these theatres are included as discontinued operations for all periods
presented.(2)
    
    All costs are expressed as a percentage of total revenues, except film rentals and
advertising, which are expressed as a percentage of admissions revenues, and concession
supplies, which are expressed as a percentage of concession revenues. 21




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Comparison of Years Ended December 31, 2004 and December 31, 2003 Revenues.Total revenues for 2004 increased to $1,024.2 million from $950.9 million for 2003,
representing a 7.7% increase. Admissions revenues increased 8.3% to $647.0 million for 2004 from
$597.5 million for 2003. Concession revenues increased 7.0% to $321.6 million for 2004 from $300.6
million for 2003. The increased revenues were partially attributable to a 3.6% increase in
attendance from 173.1 million patrons for 2003 to 179.3 million patrons for 2004.
The increase in attendance for 2004 was primarily due to new theatre openings and quality film
product, including the successful release of Shrek 2, The Passion of the Christ, Spider-Man 2,
Harry Potter and the Prisoner of Azkabanand The Incrediblesduring 2004. In addition, our average
ticket price increased from $3.45 for 2003 to $3.61 for 2004 and our concession revenues per patron
increased from $1.74 for 2003 to $1.79 for 2004. Revenues per screen increased 4.0% to $326,664 for
2004 from $314,178 for 2003. Cost of Operations. Cost of operations was $745.3 million, or 72.8% of revenues, for 2004
compared to $702.1 million, or 73.8% of revenues, for 2003. The decrease in cost of operations as a
percentage of revenues was primarily due to the 7.7% increase in revenues and the fixed nature of
some of our theatre operating costs, such as components of salaries and wages, facility lease
expense, and utilities and other costs. Film
rentals and advertising costs were $348.8 million, or 53.9% of admissions revenues, for
2004 compared to $324.9 million, or 54.4% of admissions revenues, for 2003. The decrease in film
rentals and advertising costs as a percentage of admissions revenues was due in part to the increase
in international business, which generally has lower film rental rates, and also due to the long
successful run of certain high-grossing films during 2004. Concession supplies expense increased to
16.7% of concession revenues for 2004 from 16.5% for 2003 primarily due to an increase in
international business, which generally has higher concession supplies costs. Salaries and wages increased to $103.1 million for 2004 from $97.2 million for 2003 primarily
due to new theatre openings and the increase in attendance. Facility lease expense increased to
$126.6 million for 2004 from $119.5 million for 2003 primarily due to new theatre openings and
increased percentage rent expense. Utilities and other costs increased to $113.0 million for 2004
from $110.8 million for 2003 primarily due to new theatre openings and increased utility rates in
certain regions in which we operate. General and Administrative Expenses.General and administrative expenses, excluding the stock
option compensation and change of control expenses related to the Recapitalization, increased to
$51.7 million for 2004 from $44.3 million for 2003. The increase was primarily due to increases in
salary and bonus expense of approximately $4.7 million and legal fees of approximately $2.2
million. Stock option compensation expense of $16.3 million and change of control fees of $15.7 million
were recorded during 2004 as a result of the Recapitalization. See Note 3 to the consolidated
financial statements. Depreciation and Amortization.Depreciation and amortization expense was $67.1 million for
2004 compared to $65.1 million for 2003. The increase is primarily due to new theatre openings the
latter part of 2003 and 2004. Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used
of $1.7 million in 2004 and $5.0 million in 2003, as follows: Years Ended December 31,2004
    
    
    2003U.S.
    
    $
    1.7
    
    
    $
    3.0Mexico
    
    
    
    
    
    
    1.2Chile
    
    
    
    
    
    
    0.7Other
    
    
    
    
    
    
    0.1Total
    
    $
    1.7
    
    
    $
    5.0
 (Gain) Loss on Sale of Assets and Other.We recorded a loss on sale of assets and other of
$4.9 million in 2004 compared to a gain on sale of assets and other of $1.2 million during 2003.
The loss recorded during 2004 consisted of a loss on sale of a land parcel, the write-off of a
license agreement that was terminated, the write-off of theatre 22




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equipment that was replaced, and the write-off of theatre equipment and goodwill associated
with theatres that closed during the year. Interest Expense.Interest costs incurred, including amortization of debt issue costs, was
$72.9 million for 2004 compared to $54.2 million for 2003. The increase is primarily due to the
issuance of the 9 3/4% senior discount notes on March 31, 2004 and the amortization of the related
debt issue costs. See Note 3 to the consolidated financial statements. Loss on Early Retirement of Debt.During 2004, we recorded a loss on early retirement of debt
of $6.0 million, which represented the write-off of unamortized debt issue costs, unamortized bond
discount, tender offer repurchase costs, including premiums paid, and other fees associated with
the repurchase and subsequent retirement of our 8 1/2% senior subordinated notes and a portion of our
9% senior subordinated notes related to the Recapitalization. During the 2003 period, we recorded
a loss on early retirement of debt of $7.5 million, which related to the write-off of unamortized
debt issue costs, unamortized bond premiums/discounts and tender offer repurchase costs, including
premiums paid, and other fees associated with the retirement of certain debt agreements, including
our former 9 5/8% senior subordinated notes, and the refinancing of our then existing credit
facility. Income Taxes.Income tax expense of $17.3 million was recorded for 2004 compared to $25.0
million recorded for 2003. The effective tax rate was 42.9% for 2004
versus 34.6% for 2003. The
increase in the effective tax rate was primarily due to adjustments made to the inflation adjusted
tax accumulated depreciation in Mexico. Income (Loss) from Discontinued Operations, Net of Taxes.We recorded income from
discontinued operations, net of taxes, of $3.6 million during 2004 and a loss from discontinued
operations, net of taxes, of $2.7 million during 2003. The income for 2004 includes the results of
operations of our two United Kingdom theatres that were sold on April 30, 2004, the loss on sale of
the United Kingdom theatres, the results of operations of the eleven Interstate theatres that were
sold on December 23, 2004 and the gain on sale of the Interstate theatres, all of which are
presented net of taxes. The loss recorded for 2003 primarily includes the results of operations of
our United Kingdom theatres, including an asset impairment charge of $2.5 million. See Note 5 to
the consolidated financial statements. Comparison of Years Ended December 31, 2003 and December 31, 2002 Revenues. Total revenues for 2003 increased to $950.9 million from $935.9 million in 2002,
representing a 1.6% increase. Admissions revenues increased 0.4% to $597.5 million for 2003 from
$595.3 million for 2002. Concession revenues increased 3.0% to $300.6 million for 2003 from $291.8
million for 2002. The increased revenues were partially attributable to a 0.6% increase in
attendance from 172.1 million patrons for 2002 to 173.1 million patrons for 2003.
Average ticket prices for 2003 were consistent with 2002. Concession revenues per patron increased
from $1.70 for 2002 to $1.74 for 2003. The increase in concession revenues per patron was
primarily a result of the successful implementation of a domestic concession price increase during
the fourth quarter of 2002. Revenues per average screen increased 0.6% to $314,178 for 2003 from
$312,183 for 2002. Cost of Operations. Cost of operations was $702.1 million, or 73.8% of revenues, for 2003
compared to $686.5 million, or 73.4% of revenues, for 2002. Film rentals and advertisings costs were $324.9 million, or 54.4% of admissions revenues, for
2003 compared to $320.7 million, or 53.9% of admissions revenues, for 2002. The increase is due to
increased film rental costs and promotional activities during 2003. Concession supplies expense
decreased to 16.5% of concession revenues for 2003 from 17.3% for 2002 primarily as a result of the
successful implementation of a domestic concession price increase during the fourth quarter of
2002. Salaries and wages increased to $97.2 million for 2003 from $96.7 million for 2002. Facility
lease expense increased to $119.5 million for 2003 from $115.6 million for 2002 primarily due to
new theatre openings and increased percentage rent expense. Utilities and other costs increased to
$110.8 million for 2003 from $103.1 million for 2002 primarily due to increased utility costs,
insurance and repairs and maintenance expense. 23




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General and Administrative Expenses. General and administrative expenses, as a percentage of
revenues, decreased to 4.7% in 2003 from 5.1% in 2002. General and administrative expenses
decreased to $44.3 million for 2003 from $48.0 million for 2002. The decrease is primarily related
to the write-off of $3.1 million of legal, accounting and other professional fees and costs in
2002, associated with our proposed initial public offering which
was subsequently postponed due to unfavorable market conditions. Depreciation and Amortization. Depreciation and amortization decreased to $65.1 million in
2003 from $66.6 million in 2002. Depreciation and amortization as a percentage of revenues
decreased to 6.8% in 2003 from 7.1% in 2002. Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used
of $5.0 million in 2003 and $3.9 million in 2002, as follows: Years Ended December 31,2003
    
    
    2002U.S.
    
    $
    3.0
    
    
    $
    1.8Mexico
    
    
    1.2
    
    
    
    Chile
    
    
    0.7
    
    
    
    1.3Other
    
    
    0.1
    
    
    
    0.8Total
    
    $
    5.0
    
    
    $
    3.9
 (Gain) Loss on Sale of Assets and Other. We recorded a gain on sale of assets and other of
$1.2 million in 2003 compared to a loss on sale of assets and other of $0.5 million in 2002. The
gain on sale of assets recorded during 2003 was primarily due to gains on the sale of land parcels
and recovery of a construction deposit previously written off. Interest Expense. Interest costs incurred, including amortization of debt issue costs,
decreased 6.3% to $54.2 million in 2003 from $57.8 million in 2002. The decrease in interest costs
incurred during 2003 was primarily due to a decrease in average debt outstanding during the year
under our long-term debt facilities. Foreign Currency Exchange Loss.We recorded a foreign currency exchange loss of $0.2 million
in 2003 compared to a foreign currency exchange loss of $5.1 million in 2002. The loss recorded
during 2002 was due to the translation of Cinemark Brasil S.A.s assets and liabilities denominated
in other than local currency and the devaluation of the real during 2002. Loss on Early Retirement of Debt.We recorded a loss on early retirement of debt of $7.5
million during 2003 that included a $1.6 million loss resulting from the write-off of unamortized
debt issue costs associated with the retirement of our then existing credit facility and the Cinema
Properties Facility that occurred during the first quarter of 2003, a $5.6 million loss resulting
from the write-off of unamortized debt issue costs, unamortized bond premiums/discounts and tender
offer repurchase costs associated with the tender offer to repurchase and subsequent retirement of
approximately $233 million aggregate principal amount of outstanding 9 5/8% senior
subordinated notes that occurred during the second quarter of 2003 and a $0.3 million loss
resulting from the write-off of unamortized debt issue costs, unamortized bond premiums/discounts
and other fees associated with the redemption of the remaining $42 million aggregate principal
amount of our 9 5/8% senior subordinated notes due 2008 that occurred during the third quarter of
2003. Income Taxes. Income tax expense of $25.0 million was recorded in 2003 compared to income tax
expense of $29.1 million in 2002. Our effective tax rate for
2003 was 34.6% as compared to 41.9%
in 2002. The change in the effective tax rate is primarily due to a decrease in foreign losses not
offset by a valuation allowance. 24




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##### Table of Contents



Liquidity and Capital Resources Operating Activities We primarily collect our revenues in cash, mainly through box office sales and the sale of
concession supplies. We are expanding the number of theatres that provide the patron a choice of
using a credit card, in place of cash, which we convert to cash in approximately three to four
days. Because our revenues are received in cash prior to the payment of related expenses, we have
an operating float and historically have not required traditional working capital financing. We
typically operate with a negative working capital position for our ongoing theatre operations
throughout the year, primarily because of the lack of significant inventory and accounts
receivable. Cash flow provided by operating activities, as reflected in the consolidated
statements of cash flows, amounted to $150.1 million, $135.5 million and $123.1 million in 2002,
2003 and 2004, respectively. The decrease in cash provided by operating activities in 2004 is
primarily due to the Recapitalization charges of $32.0 million. Investing Activities Our investing activities have been principally related to the development and acquisition of
additional theatres and in 2004, purchases of minority partner shares in Brazil and Mexico. New
theatre openings and acquisitions historically have been financed with internally generated cash
and by debt financing, including borrowings under our amended senior secured credit facility. Cash
flow used for investing activities, as reflected in the consolidated statements of cash flows,
amounted to $34.7 million, $47.2 million and $116.9 million in 2002, 2003 and 2004,
respectively. The increase in cash used for investing activities in 2004 is primarily
due to the funding of the $45.0 million purchase price for the acquisition of the shares of our
Brazilian operations owned by our Brazilian partners, the funding of the $5.4 million purchase
price for the acquisition of the shares of Cinemark Mexico USA, Inc. owned by our Mexican partners
and a $30.0 million increase in capital expenditures, and was partially offset by increased
proceeds from sales of theatre properties and equipment. As a result of the Recapitalization, our Brazilian partners exercised their option to cause us
to purchase all of their shares of common stock of Cinemark Brasil S.A., which represented 47.2% of
total common stock of Cinemark Brasil S.A. We purchased the partners shares of Cinemark Brasil
S.A. for $44,957,502 with available cash on August 18, 2004. See Note 4 to the consolidated
financial statements for further discussion of this acquisition. On September 15, 2004, we purchased shares of common stock of Cinemark Mexico USA, Inc. from
our Mexican partners, increasing our ownership interest in this subsidiary from 95.0% to 99.4%.
The purchase price was $5,378,768 and was funded with available cash and borrowings on our
revolving credit line. See Note 4 to the consolidated financial statements for further discussion
of this acquisition. We are continuing to expand our domestic theatre circuit. In 2004, we opened 11 new theatres
with 132 screens and added four screens to existing theatres. As of
December 31, 2004, we had
signed commitments to build 12 new theatres with 140 screens scheduled to open in the U.S. in 2005
and thereafter. We estimate the remaining capital expenditures for
the development of these 140 screens in the U.S. will be
approximately $34 million. Actual expenditures for continued theatre
development and acquisitions are subject to change based upon the availability of attractive
opportunities. We are continuing to expand our international theatre circuit. In 2004, we opened six new
theatres with 43 screens. As of December 31, 2004, we had signed
commitments to build 11 new
theatres with 87 screens scheduled to open in international markets in 2005 and thereafter. We
estimate the remaining capital expenditures for the development of
these 87 screens will be
approximately $42 million. Actual expenditures for continued theatre development and acquisitions
are subject to change based upon the availability of attractive opportunities. We plan to fund capital expenditures for our continued development with cash flow from
operations, borrowings under our amended senior secured credit facility, proceeds from sale
leaseback transactions and/or sales of excess real estate. Additionally, we may from time to time,
subject to compliance with our debt instruments, purchase on the open market our debt securities
depending upon the availability and prices of such securities. 25




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##### Table of Contents



Financing Activities Cash
flow used for financing activities amounted to $96.1 million, $45.7 million, and $14.4
million in 2002, 2003 and 2004, respectively. As of December 31, 2004 our long-term debt obligations, future minimum lease obligations under
non-cancelable operating leases, outstanding letters of credit, obligations under employment
agreements and purchase commitments were as follows: Payments Due by Period(in millions)Less Than
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    One Year
    
    
    1 - 3 Years
    
    
    4 - 5 Years
    
    
    5 YearsLong-term debt (1) (2)
    
    $
    1,204.1
    
    
    $
    6.5
    
    
    $
    11.6
    
    
    $
    7.9
    
    
    $
    1,178.1Lease obligations (3)
    
    
    1,473.3
    
    
    
    111.6
    
    
    
    233.7
    
    
    
    224.0
    
    
    
    904.0Letters of credit
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    Employment agreements (3)
    
    
    8.4
    
    
    
    2.8
    
    
    
    5.6
    
    
    
    
    
    
    
    Purchase commitments (4)
    
    
    81.7
    
    
    
    43.4
    
    
    
    36.4
    
    
    
    1.2
    
    
    
    0.7Total obligations
    
    $
    2,767.6
    
    
    $
    164.4
    
    
    $
    287.3
    
    
    $
    233.1
    
    
    $
    2,082.8
   (1)
    
    These amounts are included in our consolidated balance sheet as of
December 31, 2004. See Note 10 to the consolidated financial statements for
additional information about our long-term debt obligations and related matters.(2)
    
    Includes the 9 3/4% senior discount notes in the aggregate principal amount at
maturity of $577.2 million.(3)
    
    See Note 17 to the consolidated financial statements for additional
information about our lease obligations and employment agreements.(4)
    
    Includes estimated capital expenditures associated with the construction of
new theatres to which we were committed as of December 31, 2004. Amount of Commitment Expiration Per Period(in millions)Less Than
    
    
    
    
    
    
    
    
    
    
    AfterOther Commercial Commitments
    
    Total
    
    
    One Year
    
    
    1 - 3 Years
    
    
    4 - 5 Years
    
    
    5 YearsRevolving Line of Credit1
    
    $
    99.9
    
    
    $
    
    
    
    $
    
    
    
    $
    99.9
    
    
    $
    Total commercial commitments
    
    $
    99.9
    
    
    $
    
    
    
    $
    
    
    
    $
    99.9
    
    
    $
    
   1
    
    Represents availability under our revolving line of credit as of December
31, 2004 after giving effect to the $0.1 million letter of credit outstanding. Recapitalization and Issuance of Senior Discount Notes On March 12, 2004, we entered into an agreement and plan of merger with a newly formed
subsidiary of Madison Dearborn Partners, LLC (Madison). The transaction was completed on April
2, 2004, at which time the newly formed subsidiary of Madison was merged with and into us, with our
Company continuing as the surviving corporation. Simultaneously, an affiliate of Madison purchased
shares of our common stock for approximately $518.3 million in cash and became our controlling
stockholder owning approximately 83% of our capital stock. Lee Roy Mitchell, our Chief Executive
Officer, and the Mitchell Special Trust collectively retained approximately 16% ownership of our
capital stock with certain members of management owning the remaining 1%. Based on the terms of
the transaction, including Mr. Mitchells ownership retention, the transaction was accounted for as
a recapitalization, which resulted in us and our subsidiaries retaining our historical book values.
Since April 2, 2004, Madison sold approximately 10% of its stock in Cinemark, Inc. to outside
investors. As of the date of this report, Madison owned approximately 75% of our capital stock,
outside investors owned approximately 8%, Lee Roy 26




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##### Table of Contents



Mitchell and the Mitchell Special Trust owned approximately 16% and certain members of
management owned the remaining 1%. On March 31, 2004, we issued $577,173,000 aggregate principal amount at maturity of 9 3/4%
senior discount notes due 2014. The gross proceeds at issuance of $360,000,115 were used to fund
in part the Recapitalization. Interest on the notes accretes until March 15, 2009 up to the
aggregate principal amount of $577,173,000. Cash interest will accrue and be payable semi-annually
in arrears on March 15 and September 15, commencing on September 15, 2009. Due to our holding
company status, payments of principal and interest under these notes will be dependent on loans,
dividends and other payments from our subsidiaries. At December 31, 2004, the accreted principal
balance of the notes was $386,731,442. Upon a change of control, we would be required to make an
offer to repurchase all of the 9 3/4% senior discount notes at a price equal to 101% of the accreted
value of the notes plus accrued and unpaid interest, if any, through the date of purchase. Our
subsidiaries have no obligation, contingent or otherwise, to pay the amounts due under the 9 3/4%
senior discount notes or to make funds available to pay those amounts. The 9 3/4% senior discount
notes are general, unsecured senior obligations of ours that are effectively subordinated to the
indebtedness and other liabilities of our subsidiaries. Historical Financings Senior Subordinated Notes On March 16, 2004, in connection with the Recapitalization, Cinemark USA, Inc. initiated a
tender offer for its then outstanding $105 million aggregate principal amount 8 1/2% senior
subordinated notes due 2008 and a consent solicitation to remove substantially all restrictive
covenants in the indenture governing those notes. On March 25, 2004, a supplemental indenture
removing substantially all of the covenants was executed and became effective on the date of the
Recapitalization. On April 2, 2004, Cinemark USA, Inc. redeemed $94.1 million aggregate principal
amount of 8 1/2% senior subordinated notes that were tendered, pursuant to the tender offer,
utilizing a portion of the proceeds from its amended senior secured credit facility. On April 14,
2004, after the expiration of the tender offer, Cinemark USA, Inc. redeemed an additional $50,000
aggregate principal amount of 8 1/2% senior subordinated notes that were tendered, leaving
outstanding $10.8 million aggregate principal amount of 8 1/2% senior subordinated notes. On April 6, 2004, as a result of the consummation of the Recapitalization and in accordance
with the terms of the indenture governing its 9% senior subordinated notes due 2013, Cinemark USA,
Inc. made a change of control offer to purchase the 9% senior subordinated notes at a purchase
price of 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, at the
date of purchase. Approximately $17.8 million in aggregate principal amount of the 9% senior
subordinated notes were tendered and not withdrawn in the change of control offer, which expired on
May 26, 2004. Payment of the change of control price was made with available cash by Cinemark USA,
Inc. on June 1, 2004. On July 28, 2004, Cinemark USA, Inc. provided notice to the holders of its remaining
outstanding 8 1/2% senior subordinated notes due 2008 of its election to redeem all outstanding notes
at a redemption price of 102.833% of the aggregate principal amount plus accrued interest. On
August 27, 2004, Cinemark USA, Inc. redeemed the remaining notes utilizing available cash and
borrowings under its revolving credit line. As
of December 31, 2004, Cinemark USA, Inc. had outstanding $342.3 million aggregate principal amount of 9%
senior subordinated notes due 2013. Interest is payable on February 1 and August 1 of each year.
Cinemark USA, Inc. may redeem all or part of the existing 9% notes on or after February 1, 2008.
Prior to February 1, 2006, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal
amount of the existing 9% notes from the proceeds of certain equity offerings. The senior subordinated notes are general, unsecured obligations and are subordinated in right
of payment to the amended senior secured credit facility or other senior indebtedness. The notes
are guaranteed by certain of our domestic subsidiaries. The guarantees are subordinated to the
senior debt of the subsidiary guarantors and rank pari passu with the senior subordinated debt of
our guarantor subsidiaries. The notes are effectively subordinated to the indebtedness and other
liabilities of our non-guarantor subsidiaries. 27




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The indentures governing the senior subordinated notes contain covenants that limit, among
other things, dividends, transactions with affiliates, investments, sale of assets, mergers,
repurchases of our capital stock, liens and additional indebtedness. Upon a change of control,
Cinemark USA, Inc. would be required to make an offer to repurchase the senior subordinated notes
at a price equal to 101% of the principal amount outstanding plus accrued and unpaid interest
through the date of repurchase. The indenture governing the senior
subordinated notes allows Cinemark USA, Inc. to
incur additional indebtedness if it satisfies the coverage ratio
specified in the indenture, after
giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. Senior Secured Credit Facility On February 14, 2003, Cinemark USA, Inc. entered into a senior secured credit facility
consisting of a $75 million five year revolving credit line and a $125 million term loan with
Lehman Commercial Paper, Inc. for itself and as administrative agent for a syndicate of lenders.
The net proceeds from the senior secured credit facility were used to repay, in full, certain debt
agreements, including its then existing credit facility. On August 18, 2003, Cinemark USA, Inc. amended the senior secured credit facility to provide a
$165 million term loan expiring on March 31, 2008. The net proceeds of the $165 million term loan
and additional borrowings under the $75 million five year revolving credit line were used to (i)
repay $124.7 million of term loans outstanding under its senior secured credit facility entered
into February 14, 2003 and (ii) redeem the remaining $42 million aggregate principal amount of its
then outstanding 9 5/8% senior subordinated notes on September 18, 2003. On April 2, 2004, Cinemark USA, Inc. amended its senior secured credit facility in connection
with the Recapitalization. The amended senior secured credit facility provides for a $260 million
seven year term loan and a $100 million six and one-half year revolving credit line. The net
proceeds from the amended senior secured credit facility were used to repay the existing term loan
of approximately $163.8 million and to redeem the approximately $94.2 million aggregate principal
amount of its then outstanding $105 million aggregate principal
amount 8 1/2% senior subordinated
notes due 2008 that were tendered pursuant to the tender offer. The amended senior secured credit facility was further amended on August 18, 2004 to, among
other things, reduce the interest rate applicable to the term loan. Under the amended term loan,
principal payments of $650,000 are due each calendar quarter through March 31, 2010 and increase to
$61,100,000 each calendar quarter from June 30, 2010 to maturity at March 31, 2011. The amended
term loan bears interest, at Cinemark USA, Inc.s option, at: (A) the base rate equal to the higher
of (i) the prime lending rate as set forth on the British Banking Association Telerate page 5 or
(ii) the federal funds effective rate from time to time plus 0.50%, plus a margin of 1.00% per
annum, or (B) a eurodollar rate plus a margin of 2.00% per annum. After the completion of two
fiscal quarters after the closing date, the margin under the amended term loan applicable to base
rate loans ranges from 0.75% per annum to 1.00% per annum and the margin applicable to eurodollar
rate loans ranges from 1.75% per annum to 2.00% per annum, and will be adjusted based upon Cinemark
USA, Inc. achieving certain performance targets. Borrowings under the amended revolving credit line bear interest, at Cinemark USA, Inc.s
option, at: (A) a base rate equal to the higher of (i) the prime lending rate as set forth on the
British Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to
time plus 0.50%, plus a margin of 1.50% per annum, or (B) a eurodollar rate plus a margin of
2.50% per annum. After the completion of two fiscal quarters after the closing date, the margin
under the amended revolving credit line applicable to base rate loans ranges from 1.00% per annum
to 1.50% per annum and the margin applicable to eurodollar rate loans ranges from 2.00% per annum
to 2.50% per annum, and will be adjusted based upon Cinemark USA, Inc. achieving certain
performance targets. Cinemark USA, Inc. is required to pay a commitment fee calculated at the
rate of 0.50% per annum on the average daily unused portion of the amended revolving credit line,
payable quarterly in arrears. Cinemark USA, Inc.s obligations under the amended senior secured credit facility are
guaranteed by us and certain of our subsidiaries and are secured by mortgages on certain fee and
leasehold properties and security interests in substantially all of its domestic personal and
intangible property, including without limitation, pledges of all of the capital stock of Cinemark
USA, Inc., all of the capital stock of CNMK Holding, Inc. and certain of Cinemark USA, Inc.s
domestic subsidiaries and 65% of the voting stock of certain of its foreign subsidiaries. 28




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##### Table of Contents



At December 31, 2004, there was approximately $258.1 million outstanding under the amended
term loan and no borrowings outstanding under the amended revolving credit line. Approximately
$99.9 million was available for borrowing under the amended revolving credit line, giving effect to
a $0.1 million letter of credit outstanding. The average interest rate on outstanding borrowings
under the amended senior secured credit facility at December 31, 2004 was 4.4% per annum. Cinemark Brasil Notes Payable As of December 31, 2004, Cinemark Brasil S.A. had four main types of funding sources executed
as follows: (1) Banco Nacional de Desenvolvimento Econômico e Social (BNDES, the Brazilian National
Development Bank) credit line in the U.S. dollar equivalent in Brazilian reais of US$3.8 million.
Interest accrues at a BNDES basket rate, which is a multiple currency rate based on the rate at
which the bank borrows, plus a spread amounting to 11.4%. At December 31, 2004, there was
approximately US$0.2 million outstanding, which matures in April 2005. (2) BNDES credit line in the U.S. dollar equivalent in Brazilian reais of US$1.9 million
executed in November 2001 with a maturity date of October 2006. Interest accrues at a BNDES basket
rate plus a spread amounting to 11.2%. At December 31, 2004, there was approximately US$0.9
million outstanding under this credit line. (3) Project developer financing executed with two engineering companies in September 2000 in
the amount of US$1.8 million with a maturity date of September 2005. Interest accrues at a rate of
TJLP+5% (Taxa de Juros de Longo Prazo (a long-term interest rate published by the Brazilian
government)). At December 31, 2004, there was approximately US$0.4 million outstanding under this
financing arrangement. (4) Project developer financing executed with a mall developer in February 2004 in the amount
of US$0.7 million with a maturity date of February 2009. Interest accrues at a rate of TJLP + 5.5%
(Taxa de Juros de Longo Prazo (a long-term interest rate published by the Brazilian government)).
At December 31, 2004, there was approximately US$0.7 million outstanding under this financing
arrangement. These sources are secured by a variety of instruments, including comfort letters from Cinemark
International, L.L.C., promissory notes for up to 130% of the value, a revenue reserve account and
equipment collateral. As of December 31, 2004, an aggregate of approximately US$2.2 million was
outstanding. Cinemark Chile Note Payable On March 26, 2002, Cinemark Chile S.A. entered into a Debt Acknowledgment, Rescheduling and
Joint Guarantee and Co-Debt Agreement with Scotiabank Sud Americano and three local banks. Under
this agreement, Cinemark Chile S.A. borrowed the U.S. dollar equivalent of approximately $10.6
million in Chilean pesos (adjusted for inflation pursuant to the Unidades de Fomento). Cinemark
Chile S.A. was required to make 24 equal quarterly installments of principal plus accrued and
unpaid interest, commencing March 27, 2002. On September 29, 2004, Cinemark Chile S.A. refinanced
the outstanding debt under an amended debt agreement with two of the original local banks,
Corpbanca and Banco Security. The amended debt agreement requires 24 equal quarterly installments
of principal plus accrued and unpaid interest, commencing December 31, 2004. The agreement
requires Cinemark Chile S.A. to maintain certain financial ratios and contains other restrictive
covenants typical for agreements of this type such as a limitation on dividends. Funds borrowed
under this agreement bear interest at the 90 day TAB Banking rate as published by the Association
of Banks and Financial Institutions Act plus 1.5%. At December 31, 2004, US$7.3 million was
outstanding under this agreement. Ratings We are rated by nationally recognized rating agencies. The significance of individual ratings
varies from agency to agency. However, companies assigned ratings at the top end of the range have,
in the opinion of certain rating agencies, the strongest capacity for repayment of debt or payment
of claims, while companies at the bottom end of the range have the weakest capability. Ratings are
always subject to change and there can be no assurance that our 29




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current ratings will continue for any given period of time. A downgrade of our debt ratings,
depending on the extent, could increase the cost to borrow funds. Below are our latest ratings per
category, which were current as of February, 28, 2005. Category
    
    Moodys
    
    Standard and PoorsCinemark, Inc. 9 3/4% Senior Discount Notes
    
    B-
    
    Caa1Cinemark USA, Inc. Senior Secured Credit
Facility
    
    Ba3
    
    BB-Cinemark USA, Inc. 9% Senior Subordinated
Notes
    
    B3
    
    B-
 New Accounting Pronouncements In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No.
46 (FIN 46), Consolidation of Variable Interest Entities  an Interpretation of Accounting
Research Bulletin (ARB) No. 51. FIN 46 addresses consolidation by business enterprises of
variable interest entities. FIN 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the variable interest
entitys activities or entitled to receive a majority of the entitys residual returns or both. We
adopted FIN 46 on January 1, 2004. The adoption of FIN 46 did not have a material impact on our
consolidated financial statements. In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No.
153, Exchanges of Non-monetary Assets-Amendment of APB Opinion No. 29. SFAS No. 153 amends
Accounting Principles Board (APB) Opinion No. 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance, defined as transactions that are not
expected to result in significant changes in the cash flows of the reporting entity. This statement
is effective for exchanges of non-monetary assets occurring after June 15, 2005. The adoption of
SFAS No. 153 is not expected to have a material impact on our consolidated financial statements. In
December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which
establishes
accounting standards for all transactions in which an entity exchanges its equity
instruments for goods and
services. SFAS No. 123(R) focuses primarily on accounting for transactions with
employees, and carries
forward without change prior guidance for share-based payments for transactions with non
employees. SFAS No. 123(R) eliminates the intrinsic value measurement objective in APB
Opinion No. 25 and generally requires us to measure the cost of employee services received in
exchange for an award of equity instruments based on the fair value of the award on the date of the
grant. The standard requires grant date fair value to be estimated
using either an option-pricing model which is consistent with the terms of the award or a
market observed
price, if such a price exists. Such cost must be recognized over the period during which
an employee is
required to provide service in exchange for the award (which is usually the
vesting period). The standard also requires us to estimate the number of instruments that will
ultimately be issued, rather than accounting for forfeitures as they occur. We
are required to apply SFAS No. 123(R) to all awards granted, modified or settled in our first
annual reporting period after December 15, 2005. We will be required to use the modified
prospective method, under which we must recognize compensation cost for all awards granted
after we adopt the standard and for the unvested portion of previously granted awards
that are outstanding on that date. We have commenced our analysis of the impact of SFAS
123(R), but cannot predict with reasonable certainty the number of options that will be
unvested and outstanding on December 31, 2005. Accordingly, we cannot currently quantify
with precision the effect that this standard will have on our financial position or
results of operations. FASB Staff Position (FSP) No. 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004 (the Jobs Act)
provides guidance on enterprises income tax expense and deferred tax liability. The Jobs Act was
enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the
financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for
reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109 30




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##### Table of Contents



Accounting for Income Taxes. We have not yet completed evaluating the impact of the
repatriation provisions. We are currently performing an earnings and profit study to enable us to
model and evaluate the impact. Results cannot be estimated at this time. Accordingly, as provided
for in FSP 109-2, we have not adjusted our tax expense or deferred tax liability to reflect the
repatriation provisions of the Jobs Act. We expect to complete our evaluation in 2005. 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk We have exposure to financial market risks, including changes in interest rates, foreign
currency exchange rates and other relevant market prices. Interest Rate Risk An increase or decrease in interest rates would affect interest costs relating to our variable
rate debt facilities. We and our subsidiaries are currently parties to such variable rate debt
facilities. At December 31, 2004, there was an aggregate of approximately $271.8 million of
variable rate debt outstanding under these facilities. Based on interest rates in effect on our
variable rate debt outstanding at December 31, 2004, a 10% increase in these rates would not
increase our annual interest expense by a material amount. Changes in interest rates do not have a
direct impact on interest expense relating to the remaining fixed rate debt facilities. The tables below provide information about our fixed rate and variable rate long-term debt
agreements as of December 31, 2004 and 2003: Expected Maturity As of December 31, 2004(in millions)
    
    
    
    
    
    
    AverageDecember 31,
    
    
    Fair
    
    
    Interest2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Total
    
    
    Value
    
    
    RateFixed rate
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    932.1
    
    
    $
    932.3
    
    
    $
    741.0
    
    
    
    9.5
    %Variable rate
    
    
    6.4
    
    
    
    6.5
    
    
    
    5.0
    
    
    
    4.0
    
    
    
    3.9
    
    
    
    246.0
    
    
    
    271.8
    
    
    
    271.4
    
    
    
    4.5
    %Total debt
    
    $
    6.5
    
    
    $
    6.6
    
    
    $
    5.0
    
    
    $
    4.0
    
    
    $
    3.9
    
    
    $
    1,178.1
    
    
    $
    1,204.1
    
    
    $
    1,012.4
 Expected Maturity As of December 31, 2003(in millions)
    
    
    
    
    
    
    AverageDecember 31,
    
    
    Fair
    
    
    Interest2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    Thereafter
    
    
    Total
    
    
    Value
    
    
    RateFixed rate
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    104.5
    
    
    $
    374.2
    
    
    $
    478.9
    
    
    $
    474.4
    
    
    
    8.9
    %Variable rate
    
    
    6.6
    
    
    
    6.9
    
    
    
    4.4
    
    
    
    121.8
    
    
    
    39.8
    
    
    
    
    
    
    
    179.5
    
    
    
    179.2
    
    
    
    4.1
    %Total debt
    
    $
    6.7
    
    
    $
    6.9
    
    
    $
    4.5
    
    
    $
    121.8
    
    
    $
    144.3
    
    
    $
    374.2
    
    
    $
    658.4
    
    
    $
    653.6
 Foreign Currency Exchange Rate Risk We are also exposed to market risk arising from changes in foreign currency exchange rates as
a result of our international operations. Generally, we export from the U.S. certain of the
equipment and construction interior finish items and other operating supplies used by our
international subsidiaries. Principally all the revenues and operating expenses of our
international subsidiaries are transacted in the countrys local currency. Generally accepted
accounting principles in the U.S. require that our subsidiaries use the currency of the primary
economic environment in which they operate as their functional currency. If our subsidiaries
operate in a highly inflationary economy, generally accepted accounting principles in the U.S.
require that the U.S. dollar be used as the functional currency for the subsidiary. Currency
fluctuations result in us reporting exchange gains (losses) or foreign currency translation
adjustments relating to our international subsidiaries depending on the inflationary environment of
the country in which we operate. Based upon our equity ownership in our international subsidiaries
as of December 31, 2004, holding everything else constant, a 10% immediate unfavorable change in
each of the foreign currency 31




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exchange rates to which we are exposed would decrease the net fair value of our investments in
our international subsidiaries by approximately $13 million. The accumulated other comprehensive loss account in stockholders equity of $86,544,422 and
$77,121,825 at December 31, 2003 and December 31, 2004, respectively, primarily relates to the
cumulative foreign currency adjustments from translating the financial statements of Cinemark
Argentina, S.A., Cinemark Brasil S.A. and Cinemark de Mexico, S.A. de C.V. into U.S. dollars. In 2003 and 2004, all foreign countries where we have operations, including Argentina, Brazil
and Mexico were deemed non-highly inflationary. Thus, any fluctuation in the currency results in a
cumulative foreign currency translation adjustment to the accumulated other comprehensive loss
account recorded as an increase in, or reduction of, stockholders equity. On December 31, 2004, the exchange rate for the Brazilian real was 2.65 reais to the U.S.
dollar (the exchange rate was 2.89 reais to the U.S. dollar at December 31, 2003). As a result, the
effect of translating the December 31, 2004 Brazilian financial statements into U.S. dollars is
reflected as a cumulative foreign currency translation adjustment to the accumulated other
comprehensive loss account as an increase in stockholders equity of $8,711,434. At December 31,
2004, the total assets of our Brazilian subsidiaries were U.S. $101,268,957. On December 31, 2004, the exchange rate for the Mexican peso was 11.22 pesos to the U.S.
dollar (the exchange rate was 11.20 pesos to the U.S. dollar at December 31, 2003). The effect of
translating the December 31, 2004 Mexican financial statements into U.S. dollars was immaterial to
the change in the accumulated other comprehensive loss account. At December 31, 2004, the total
assets of our Mexican subsidiaries were U.S. $100,886,012. On December 31, 2004, the exchange rate for the Argentine peso was 2.97 pesos to the U.S.
dollar (the exchange rate was 2.94 pesos to the U.S. dollar at December 31, 2003). The effect of
translating the December 31, 2004 Argentine financial statements into U.S. dollars was immaterial
to the change in the accumulated other comprehensive loss account. At December 31, 2004, the total
assets of our Argentine subsidiaries were U.S. $16,880,777. During 2004, we sold our United Kingdom theatres, which resulted in a reduction of
stockholders equity upon the realization of $1,075,684 of cumulative foreign currency translation
adjustments previously recorded in the accumulated other comprehensive loss account. 
 Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data are listed on the Index on page F-1. Such
financial statements and supplementary data are included herein beginning on page F-3. 
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. 
 Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We have established a system of controls and other procedures designed to ensure that
information required to be disclosed in our periodic reports filed under the Securities Exchange
Act of 1934 (the Exchange Act), as amended, is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commissions rules and forms.
These disclosure controls and procedures have been evaluated under the direction of our Chief
Executive Officer and Chief Financial Officer for the period covered by this report. Based on such
evaluations, the Chief Executive Officer and Chief Financial Officer have concluded that the
disclosure controls and procedures are effective in alerting them in a timely basis to material
information relating to the 32




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Company and its consolidated subsidiaries required to be included in our reports filed or
submitted under the Exchange Act. Changes in Internal Controls There have been no significant changes in our system of internal controls or in other factors
that could significantly affect internal controls within the period covered by this report or
subsequent to the evaluation by the Chief Executive Officer and Chief Financial Officer. 
 
 PART III 
 Item 10. Directors and Executive Officers of the Registrant Name
    
    Age
    
    PositionLee Roy Mitchell
    
    
    68
    
    
    Chairman of the Board; Chief Executive Officer; DirectorTandy Mitchell
    
    
    54
    
    
    Executive Vice President; Assistant SecretaryAlan Stock
    
    
    44
    
    
    President; Chief Operating OfficerRobert Copple
    
    
    46
    
    
    Senior Vice President; Treasurer; Chief Financial Officer; Assistant SecretaryTim Warner
    
    
    60
    
    
    Senior Vice President; President of
Cinemark International, L.L.C.Robert Carmony
    
    
    47
    
    
    Senior Vice President-OperationsMargaret Richards
    
    
    46
    
    
    Vice President-Real Estate; Assistant SecretaryJohn Lundin
    
    
    55
    
    
    Vice President-Film LicensingWalter Hebert, III
    
    
    59
    
    
    Vice President-PurchasingDon Harton
    
    
    47
    
    
    Vice President-ConstructionMichael Cavalier
    
    
    38
    
    
    Vice President-General Counsel; SecretaryTerrell Falk
    
    
    54
    
    
    Vice President-Marketing and CommunicationsTom Owens
    
    
    48
    
    
    Vice President-DevelopmentBenjamin D Chereskin
    
    
    46
    
    
    DirectorJames N Perry, Jr
    
    
    44
    
    
    DirectorRobin P Selati
    
    
    39
    
    
    DirectorVahe A Dombalagian
    
    
    31
    
    
    DirectorEnrique F Senior
    
    
    61
    
    
    DirectorPeter R Ezersky
    
    
    44
    
    
    Director
 As
a result of the Recapitalization, which occurred on April 2,
2004, the following directors resigned from Cinemark USA, Inc.s Board of Directors: Mrs. Tandy
Mitchell, Mr. Alan Stock, Mr. Robert Copple, Mr. W. Bryce Anderson, Mr. Heriberto Guerra, Jr., Mr.
James Stern, Mr. Denny Rydberg, and Mr. William Spiegel. The Company has adopted a code of ethics applicable to its principal executive officer and its
principal financial officer. The following is a brief description of the business experience of each of our current
directors and executive officers. Lee Roy Mitchellhas served as Chairman of the Board since March 1996 and as Chief Executive
Officer and a Director since our inception in 1987. Since March 1999, Mr. Mitchell has served as a
director of Texas Capital Bancshares, Inc., a bank holding company. Mr. Mitchell has served on the
Board of Directors of the National Association of Theatre Owners since 1991. Mr. Mitchell is the
husband of Tandy Mitchell. 33




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##### Table of Contents



Tandy Mitchellhas served as Executive Vice President since October 1989 and Assistant
Secretary since December 2003. Mrs. Mitchell also served as Vice Chairman of the Board from March
1996 to April 2004. Mrs. Mitchell is the wife of Lee Roy Mitchell and sister of Walter Hebert, III. Alan Stockhas served as President since March 1993 and as Chief Operating Officer since March
1992. Mr. Stock also served as a Director from April 1992 until April 2004. Robert Copplehas served as Senior Vice President, Treasurer, Chief Financial Officer and
Assistant Secretary since August 2000 and also served as a Director from September 2001 to April
2004. Mr. Copple was acting Chief Financial Officer from March 2000 to August 2000. Tim Warnerhas served as Senior Vice President since May 2002 and President of Cinemark
International, L.L.C. since April 1996. Mr. Warner has served on the Board of Directors of the
National Association of Theatre Owners since 1982 and was the Chairman of the National Association
of Theatre Owners International Committee from 2002 through 2004. Robert Carmonyhas served as Senior Vice President-Operations since July 1997. Margaret Richardshas served as Vice President-Real Estate since March 1994 and as Vice
President and Assistant Secretary since October 1989. John Lundinhas served as Vice President-Film Licensing since September 2000 and as Head Film
Buyer from September 1997 to September 2000. Walter Hebert, IIIhas served as Vice PresidentPurchasing since July 1997. Mr. Hebert is the
brother of Tandy Mitchell. Don Hartonhas served as Vice President-Construction since July 1997. Michael Cavalierhas served as Vice President-General Counsel since July 1999, as Assistant
Secretary from December 2002 to December 2003 and as Secretary since December 2003. Terrell Falkhas served as Vice President-Marketing and Communications since April 2001. From
March 1998 to April 2001, Ms. Falk was Director of Large Format Theatres, overseeing the marketing
and operations of our IMAX theatres. Tom Owenshas served as Vice President-Development since December 2003 and as Director of Real
Estate since April 2001. From 1998 to April 2001, Mr. Owens was President of NRE, a company he
founded that specialized in the development and financing of motion picture theatres. From 1996 to
1998, Mr. Owens served as President of Silver Cinemas International, Inc., a motion picture
exhibitor. In May 2002, Silver Cinemas International, Inc., filed for bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code. Benjamin D. Chereskinhas served as a Director since April 2004. Mr. Chereskin is a Managing
Director of Madison Dearborn Partners, LLC and co-founded the firm in 1993. Previously, Mr.
Chereskin was with First Chicago Venture Capital for nine years. Mr. Chereskin also serves on the
Board of Directors of Cornerstone Brands, Inc., Tuesday Morning Corporation, NWL Holdings, Inc.,
Family Christian Stores, Inc. and Carrols Holdings Corp. James N. Perry, Jr.has served as a Director since April 2004. Mr. Perry is a Managing
Director of Madison Dearborn Partners, LLC and has been employed by the firm since 1993.
Previously, Mr. Perry was with First Chicago Venture Capital for eight years. Mr. Perry currently
serves on the Board of Directors of Nextel Partners, Inc., Cbeyond Communications, LLC, Madison
River Telephone Company, Intelsat, Ltd., and Band-X. Robin P. Selatihas served as a Director since April 2004. Mr. Selati is a Managing Director
of Madison Dearborn Partners, LLC and has been employed by the firm since 1993. Previously, Mr.
Selati was with Alex, 34




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##### Table of Contents



Brown & Sons Incorporated, an investment bank. Mr. Selati currently serves on the Board of
Directors of Tuesday Morning Corporation, Peter Piper, Inc., NWL Holdings, Inc., Carrols Holdings
Corporation, Family Christian Stores, Inc., Ruths Chris Steak House, Inc., Beverages & More, Inc.,
and Pierre Foods, Inc. Vahe
A. Dombalagianhas served as a Director since April 2004.
Mr. Dombalagian is a Director of Madison Dearborn Partners, LLC and has been employed by the firm since July 2001.
From August 1997 to August 1999, Mr. Dombalagian was an Associate with Texas Pacific Group, a
private equity firm. Mr. Dombalagian currently serves on the Board of Directors of Outsourcing
Solutions, Inc. Enrique
F. Seniorhas served as a Director since July 2004. Mr. Senior is a Managing
Director of Allen & Company LLC, formerly Allen & Company Incorporated, and has been employed by
the firm since 1973. Previously Mr. Senior was with White, Weld & Company for three years. Mr.
Senior currently serves on the Board of Directors of Grupo Televisa S.A. de C.V., Coca Cola FEMSA
S.A. de C.V., and Premiere Retail Networks, Inc. Peter
R. Ezerskyhas served as a Director since December 2004. Mr. Ezersky is a Managing
Principal of Quadrangle Group LLC and co-founded the firm in 2000. Previously, Mr. Ezersky was with
Lazard Freres & Co., LLC for ten years and The First Boston Corporation for four years. Mr. Ezersky
also serves on the Board of Directors of GT Brands Holdings LLC and Publishing Group of America. 35




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##### Table of Contents



Item 11. Executive Compensation The following Summary Compensation Table sets forth the compensation earned by the Companys
Chief Executive Officer and the four most highly compensated executive officers: Long-TermCompensationAnnual Compensation
    
    
    AwardsSecurities
    
    
    All OtherSalary(1)
    
    
    Bonus
    
    
    Underlying
    
    
    CompensationName and Principal Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    Options/SAR
    
    
    ($)Lee Roy Mitchell,
    
    
    2004
    
    
    $
    716,625
    
    
    $
    417,526
    (2)
    
    
    
    
    
    $
    2,532,271
    (5)Chairman of the Board
    
    
    2003
    
    
    
    682,500
    
    
    
    652,740
    (3)
    
    
    
    
    
    
    132,020
    (6)and Chief Executive Officer
    
    
    2002
    
    
    
    572,870
    
    
    
    975,000
    (4)
    
    
    
    
    
    
    124,309
    (7)Alan Stock, President
    
    
    2004
    
    
    
    424,086
    
    
    
    247,084
    (2)
    
    
    307,499
    (13)
    
    
    4,315,751
    (8)and Chief Operating
    
    
    2003
    
    
    
    403,891
    
    
    
    98,826
    (3)
    
    
    
    
    
    
    10,500
    (9)Officer
    
    
    2002
    
    
    
    384,658
    
    
    
    230,795
    (4)
    
    
    
    
    
    
    9,750
    (9)Tim Warner, Senior Vice
    
    
    2004
    
    
    
    343,901
    
    
    
    200,366
    (2)
    
    
    307,499
    (13)
    
    
    3,929,017
    (10)President and President -
    
    
    2003
    
    
    
    327,525
    
    
    
    80,140
    (3)
    
    
    
    
    
    
    10,500
    (9)Cinemark International, L.L.C.
    
    
    2002
    
    
    
    311,929
    
    
    
    187,157
    (4)
    
    
    
    
    
    
    9,750
    (9)Robert Copple, Senior
    
    
    2004
    
    
    
    309,665
    
    
    
    180,419
    (2)
    
    
    307,499
    (13)
    
    
    3,162,632
    (11)Vice President and
    
    
    2003
    
    
    
    294,919
    
    
    
    72,162
    (3)
    
    
    
    
    
    
    10,500
    (9)Chief Financial Officer
    
    
    2002
    
    
    
    280,875
    
    
    
    168,525
    (4)
    
    
    
    
    
    
    9,750
    (9)Robert Carmony, Senior
    
    
    2004
    
    
    
    298,529
    
    
    
    173,931
    (2)
    
    
    199,874
    (13)
    
    
    1,814,225
    (12)Vice President 
    
    
    2003
    
    
    
    284,313
    
    
    
    69,567
    (3)
    
    
    
    
    
    
    9,035
    (9)Operations
    
    
    2002
    
    
    
    270,775
    
    
    
    162,465
    (4)
    
    
    
    
    
    
    9,750
    (9)
   (1)
    
    Amounts shown include cash and non-cash compensation earned and received by executive
officers.(2)
    
    Bonuses were earned in 2004 but were paid in 2005.(3)
    
    Bonuses were earned in 2003 but were paid in 2004.(4)
    
    Bonuses were earned in 2002 but were paid in 2003.(5)
    
    Represents a $10,762 annual contribution to our 401(k) savings plan, $22,665 representing
the value of the use of a company vehicle for one year and $98,844 of life insurance premiums
paid by us for the benefit of Mr. Mitchell and a $2,400,000 bonus payment made to Mr. Mitchell
under Mr. Mitchells new employment agreement upon the Recapitalization of Cinemark, Inc.(6)
    
    Represents a $10,500 annual contribution to our 401(k) savings plan, $22,665 representing the
value of the use of a company vehicle for one year and $98,855 of life insurance premiums paid
by us for the benefit of Mr. Mitchell. 36




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##### Table of Contents



(7)
    
    Represents a $2,800 annual contribution to our 401(k) savings plan, $22,665 representing the
value of the use of a company vehicle for one year and $98,844 of life insurance premiums paid
by us for the benefit of Mr. Mitchell.(8)
    
    Represents a $10,762 contribution to our 401(k) savings plan, $364,699 payment under Mr.
Stocks profit participation agreement for certain of our theatres, and, upon the
Recapitalization a $1,742,391 payment made to Mr. Stock under a sale bonus agreement, a
$1,159,640 change of control compensation payment under Mr. Stocks prior employment agreement, a
$50,000 bonus payment under Mr. Stocks new employment agreement and $988,259 net
consideration paid for options that were acquired as part of the Recapitalization.(9)
    
    Represents an annual contribution to our 401(k) savings plan.(10)
    
    Represents a $10,762 contribution to our 401(k) savings plan, and, upon the Recapitalization,
a $1,939,614 payment made to Mr. Warner under a sale bonus agreement, a $940,382 change of
control compensation payment under Mr. Warners prior employment agreement, a $50,000 bonus payment
under Mr. Warners new employment agreement and $988,259 net consideration paid for options
that were acquired as part of the Recapitalization.(11)
    
    Represents a $10,762 contribution to our 401(k) savings plan, and, upon the Recapitalization,
a $1,733,757 payment made to Mr. Copple under a sale bonus agreement, a $846,763 change of
control compensation payment under Mr. Copples prior employment agreement, a $50,000 bonus payment
under Mr. Copples new employment agreement and $521,350 net consideration paid for options
that were acquired as part of the Recapitalization.(12)
    
    Represents a $9,652 contribution to our 401(k) savings plan, and, upon the Recapitalization,
a $816,314 change of control compensation payment under Mr. Carmonys prior employment agreement and
$988,259 net consideration paid for options that were acquired as part of the
Recapitalization.(13)
    
    On September 30, 2004, we granted each of Mr. Stock, Mr. Warner, and Mr. Copple options to
purchase an aggregate of 307,499 shares of Class A common stock and granted Mr. Carmony
options to purchase an aggregate of 199,874 shares of Class A common stock under our Long Term
Incentive Plan at an exercise price of $22.58 per share. On the date of grant, our Class A
common stock had a market value of $22.58 per share. For Messrs. Stock, Warner and Copple,
options to purchase 30,497 shares vested immediately and for Mr. Carmony, options to purchase
19,823 shares vested immediately. The remaining options vest daily over the period ending
April 1, 2009. 37




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##### Table of Contents



Options/ Stock Appreciation Right Grants in Last Fiscal Year There were no stock appreciation rights granted or exercised during the year ended December
31, 2004. The following table shows option grants for each of our named executive officers during
the most recent fiscal year ended December 31, 2004. Percent of
    
    
    
    
    
    
    
    Potential Realizable Value atNumber of
    
    
    Total Options

    
    
    
    
    
    
    
    Assumed Annual Rates of StockSecurities
    
    

Granted
to

    
    
    
    
    

    
    
    Price Appreciation for OptionUnderlying Options
    
    
    Employees
    
    Exercise
    
    
    Expiration
    
    Term (1)Executive Officer
    
    Granted (#)
    
    
    During Fiscal Year

    
    Price ($)
    
    
    Date
    
    5%
    
    
    10%Lee Roy Mitchell
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    N/A
    
    $
    
    
    
    $
    Alan Stock
    
    
    307,499
    
    
    
    13.0
    %
    
    $
    22.58
    
    
    Sep. 29, 2014
    
    $
    4,019,455
    
    
    $
    10,371,543Tim Warner
    
    
    307,499
    
    
    
    13.0
    %
    
    $
    22.58
    
    
    Sep. 29, 2014
    
    $
    4,019,455
    
    
    $
    10,371,543Robert Copple
    
    
    307,499
    
    
    
    13.0
    %
    
    $
    22.58
    
    
    Sep. 29, 2014
    
    $
    4,019,455
    
    
    $
    10,371,543Robert Carmony
    
    
    199,874
    
    
    
    8.5
    %
    
    $
    22.58
    
    
    Sep. 29, 2014
    
    $
    2,612,641
    
    
    $
    6,741,491
   (1)
    
    Reflects the purchase price paid by an affiliate of Madison to acquire our stock in
connection with the Recapitalization and the purchase price of subsequent sales of our common
stock to third party investors through December 30, 2004 paid by third parties to an affiliate
of Madison. Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value Table The following table shows the value realized on option exercises for each of our named
executive officers during the most recent fiscal year ended December 31, 2004 and the number of
securities underlying exercised and unexercised options at December 31, 2004. Value ofNumber of Securities
    
    
    Unexercised In-Shares
    
    
    
    
    
    
    Underlying
    
    
    the-MoneyAcquired on
    
    
    
    
    
    
    Unexercised Options
    
    
    Options at FYExecutive Officer
    
    Exercise (#)
    
    
    Value Realized ($)
    
    
    at FY End (#)
    
    

    End (3)Lee Roy Mitchell
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Alan Stock
    
    
    66,000
    (1)
    
    $
    988,259
    (1)
    
    
    307,499
    
    
    $
    0Tim Warner
    
    
    66,000
    (1)
    
    $
    988,259
    (1)
    
    
    307,499
    
    
    $
    0Robert Copple
    
    
    99,000
    (2)
    
    $
    521,350
    (2)
    
    
    307,499
    
    
    $
    0Robert Carmony
    
    
    66,000
    (1)
    
    $
    988,259
    (1)
    
    
    199,874
    
    
    $
    0
   (1) Messrs. Stock, Warner and Carmony each owned options to purchase 66,000
shares of Class A common stock with an exercise price of $7.61 per share. Upon the closing of the
Recapitalization, Messrs. Stock, Warner and Carmony each received consideration of approximately
$22.58 per share less the applicable exercise price. As part of the Recapitalization, Mr. Stock
purchased 83,526 shares and Mr. Warner purchased 82,892 shares of Class A common stock with the
net proceeds received from the sale of their respective options.(2) Mr. Copple owned options to purchase 99,000 shares of Class A common stock with an exercise
price of $1.50 per share. All of these options were incentive stock options. Upon the closing of
the Recapitalization, Mr. Copple exercised options and received stock for 74,272 shares of
Class A common stock and received consideration of approximately $22.58 per share less the
applicable exercise price for the remaining options to purchase 24,728 shares.(3) The exercise price of vested options was equal to the market value of the underlying securities
at fiscal year end. 38




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##### Table of Contents



Director Compensation Our
directors are elected each year by our stockholders to serve for a one year term and until
their successors are elected and qualified. Directors are reimbursed for expenses actually
incurred for each Board meeting which they attend. In addition, independent directors may receive
a fee for each meeting of the Board of Directors attended by such person. Our executive officers
are elected by the Board of Directors to serve at the discretion of the Board. Committees of the Board of Directors The Board of Directors has established an audit committee and a compensation committee. Mr.
Dombalagian is serving as the initial chairman and sole member of the audit committee, and Mr.
Chereskin is serving as the initial chairman of the compensation committee. The audit committee
recommends the annual appointment of auditors. The audit committee reviews the scope of audit and
non-audit services and related fees, accounting principles we use in financial reporting, and the
adequacy of our internal control procedures. The compensation committee reviews and approves the
compensation and benefits for our executive officers, authorizes and ratifies stock option grants
and other incentive arrangements, and authorizes employment and related agreements. The Board of
Directors may contemplate establishing other committees. Employment Agreements On March 12, 2004, we entered into new employment agreements with certain executives which
became effective upon the consummation of the Recapitalization on April 2, 2004. In addition, in
connection with the Recapitalization, we paid a one-time special bonus in the amount of $2.4
million to Lee Roy Mitchell and in the amount of $50,000 to each of Alan Stock, Tim Warner and
Robert Copple. Set forth below is a summary of the new agreements. Lee Roy Mitchell We entered into an employment agreement with Lee Roy Mitchell pursuant to which Mr. Mitchell
serves as our Chief Executive Officer. The employment agreement became effective upon the
consummation of the Recapitalization. The initial term of the employment agreement is three years,
subject to an automatic extension for a one-year period, unless the employment agreement is
terminated. Mr. Mitchell receives a base salary of $716,625 per year, which is subject to annual
review for increase (but not decrease) each year by our Board of Directors or committee or delegate
thereof. In addition, Mr. Mitchell is eligible to receive an annual cash incentive bonus upon our
meeting certain performance targets established by the board or the compensation committee for the
fiscal year. Mr. Mitchell is also entitled to additional fringe benefits including life insurance
benefits of not less than $5 million, disability benefits of not less than 66% of base salary, a
luxury automobile and a membership at a country club. The employment agreement provides for
severance payments upon termination of employment, the amount and nature of which depends upon the
reason for the termination of employment. If Mr. Mitchell resigns for good reason or is terminated
by us without cause (as defined in the agreement), Mr. Mitchell will receive: accrued compensation
(which includes base salary and a pro rata bonus) through the date of termination; any previously
vested stock options and accrued benefits, such as retirement benefits, in accordance with the
terms of the plan or agreement pursuant to which such options or benefits were granted; his annual
base salary as in effect at the time of termination for a period of twelve months following such
termination; and an amount equal to the most recent annual bonus he received prior to the date of
termination. Mr. Mitchells equity-based or performance-based awards will become fully vested and
exercisable upon such termination or resignation. Mr. Mitchell may choose to continue to
participate in our benefit plans and insurance programs on the same terms as other actively
employed senior executives for a one-year period. Furthermore, so long as Mr. Mitchell remains
Chief Executive Officer, he will possess approval rights over certain significant transactions that
may be pursued by us. In the event Mr. Mitchells employment is terminated due to his death or disability, Mr.
Mitchell or his estate will receive: accrued compensation (which includes base salary and a pro
rata bonus) through the date of termination; any previously vested stock options and accrued
benefits, such as retirement benefits, in accordance 39




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with the terms of the plan or agreement pursuant to which such options or benefits were
granted; his annual base salary as in effect at the time of termination for a period of six months
following such termination; a lump sum payment equal to an additional six months of base salary
payable six months after the date of termination; and any benefits payable to Mr. Mitchell and or
his beneficiaries in accordance with the terms of any applicable benefit plan. In the event Mr. Mitchells employment is terminated by us for cause or under a voluntary
termination (as defined in the agreement), Mr. Mitchell will receive: accrued base salary through
the date of termination; and any previously vested rights under a stock option or similar incentive
compensation plan in accordance with the terms of such plan. Mr. Mitchell will also be entitled, for a period of five years, to tax preparation assistance
upon termination of his employment for any reason other than for cause or under a voluntary
termination. The employment agreement contains various covenants, including covenants related to
confidentiality, non-competition (other than certain permitted activities as defined therein) and
non-solicitation. Tandy Mitchell, Alan Stock, Robert Copple, Timothy Warner, Robert Carmony, John Lundin and
Michael Cavalier We entered into executive employment agreements with each of Tandy Mitchell, Alan Stock,
Robert Copple, Timothy Warner, Robert Carmony, John Lundin and Michael Cavalier pursuant to which
Mrs. Mitchell and Messrs. Stock, Copple, Warner, Carmony, Lundin and Cavalier serve, respectively,
as its and our Executive Vice President, President and Chief Operating Officer, Senior Vice
President and Chief Financial Officer, Senior Vice President, Senior Vice President of Operations,
Vice President of Film Licensing and Vice President and General Counsel. The employment agreements
became effective upon the consummation of the Recapitalization. The initial term of each employment
agreement is three years, subject to automatic extensions for a one-year period at the end of each
year of the term, unless the agreement is terminated. Pursuant to the employment agreements, each
of these individuals receives a base salary, which is subject to annual review for increase (but
not decrease) each year by our Board of Directors or committee or delegate thereof. In addition,
each of these executives is eligible to receive an annual cash incentive bonus upon our meeting
certain performance targets established by our Board of Directors or the compensation committee for
the fiscal year. Our Board of Directors has adopted a stock option plan and granted each executive stock
options to acquire such number of shares as set forth in that executives employment agreement. The
executives stock options vest and become exercisable twenty percent per year on a daily pro rata
basis and shall be fully vested and exercisable five years after the date of the grant, as long as
the executive remains continuously employed by us. Upon consummation of a sale of our company, the
executives stock options will accelerate and become fully vested. The employment agreement with each executive provides for severance payments on substantially
the same terms as the employment agreement for Mr. Mitchell, except that if the executive resigns
for good reason or is terminated by us without cause (as defined in the agreements) prior to the
first anniversary of the effectiveness of the employment agreement, the executive will receive his
or her annual base salary in effect at the time of termination for a period commencing on the date
of termination and ending on the second anniversary of the effective date (rather than for twelve
months); and an amount equal to the most recent annual bonus he or she received prior to the date
of termination pro rated for the number of days between such termination and the second anniversary
of the effective date (rather than a single annual bonus). Each executive will also be entitled to office space and support services for a period of not
more than three months following the date of any termination except for termination for cause. The
employment agreements contain various covenants, including covenants related to confidentiality,
non-competition and non-solicitation. Non-Competition, Non-Solicitation and Non-Disclosure Agreement Each of Lee Roy Mitchell, Tandy Mitchell, Alan Stock, Robert Copple, Timothy Warner, Robert
Carmony, John Lundin, Michael Cavalier and certain trusts, in his, her or its capacity as a seller
of our common stock, have entered into non-competition, non-solicitation and non-disclosure
agreements with us. These agreements became effective upon the consummation of the
Recapitalization. Pursuant to the agreements, each executive agreed not to compete with us for a
period of two years, and each executive agreed not to solicit its customers or hire its 40




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employees, or disparage our Company, for a period of three years. The obligation not to
compete will terminate prior to the two year period if we effect a sale of Cinemark, Inc. (as
defined in the agreements). In addition, each executive agreed not to disclose confidential
information for a period of three years. 401(k) Plan We sponsor a defined contribution savings plan, or 401(k) Plan, whereby certain employees may
elect to contribute, in whole percentages between 1% and 50% of such employees compensation,
provided no employees elective contribution shall exceed the amount permitted under Section 402(g)
of the Internal Revenue Code of 1986, as amended ($13,000 in 2004). We may make an annual
discretionary matching contribution. For plan years prior to 2002, our discretionary matching
contribution is subject to vesting and forfeiture. For these plan years, our discretionary matching
contributions vest to individual accounts at the rate of 20% per year beginning two years from the
date of employment, and employees are fully vested in the discretionary matching contributions
after six years of employment. For plan years beginning in 2002, our discretionary matching
contributions immediately vest. Stock Option Plan Upon consummation of the Recapitalization on April 2, 2004, all of our stock
options outstanding prior to the Recapitalization immediately vested and the majority were repurchased, resulting in compensation expense of
$16,245,270 recorded by us. See Note 3 to the consolidated financial statements for further
discussion of the Recapitalization. On September 30, 2004, our Board of Directors and the majority of our stockholders approved
the 2004 Long Term Incentive Plan (the Plan) under which 3,074,991 shares of Class A common stock
are available for issuance to selected employees, directors and consultants of ours. The Plan
provides for restricted share grants, incentive option grants and nonqualified option grants. On
September 30, 2004, we granted options to purchase 2,361,590 shares of our Class A common stock
under the Plan at an exercise price of $22.58 per option. The exercise price was equal to the fair
market value of our Class A common stock on the date of grant. Options to purchase 234,219 shares
vested immediately and the remaining options granted in 2004 vest daily over the period ending
April 1, 2009. The options expire ten years from the grant date. There were options to purchase
2,361,590 shares of our Class A common stock outstanding under the Plan as of December 31, 2004. A participants options under the Plan are forfeited if the participants service to us or any
of our subsidiaries is terminated for cause. At any time before our Class A common stock becomes
listed or admitted to unlisted trading privileges or a national securities exchange or designated
as a national market system security on an interdealer quotation system by the National Association
of Securities Dealers or if sale or bid and other offer quotations are reported for that class of
common stock on the NASDAQ National Market, we or a designee shall have the right to purchase any
shares of Class A common stock acquired on exercise of an option, any restricted shares issued
under the Plan and any exercisable options granted under the Plan. The purchase price in such event
shall be determined as provided in the Plan. Compensation Committee Interlocks and Insider Participation In April 2004, our Board of Directors established a Compensation Committee to study senior
management compensation and make recommendations to the Board of Directors as a whole relating to
said compensation. Mr. Chereskin currently serves as the chairman of the Compensation Committee.
Mr. Chereskin is not and has never been an officer of the Company. 41




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Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholders Matters Equity Compensation Plan Information The following table provides information about the securities authorized for issuance under
our equity compensation plans as of December 31, 2004: (c)Number of securitiesremaining available(a)
    
    
    (b)
    
    
    for future issuanceNumber of securities
    
    
    Weighted-average
    
    
    under equityto be issued upon
    
    
    exercise price of
    
    
    compensation plansexercise of
    
    
    outstanding
    
    
    (excluding securitiesoutstanding options,
    
    
    options, warrants
    
    
    reflected inPlan Category
    
    warrants and rights
    
    
    and rights
    
    
    column (a))Equity compensation
plans approved by
security holders
    
    
    2,361,590
    
    
    $
    22.58
    
    
    
    713,401Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,361,590
    
    
    $
    22.58
    
    
    
    713,401
 Beneficial Ownership The following table presents information regarding beneficial ownership of our common stock as
of February 28, 2005 by:  
    each person known by us to beneficially hold five percent or more of our common stock;
    each of our directors;
    each of our named executive officers; and
    all of our executive officers and directors as a group. Beneficial ownership has been determined in accordance with the applicable rules and
regulations, promulgated under the Securities Exchange Act of 1934, as amended. Unless indicated
below, to our knowledge, the persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to community property laws
where applicable. Shares of our common stock subject to options that are currently exercisable or
exercisable within 60 days of February 28, 2005 are deemed to be outstanding and to be beneficially
owned by the person holding the options for the purpose of computing the percentage ownership of
that person but are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. Percentage ownership is based on 27,674,916 shares of Class A common
stock issued and outstanding as of February 28, 2005. As of February 28, 2005, there were 13
holders of record of our Class A common stock. 42




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##### Table of Contents



Number ofSharesBeneficially
    
    Percent ofNames of Beneficial Owner (1)
    
    Owned
    
    ClassDirectors and Executive OfficersMadison Dearborn Capital Partners IV, L.P. (1)
    
    
    20,676,263
    
    
    
    74.7
    %Mitchell Special Trust (2)
    
    
    2,169,713
    
    
    
    7.8
    %Lee Roy Mitchell(3)
    
    
    4,427,986
    
    
    
    16.0
    %Quadrangle Capital Partners LP (4)
    
    
    2,213,993
    
    
    
    8.0
    %Alan W. Stock(5)
    
    
    149,575
    
    
    
    *Tim Warner (5)
    
    
    148,941
    
    
    
    *Robert Copple(5)
    
    
    140,321
    
    
    
    *Robert Carmony(6)
    
    
    42,931
    
    
    
    *Benjamin D. Chereskin (7)
    
    
    20,676,263
    
    
    
    74.7
    %James N. Perry, Jr. (7)
    
    
    20,676,263
    
    
    
    74.7
    %Robin P. Selati (7)
    
    
    20,676,263
    
    
    
    74.7
    %Vahe A. Dombalagian
    
    
    
    
    
    
    *Enrique
F. Senior (8)
    
    
    
    
    
    
    *Peter
R. Ezersky (9)
    
    
    2,213,993
    
    
    
    8.0
    %All directors and executive officers as a
group (19 persons)(10)
    
    
    27,973,351
    
    
    
    99.8
    %
   * Represents less than 1% (1) The address of Madison Dearborn Capital Partners IV, L.P. is Three First National Plaza,
Suite 3800, 70 West Madison Street, Chicago, Illinois 60602. (2) The address of the Mitchell Special Trust is 3900 Dallas Parkway, Suite 500, Plano, Texas
75093. (3) Includes 2,169,713 shares owned by the Mitchell Special Trust. Mr. Mitchell is the co-trustee
of the Mitchell Special Trust. Mr. Mitchell disclaims beneficial ownership of all shares held by
the Mitchell Special Trust. Mr. Mitchells address is c/o Cinemark, Inc., 3900 Dallas Parkway,
Suite 500, Plano, Texas 75093. (4) Includes 80,986 shares owned by Quadrangle Select Partners L.P. and 567,067 shares owned by
Quadrangle Capital Partners A LP. Quadrangle GP Investors LLC is the general partner of Quadrangle
GP Investors LP. Quadrangle GP Investors LP is the general partner of Quadrangle Capital Partners
LP, Quadrangle Select Partners LP and Quadrangle Capital Partners A LP. Quadrangle Capital Partners
LP disclaims beneficial ownership of all shares held by Quadrangle Select Partners LP and
Quadrangle Capital Partners A LP. The address of Quadrangle Capital Partners LP is c/o Quadrangle
Group LLC, 375 Park Avenue, New York, New York 10152. (5) Includes 66,049 shares of Class A common stock issuable upon the exercise of options that may
be exercised within 60 days of February 28, 2005. (6) Includes 42,931 shares of Class A common stock issuable upon the exercise of options that may
be exercised within 60 days of February 28, 2005. (7) Messrs. Chereskin, Perry and Selati are Managing Directors of Madison Dearborn Partners, LLC,
which is the General Partner of Madison Dearborn Partners IV, L.P., which is the General Partner of
Madison Dearborn Capital Partners IV, L.P., and they may therefore be deemed to share beneficial
ownership of the shares owned by Madison Dearborn Capital Partners IV, L.P. Messrs. Chereskin,
Perry and Selati expressly disclaim beneficial ownership of the shares owned by Madison Dearborn
Capital Partners IV, L.P. The address of Messrs. Chereskin, Perry and 43




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Selati is c/o Madison Dearborn Partners, LLC, Three First National Plaza, Suite 3800, 70 West
Madison Street, Chicago, Illinois 60602. (8) The address of Mr. Senior is 711 Fifth Avenue, New York, New York, 10022. (9) Mr. Ezersky is a Managing Member of Quadrangle GP Investors LLC, which is the general partner
of Quadrangle GP Investors LP. Quadrangle GP Investors LP is the general partner of Quadrangle
Capital Partners LP, Quadrangle Select Partners LP and Quadrangle Capital Partners A LP, and he may
therefore be deemed to share beneficial ownership of the 1,565,940 shares owned by Quadrangle
Capital Partners LP, the 80,986 shares owned by Quadrangle Select Partners LP and the 567,067
shares owned by Quadrangle Capital Partners A LP. Mr. Ezersky expressly disclaims beneficial
ownership of the shares owned by Quadrangle Capital Partners LP, Quadrangle Select Partners LP, and
Quadrangle Capital Partners A LP. The address of Mr. Ezersky is c/o Quadrangle Group LLC,
14th Floor, 375 Park Avenue, New York, New York 10152. (10) Includes 355,999 shares of Class A common stock issuable upon the exercise of options that
may be exercised within 60 days of February 28, 2005. 
 Item 13. Certain Relationships and Related Transactions Certain Agreements We manage one theatre with 12 screens for Laredo Theatre, Ltd. (Laredo). We are the sole
general partner and own 75% of the limited partnership interests of Laredo. Lone Star Theatres,
Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr.
David Roberts, Lee Roy Mitchells son-in-law. Under the agreement, management fees are paid by
Laredo to us at a rate of 5% of annual theatre revenues up to $50,000,000 and 3% of annual theatre
revenues in excess of $50,000,000. We recorded $190,834 of management fee revenues and received
dividends of $562,500 from Laredo during 2004. Laredo distributed dividends of $187,500 to Lone
Star Theatres in accordance with the terms of the limited partnership agreement. All such amounts
are included in our consolidated financial statements with the intercompany amounts eliminated in
consolidation. We lease one theatre from Plitt Plaza Joint Venture (Plitt Plaza) on a month-to-month basis.
Plitt Plaza is indirectly owned by Lee Roy Mitchell. Annual rent is approximately $118,000 plus
certain taxes, maintenance expenses and insurance. The Company recorded $137,723 of facility
expenses payable to Plitt Plaza joint venture during 2004. We paid approximately $72,000 to Addison Jet Management, Inc. for use of an airplane during
2004. Lee Roy Mitchell owns 50% of the airplane and leases the plane to Addison Jet Management,
Inc. Madison Dearborn Partners, LLC or an affiliate received a fee of approximately $12.5 million
plus out-of-pocket expenses incurred at the closing of the Recapitalization. In conjunction with the Recapitalization, Cinemark, Inc. paid fees of approximately $6 million
to Allen & Company LLC. Mr. Enrique Senior is a Managing Director of Allen & Company LLC and is a
member of our Board of Directors. Profit Participation We entered into an amended and restated profit participation agreement on March 12, 2004 with
our President, Alan Stock, which became effective upon consummation of the Recapitalization and
amends a profit participation agreement with Mr. Stock in effect since May 2002. Under the
agreement, Mr. Stock receives a profit interest in two theatres once we have recovered our capital
investment in these theatres plus our borrowing costs. During 2004, we recorded $599,818 in profit
participation expense payable to Mr. Stock, which is included in general and administrative expense
in our consolidated statements of income. We paid $364,699 of this amount to Mr. Stock during
2004. In the event that Mr. Stocks employment is terminated without cause, profits will be
distributed according to a formula set forth in the profit participation agreement. 44




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Stockholders Agreement On March 12, 2004, Madison Dearborn Capital Partners IV, L.P., an affiliate of Madison
Dearborn Partners, LLC, or the equity sponsor, the Mitchell investors and the management
investors entered into a stockholders agreement with us. The stockholders agreement became
effective on April 2, 2004 upon the consummation of the Recapitalization. Future holders of our
common stock, including any permitted co-investor introduced to us by the equity sponsor that
acquires a portion of the common stock which the equity sponsor has agreed to purchase, or a
co-investor, may also be required to become parties to the agreement. On December 30, 2004, we,
the equity sponsor, the Mitchell investors, the Quadrangle investors, the management investors and
our other stockholders entered into an Amended and Restated Stockholders Agreement. We refer to
the equity sponsor, the Quadrangle investors, the Mitchell investors, the management investors, the
other stockholders and their permitted transferees collectively as the Stockholders. Voting.The Stockholders will vote any voting securities over which they have control and will
take all other reasonably necessary or desirable actions to elect and continue in office, members
of our Board of Directors consisting of twelve members, initially composed of two persons
designated by the Mitchell investors, nine persons designated by the equity sponsor and one person
designated by the Quadrangle investors. The equity sponsor has the right to assign to a
co-investor, if any, the right to designate one of the ten directors the equity sponsor is entitled
to designate. Transfer restrictions.Stockholders may not transfer shares, other than in an exempt transfer,
which includes transfers to affiliates, transfers to family members in the case of a natural
person, transfers in connection with certain sales of our Company approved by our board or by the
equity sponsor and transfers by the management investors to us. Any such affiliates, family members
or other investors to which the Stockholders transfer our shares will agree in writing to be bound
by the provisions of the stockholders agreement. Rights of first refusal.We, the equity sponsor, the Mitchell investors and the Quadrangle
investors are granted certain rights of first refusal in connection with certain sales of our
shares by any of the Mitchell investors, the management investors, the investors or their permitted
assigns. We, the Mitchell investors and the Quadrangle investors are granted certain rights of
refusal in connection with certain transfers of our shares by the equity sponsor to any of our
competitors. Participation rights.Pursuant to the amended and restated stockholders agreement, the
Quadrangle investors, the Mitchell investors, the management investors and certain other
stockholders are granted certain tag-along rights, which entitle them to participate in certain
sales by the equity sponsor of the shares of our common stock held by the equity sponsor. Sale of Cinemark, Inc.Subject to certain exceptions, if our Board of Directors or the equity
sponsor approves a sale of our company, each of the Stockholders will vote for and consent to the
approved sale and will take all necessary and desirable actions in connection with the consummation
of the approved sale as reasonably requested by the board or by the equity sponsor. Holdback agreement.No management investor or his permitted transferee shall sell any of our
equity securities or any securities convertible into or exchangeable or exercisable for such
securities, during the period beginning on the effective date of any underwritten demand
registration or any underwritten piggyback registration pursuant to the equity registration
agreement as we and the underwriters managing the registration request. Preemptive rights.If we propose to issue any additional shares of our common stock or of any
other capital stock or equity securities, or any securities convertible into or exchangeable or
exercisable for shares of our stock, subject to certain exceptions, we will offer to each
Stockholder a portion of the number or amount of such securities proposed to be sold in any such
transaction. Anti-takeover measures.Prior to the commencement of an initial public offering of our shares,
the equity sponsor will request that our Board of Directors adopt reasonable and customary
anti-takeover measures, except to the extent that our Board of Directors determines in the
observance of its fiduciary duties that any such measures are 45




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not in the best interests of our stockholders, or the underwriters managing the initial public
offering advise us that any such measures will adversely affect such offering or offering price. Approval of certain transactions.So long as the Mitchell investors or the Quadrangle
investors and their permitted transferees own at least 5% of our outstanding common stock, they
will possess approval rights over certain significant transactions that may be pursued by us. Equity Registration Agreement On March 12, 2004, we entered into a registration agreement with the equity sponsor and the
Mitchell investors. The registration agreement became effective on April 2, 2004 upon the
consummation of the Recapitalization. Demand registrations.Under the registration agreement, the holders of at least a majority of
the registrable securities held by the MDCP investors have the right at any time, subject to
certain conditions, to require us to register any or all of their common stock under the Securities
Act on a registration statement on Form S-1 or any similar long-form registration at our expense.
The holders of a majority of the registrable securities held by the Mitchell investors have the
right, upon the first to occur of (1) the third anniversary of the closing of the Recapitalization,
(2) 180 days after the completion of an initial public offering of our common stock and (3) our
achievement of certain financial targets as set forth therein for any two consecutive fiscal years
prior to the end of 2008, subject to certain conditions, to require us to register any or all of
their common stock on a registration statement on Form S-1 or any similar long-form registration at
our expense. The holders of a majority of the registrable securities held by the co-investors, if
any, have the right, at any time after 180 days after the completion of an initial public offering
of our common stock, subject to certain conditions, to require us to register at a certain minimum
price any or all of their common stock on a registration statement on Form S-1 or any similar
long-form registration at our expense. In addition, the holders of a majority of the registrable
securities held by the MDCP investors, the Mitchell investors and the co-investors, each as a
separate group, have the right any time after an initial public offering, subject to conditions, to
require us to register any or all of their common stock on a registration statement on Form S-3 or
any similar short-form registration, if available. On December 30, 2004, we entered into an
amendment to the registration agreement with the equity sponsor, the Mitchell investors and the
Quadrangle investors. Under the amendment, the holders of at least a majority of the registrable
securities held by the Quadrangle investors have the right at any time after 180 days after the
completion of an initial public offering of our common stock, subject to certain conditions, to
require us to register their common stock on a registration statement on Form S-1 or any similar
long-form registration at our expense. We refer to each of these types of registrations as demand
registrations. We are not required, however, to effect any registration within 180 days of the effective date
of a previous demand registration or a previous registration in which holders of the registrable
securities were given piggyback rights. In addition, we may postpone for up to 180 days the filing
or the effectiveness of a registration statement for a demand registration no more than once in any
twelve month period, if our Board of Directors determines that the demand registration would
reasonably be expected to have a material adverse effect on any proposal or plan by us or any of
our subsidiaries to engage in any acquisition or sale of assets, or any merger, consolidation,
tender offer, acquisition, recapitalization, reorganization or similar transaction. Piggyback registrations.All holders of registrable securities are entitled to request the
inclusion of their securities in any registration statement at our expense whenever we propose to
register any offering of our equity securities (other than pursuant to a demand registration). The
registration form to be used may be used for the registration of such registrable securities. Holdback agreement.Each holder of registrable securities has agreed not to effect any public
sale or distribution of our equity securities or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day period beginning on
the effective date of any underwritten demand registration or any underwritten piggyback
registration (except as part of that registration or if the underwriters otherwise agree). We have
agreed not to, and have agreed to cause any 5% holder of our common stock to agree not to, effect
any public sale or distribution of our equity securities or any securities convertible into or
exchangeable or exercisable for such securities, during the same time period. 46




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In connection with all registrations pursuant to the registration agreement, we have agreed to
indemnify the holders of registrable common stock against liabilities relating to the registration,
including liabilities under the Securities Act. Indemnification of Directors We have adopted provisions in our Certificate of Incorporation and Bylaws which provide for
indemnification of our officers and directors to the maximum extent permitted under the Delaware General Corporation Law. We have obtained an insurance policy providing for indemnification of
our officers and directors and certain other persons against liabilities and expenses incurred by
any of them in certain stated proceedings and under certain stated conditions. 
 Item 14. Principal Accounting Fees and Services For the years ended December 31, 2004 and 2003, Deloitte & Touche LLP, our independent
auditor, billed the aggregate fees listed in the table below: (in millions)Category
    
    2004
    
    
    2003Audit Fees (a)
    
    $
    0.8
    
    
    $
    1.0Audit-Related Fees (b)
    
    
    0.3
    
    
    
    Tax Fees (c)
    
    
    0.6
    
    
    
    0.7All Other Fees (d)
    
    
    
    
    
    
    Total
    
    $
    1.7
    
    
    $
    1.7
   (a)
    Fees for audit services billed in 2004 consisted of the audit of our annual consolidated
financial statements, reviews of our quarterly consolidated financial statements, statutory
audits and comfort letters, consents and other services related to Securities and Exchange
Commission (SEC) matters, including fees and services related to our bond offerings.Fees for audit services billed in 2003 consisted of the audit of our annual consolidated
financial statements, reviews of our quarterly consolidated financial statements, statutory
audits and comfort letters, consents and other services related to Securities and Exchange
Commission (SEC) matters, including fees and services related to our bond offerings.(b)
    Fees for audit-related services billed in 2004 consisted of due diligence associated with
mergers and acquisitions.(c)
    Fees for tax services billed in 2003 and 2004 consisted of assistance with our federal,
state, local and foreign jurisdictions income tax returns. We have additionally sought
consultation and advice related to various tax compliance planning projects.(d)
    No material other fees were billed in 2003 and 2004. Under our Audit Committees charter, the Audit Committee is required to give advance approval
of any nonaudit services, other than those of a de minimus nature, to be performed by our auditors,
provided that such services are not otherwise prohibited by law. In recognition of this
responsibility, the Audit Committee has established a policy to review and pre-approve all audit
and permissible non-audit services provided by the independent auditor. The policy provides for
the general pre-approval of specific types of services, gives detailed guidance to management as to
the specific services that are eligible for general pre-approval and provides specific cost limits
for each such service on an annual basis. The policy also requires specific pre-approval of all
other permitted services. Our Audit Committee has considered and concluded that the provision of the non-audit services
is compatible with maintaining auditor independence. 47




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PART IV 
 Item 15. Exhibits and Financial Statement Schedules (a) Documents Filed as Part of this Report  1.
    The financial statement schedules and related data listed in the accompanying Index
beginning on page F-1 are filed as a part of this report.2.
    The exhibits listed in the accompanying Index beginning on page E-1 are filed as a part
of this report, which exhibits are bound separately.  (b)
    ExhibitsSee the accompanying Index beginning on page E-1, which exhibits are bound separately.(c)
    Financial Statement SchedulesSee the accompanying Index beginning on page F-1. 48




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. Dated: March 29, 2005
    
    CINEMARK, INC.BY:
    
    /s/ Alan W.
StockAlan W. Stock, President
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
 Name
    
    Title
    
    Date/s/ Lee Roy Mitchell

Lee Roy Mitchell
    
    Chairman of the Board of
Directors and Chief
Executive Officer
    
    March 29,  2005/s/ Robert Copple

Robert Copple
    
    Senior Vice President and
Treasurer (Chief
Financial and Accounting
Officer)
    
    March 29,  2005/s/ Benjamin D. Chereskin

Benjamin D. Chereskin
    
    Director
    
    March 29, 2005/s/ James N. Perry, Jr.

James N. Perry, Jr.
    
    Director
    
    March 29, 2005/s/ Robin P. Selati

Robin P. Selati
    
    Director
    
    March 29, 2005/s/ Vahe A. Dombalagian

Vahe A. Dombalagian
    
    Director
    
    March 29, 2005/s/
Enrique F. Senior

Enrique F. Senior
    
    Director
    
    March 29, 2005/s/ Peter R. Ezersky

Peter R. Ezersky
    
    Director
    
    March 29, 2005
 SUPPLEMENTAL INFORMATION
TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. No annual report or proxy material has been sent to our stockholders. An annual report and
proxy material may be sent to our stockholders subsequent to the filing of this Form 10-K. We
shall furnish to the Securities and Exchange Commission copies of any annual report or proxy
material that is sent to our stockholders.




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
(ITEMS 8 AND 15 OF FORM 10-K) PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F-2CONSOLIDATED FINANCIAL STATEMENTS AND NOTES:Consolidated Balance Sheets, December 31, 2003 and 2004
    
    
    F-3Consolidated Statements of Income for the Years Ended December 31, 2002, 2003 and 2004
    
    
    F-4Consolidated Statements of Stockholders Equity and Comprehensive Income for the Years Ended
December 31, 2002, 2003 and 2004
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors
Cinemark, Inc. and Subsidiaries
Plano, TX We have audited the accompanying consolidated balance sheets of Cinemark, Inc. and subsidiaries
(the Company) as of December 31, 2004 and 2003, and the related consolidated statements of
income, stockholders equity and comprehensive income, and cash flows for each of the three years
in the period ended December 31, 2004. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with the standards of the Public Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The Company is
not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of Cinemark, Inc. and subsidiaries as of December 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the three years in the period ended
December 31, 2004, in conformity with accounting principles generally accepted in the United States
of America. As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of
Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets which changed its
method of accounting for goodwill and indefinite-lived intangible
assets in 2002. Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The supplemental schedules of certain consolidating information listed
in the index on page F-1 are presented for the purpose of additional analysis of the basic
consolidated financial statements rather than to present the financial position, results of
operations, and cash flows of the individual companies, and are not a required part of the basic
consolidated financial statements. These schedules are the responsibility of the Companys
management. Such schedules have been subjected to the auditing procedures applied in our audits of
the basic 2004 consolidated financial statements and, in our opinion, are fairly stated in all
material respects when considered in relation to the basic 2004 consolidated financial statements
taken as a whole. /s/ Deloitte & Touche LLP Dallas, Texas
March 24, 2005 F-2




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CINEMARK, INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,2003
    
    
    2004ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    107,321,510
    
    
    $
    100,248,124Inventories
    
    
    4,323,687
    
    
    
    4,237,291Accounts receivable
    
    
    15,440,439
    
    
    
    11,302,828Income tax receivable
    
    
    
    
    
    
    7,036,960Prepaid expenses and other
    
    
    5,476,066
    
    
    
    3,888,895Total current assets
    
    
    132,561,702
    
    
    
    126,714,098THEATRE PROPERTIES AND EQUIPMENTLand
    
    
    58,962,924
    
    
    
    60,700,155Buildings
    
    
    323,156,916
    
    
    
    337,558,728Theatre furniture and equipment
    
    
    485,206,325
    
    
    
    509,736,809Leasehold interests and improvements
    
    
    364,337,716
    
    
    
    385,043,181Theatres under construction
    
    
    6,233,088
    
    
    
    14,049,052Total
    
    
    1,237,896,969
    
    
    
    1,307,087,925Less accumulated depreciation and amortization
    
    
    462,016,911
    
    
    
    521,492,895Theatre properties and equipment, net
    
    
    775,880,058
    
    
    
    785,595,030OTHER ASSETSGoodwill
    
    
    12,083,095
    
    
    
    45,005,983Intangible
assets  net
    
    
    7,865,294
    
    
    
    6,084,001Investments in and advances to affiliates
    
    
    2,334,145
    
    
    
    1,218,988Deferred charges and other assets  net
    
    
    30,011,763
    
    
    
    52,139,103Total other assets
    
    
    52,294,297
    
    
    
    104,448,075TOTAL ASSETS
    
    $
    960,736,057
    
    
    $
    1,016,757,203LIABILITIES
AND STOCKHOLDERS EQUITY (DEFICIENCY)CURRENT LIABILITIESCurrent portion of long-term debt
    
    $
    6,744,842
    
    
    $
    6,539,206Accounts payable
    
    
    37,373,428
    
    
    
    34,256,718Income tax payable
    
    
    5,317,839
    
    
    
    Accrued film rentals
    
    
    27,337,817
    
    
    
    21,394,776Accrued interest
    
    
    17,939,898
    
    
    
    14,569,435Accrued payroll
    
    
    12,954,499
    
    
    
    14,335,024Accrued property taxes
    
    
    15,188,282
    
    
    
    14,326,386Accrued other current liabilities
    
    
    24,956,025
    
    
    
    23,461,382Total current liabilities
    
    
    147,812,630
    
    
    
    128,882,927LONG-TERM LIABILITIESLong-term debt, less current portion
    
    
    651,686,139
    
    
    
    1,007,135,783Deferred income taxes
    
    
    13,033,013
    
    
    
    23,137,583Deferred lease expenses
    
    
    27,652,702
    
    
    
    27,961,902Deferred gain on sale leasebacks
    
    
    4,006,700
    
    
    
    3,640,780Deferred revenues and other long-term liabilities
    
    
    5,665,863
    
    
    
    12,025,239Total long-term liabilities
    
    
    702,044,417
    
    
    
    1,073,901,287COMMITMENTS AND CONTINGENCIES (see Note 17)
    
    
    
    
    
    
    MINORITY INTERESTS IN SUBSIDIARIES
    
    
    33,932,183
    
    
    
    16,697,318STOCKHOLDERS EQUITY (DEFICIENCY)Class A common stock, $0.001 par value: 40,000,000 shares authorized and
27,674,916 shares issued and outstanding at December 31, 2004;
350,000,000 shares
authorized and 19,664,480 issued and outstanding at December 31, 2003
    
    
    19,665
    
    
    
    27,675Class B common stock, $0.001 par value: no shares authorized, issued or outstanding
at December 31, 2004; 150,000,000 shares authorized and 20,949,280
shares issued
and outstanding at December 31, 2003
    
    
    20,949
    
    
    
    Additional paid-in capital
    
    
    40,369,474
    
    
    
    599,524,344Unearned compensation
    
    
    (1,740,255
    )
    
    
    Retained
earnings (deficit)
    
    
    124,821,416
    
    
    
    (725,154,523
    )Accumulated other comprehensive loss
    
    
    (86,544,422
    )
    
    
    (77,121,825
    )Total
stockholders equity (deficiency)
    
    
    76,946,827
    
    
    
    (202,724,329
    )TOTAL
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)
    
    $
    960,736,057
    
    
    $
    1,016,757,203
 The accompanying notes are an integral part of the consolidated financial statements. F-3




---



##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF INCOME
 YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
 2002
    
    
    2003
    
    
    2004REVENUESAdmissions
    
    $
    595,286,841
    
    
    $
    597,547,930
    
    
    $
    646,999,129Concession
    
    
    291,807,230
    
    
    
    300,568,065
    
    
    
    321,621,092Other
    
    
    48,759,804
    
    
    
    52,756,165
    
    
    
    55,621,584Total revenues
    
    
    935,853,875
    
    
    
    950,872,160
    
    
    
    1,024,241,805COSTS AND EXPENSESCost of operations:Film rentals and advertising
    
    
    320,741,903
    
    
    
    324,901,748
    
    
    
    348,815,899Concession supplies
    
    
    50,356,355
    
    
    
    49,640,261
    
    
    
    53,760,946Salaries and wages
    
    
    96,682,317
    
    
    
    97,240,383
    
    
    
    103,084,095Facility lease expense
    
    
    115,587,807
    
    
    
    119,516,682
    
    
    
    126,642,734Utilities and other
    
    
    103,167,023
    
    
    
    110,791,539
    
    
    
    112,965,519Total cost of operations
    
    
    686,535,405
    
    
    
    702,090,613
    
    
    
    745,269,193General and administrative expenses
    
    
    47,952,485
    
    
    
    44,285,360
    
    
    
    51,672,209Stock option compensation and change of control
expenses related to the Recapitalization
    
    
    
    
    
    
    
    
    
    
    31,994,529Depreciation and amortization
    
    
    66,583,237
    
    
    
    65,085,532
    
    
    
    67,051,388Impairment of long-lived assets
    
    
    3,869,331
    
    
    
    5,049,199
    
    
    
    1,666,703(Gain) loss on sale of assets and other
    
    
    469,961
    
    
    
    (1,201,850
    )
    
    
    4,851,233Total costs and expenses
    
    
    805,410,419
    
    
    
    815,308,854
    
    
    
    902,505,255OPERATING INCOME
    
    
    130,443,456
    
    
    
    135,563,306
    
    
    
    121,736,550OTHER INCOME (EXPENSE)Interest expense
    
    
    (55,428,317
    )
    
    
    (51,852,977
    )
    
    
    (69,470,459
    )Amortization of debt issue costs
    
    
    (2,364,680
    )
    
    
    (2,310,372
    )
    
    
    (3,472,406
    )Interest income
    
    
    2,318,172
    
    
    
    2,035,338
    
    
    
    1,969,500Foreign currency exchange loss
    
    
    (5,120,336
    )
    
    
    (195,670
    )
    
    
    (266,711
    )Loss on early retirement of debt
    
    
    
    
    
    
    (7,540,269
    )
    
    
    (5,974,128
    )Equity in income of affiliates
    
    
    249,951
    
    
    
    141,359
    
    
    
    172,930Minority interests in income of subsidiaries
    
    
    (598,923
    )
    
    
    (3,410,018
    )
    
    
    (4,352,563
    )Total other expenses
    
    
    (60,944,133
    )
    
    
    (63,132,609
    )
    
    
    (81,393,837
    )INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE
    
    
    69,499,323
    
    
    
    72,430,697
    
    
    
    40,342,713Income taxes
    
    
    29,091,892
    
    
    
    25,041,386
    
    
    
    17,301,693INCOME FROM CONTINUING OPERATIONS BEFORE
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE
    
    
    40,407,431
    
    
    
    47,389,311
    
    
    
    23,041,020Income (loss) from discontinued operations, net of taxes (See Note 5)
    
    
    (1,542,048
    )
    
    
    (2,739,798
    )
    
    
    3,583,714INCOME BEFORE CUMULATIVE EFFECT OF AN
ACCOUNTING CHANGE
    
    
    38,865,383
    
    
    
    44,649,513
    
    
    
    26,624,734Cumulative effect of a change in accounting principle, net of taxes
    
    
    (3,389,779
    )
    
    
    
    
    
    
    NET INCOME
    
    $
    35,475,604
    
    
    $
    44,649,513
    
    
    $
    26,624,734EARNINGS (LOSS) PER SHAREBasic:Income from continuing operations before accounting change
    
    $
    1.00
    
    
    $
    1.17
    
    
    $
    0.75Income (loss) from discontinued operations
    
    
    (0.04
    )
    
    
    (0.07
    )
    
    
    0.11Income before accounting change
    
    $
    0.96
    
    
    $
    1.10
    
    
    $
    0.86Cumulative effect of a change in accounting principle
    
    
    (0.08
    )
    
    
    
    
    
    
    Net income
    
    $
    0.88
    
    
    $
    1.10
    
    
    $
    0.86Diluted:Income from continuing operations before accounting change
    
    $
    0.99
    
    
    $
    1.16
    
    
    $
    0.75Income (loss) from discontinued operations
    
    
    (0.04
    )
    
    
    (0.07
    )
    
    
    0.11Income before accounting change
    
    $
    0.95
    
    
    $
    1.09
    
    
    $
    0.86Cumulative effect of a change in accounting principle
    
    
    (0.08
    )
    
    
    
    
    
    
    Net income
    
    $
    0.87
    
    
    $
    1.09
    
    
    $
    0.86
 The accompanying notes are an integral part of the consolidated financial statements. F-4




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY) AND COMPREHENSIVE INCOME
 YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
 Class A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon Stock
    
    
    Common Stock
    
    
    Additional
    
    
    Unearned
    
    
    Retained
    
    
    OtherShares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Paid-in
    
    
    Compensation
    
    
    Earnings
    
    
    Comprehensive
    
    
    
    
    
    
    ComprehensiveIssued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Capital
    
    
    Stock Options
    
    
    (Deficit)
    
    
    Loss
    
    
    Total
    
    
    IncomeBalance at December 31, 2001
    
    
    19,563,280
    
    
    $
    19,563
    
    
    
    20,949,280
    
    
    $
    20,949
    
    
    $
    40,367,749
    
    
    $
    (4,226,004
    )
    
    $
    44,696,299
    
    
    $
    (55,541,300
    )
    
    $
    25,337,256Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,475,604
    
    
    
    
    
    
    
    35,475,604
    
    
    $
    35,475,604Unearned compensation from stock options forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,891
    )
    
    
    17,891
    
    
    
    
    
    
    
    
    
    
    
    Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,103,155
    
    
    
    
    
    
    
    
    
    
    
    1,103,155Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,252,160
    )
    
    
    (34,252,160
    )
    
    
    (34,252,160
    )Balance at December 31, 2002
    
    
    19,563,280
    
    
    $
    19,563
    
    
    
    20,949,280
    
    
    $
    20,949
    
    
    $
    40,349,858
    
    
    $
    (3,104,958
    )
    
    $
    80,171,903
    
    
    $
    (89,793,460
    )
    
    $
    27,663,855
    
    
    $
    1,223,444Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,649,513
    
    
    
    
    
    
    
    44,649,513
    
    
    
    44,649,513Unearned compensation from stock options forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (284,877
    )
    
    
    284,877
    
    
    
    
    
    
    
    
    
    
    
    Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,079,826
    
    
    
    
    
    
    
    
    
    
    
    1,079,826Stock options exercised, including tax benefit of
$203,742
    
    
    101,200
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    304,493
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    304,595Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,249,038
    
    
    
    3,249,038
    
    
    
    3,249,038Balance at December 31, 2003
    
    
    19,664,480
    
    
    $
    19,665
    
    
    
    20,949,280
    
    
    $
    20,949
    
    
    $
    40,369,474
    
    
    $
    (1,740,255
    )
    
    $
    124,821,416
    
    
    $
    (86,544,422
    )
    
    $
    76,946,827
    
    
    $
    47,898,551Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,624,734
    
    
    
    
    
    
    
    26,624,734
    
    
    
    26,624,734Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,021
    
    
    
    
    
    
    
    
    
    
    
    145,021Recapitalization:Retirement of existing stock
    
    
    (19,664,480
    )
    
    
    (19,665
    )
    
    
    (20,949,280
    )
    
    
    (20,949
    )
    
    
    (40,369,474
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,410,088
    )Issuance of stock
    
    
    27,674,916
    
    
    
    27,675
    
    
    
    
    
    
    
    
    
    
    
    624,972,325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    625,000,000Write-off of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,595,234
    
    
    
    
    
    
    
    
    
    
    
    1,595,234Recapitalization fees, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,447,981
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,447,981
    )Impact on retained earnings (deficit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (876,600,673
    )
    
    
    
    
    
    
    (876,600,673
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,422,597
    
    
    
    9,422,597
    
    
    
    9,422,597Balance at December 31, 2004
    
    
    27,674,916
    
    
    $
    27,675
    
    
    
    
    
    
    $
    
    
    
    $
    599,524,344
    
    
    $
    
    
    
    $
    (725,154,523
    )
    
    $
    (77,121,825
    )
    
    $
    (202,724,329
    )
    
    $
    36,047,331
 The accompanying notes are an integral part of the consolidated financial statements. F - 5




---



##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
 2002
    
    
    2003
    
    
    2004OPERATING ACTIVITIESNet income
    
    $
    35,475,604
    
    
    $
    44,649,513
    
    
    $
    26,624,734Noncash items in net income:Depreciation
    
    
    65,822,005
    
    
    
    64,428,858
    
    
    
    66,398,601Amortization of intangible and other assets
    
    
    761,232
    
    
    
    656,674
    
    
    
    652,787Amortization of foreign advanced rents
    
    
    1,796,405
    
    
    
    1,805,684
    
    
    
    1,713,365Amortized compensation  stock options
    
    
    1,103,155
    
    
    
    1,079,826
    
    
    
    145,021Amortization of debt issue costs
    
    
    2,364,680
    
    
    
    2,310,372
    
    
    
    3,472,406Amortization of gain on sale leasebacks
    
    
    (365,920
    )
    
    
    (365,920
    )
    
    
    (365,920
    )Amortization of debt discount and premium
    
    
    (28,507
    )
    
    
    (972,306
    )
    
    
    (1,534,912
    )Amortization of deferred revenues
    
    
    (4,852,905
    )
    
    
    (2,622,904
    )
    
    
    (752,769
    )Impairment of long-lived assets
    
    
    3,869,331
    
    
    
    5,049,199
    
    
    
    1,666,703(Gain) loss on sale of assets and other
    
    
    469,961
    
    
    
    (661,384
    )
    
    
    4,851,233Write-off unamortized debt issue costs and debt discount and
premium related to the early retirement
of debt
    
    
    
    
    
    
    3,600,608
    
    
    
    938,075Write-off unearned compensation related to the Recapitalization
    
    
    
    
    
    
    
    
    
    
    1,595,234Accretion of interest on senior discount notes
    
    
    
    
    
    
    
    
    
    
    26,731,328Deferred lease expenses
    
    
    2,005,069
    
    
    
    2,740,580
    
    
    
    309,200Deferred income tax expenses
    
    
    14,886,334
    
    
    
    1,862,885
    
    
    
    10,104,570Equity in income of affiliates
    
    
    (249,951
    )
    
    
    (141,359
    )
    
    
    (172,930
    )Minority interests in income of subsidiaries
    
    
    598,923
    
    
    
    3,410,018
    
    
    
    4,352,563Tax expense related to common stock issued for options exercised
    
    
    
    
    
    
    203,742
    
    
    
    Other noncash items
    
    
    132,621
    
    
    
    2,832,782
    
    
    
    (1,916,269
    )Cumulative effect of an accounting change
    
    
    3,389,779
    
    
    
    
    
    
    
    Changes in assets and liabilities:Inventories
    
    
    (366,883
    )
    
    
    (634,772
    )
    
    
    86,396Accounts receivable
    
    
    (1,392,201
    )
    
    
    (2,998,590
    )
    
    
    3,700,538Prepaid expenses and other
    
    
    (847,306
    )
    
    
    (1,381,931
    )
    
    
    1,587,171Other assets
    
    
    6,463,964
    
    
    
    (5,909,117
    )
    
    
    (7,448,403
    )Advances with affiliates
    
    
    1,191,191
    
    
    
    405,082
    
    
    
    53,862Accounts payable
    
    
    (2,338,589
    )
    
    
    8,602,356
    
    
    
    (3,116,711
    )Accrued liabilities
    
    
    19,350,008
    
    
    
    (1,695,914
    )
    
    
    (4,883,109
    )Other long-term liabilities
    
    
    158,063
    
    
    
    3,234,062
    
    
    
    649,131Income tax receivable/payable
    
    
    722,863
    
    
    
    6,033,770
    
    
    
    (12,354,799
    )Net cash provided by operating activities
    
    
    150,118,926
    
    
    
    135,521,814
    
    
    
    123,087,096INVESTING ACTIVITIESAdditions to theatre properties and equipment
    
    
    (38,031,643
    )
    
    
    (51,002,145
    )
    
    
    (81,008,032
    )Proceeds from sale of theatre properties and equipment
    
    
    2,639,965
    
    
    
    3,084,531
    
    
    
    12,944,262Proceeds from sale of equity investment
    
    
    
    
    
    
    
    
    
    
    1,250,000Purchase of minority partner shares in Cinemark Brasil
    
    
    
    
    
    
    
    
    
    
    (44,957,502
    )Purchase of minority partner shares in Cinemark Mexico
    
    
    
    
    
    
    
    
    
    
    (5,378,768
    )Investment in affiliates
    
    
    
    
    
    
    (3,314
    )
    
    
    Dividends/capital returned from affiliates
    
    
    641,808
    
    
    
    770,062
    
    
    
    202,688Net cash used for investing activities
    
    
    (34,749,870
    )
    
    
    (47,150,866
    )
    
    
    (116,947,352
    )FINANCING ACTIVITIESProceeds from equity investors related to Recapitalization
    
    
    
    
    
    
    
    
    
    
    518,245,013Net payments to stockholders, options holders and other
    
    
    
    
    
    
    
    
    
    
    (835,703,754
    )Issuance of common stock
    
    
    
    
    
    
    100,853
    
    
    
    Issuance of senior discount notes
    
    
    
    
    
    
    
    
    
    
    360,000,115Issuance of senior subordinated notes
    
    
    
    
    
    
    375,225,000
    
    
    
    Retirement of senior subordinated notes
    
    
    
    
    
    
    (275,000,000
    )
    
    
    (122,750,000
    )Proceeds from long-term debt
    
    
    61,748,082
    
    
    
    403,516,357
    
    
    
    291,445,591Repayments of long-term debt
    
    
    (148,650,617
    )
    
    
    (537,764,968
    )
    
    
    (200,069,283
    )Debt issue costs
    
    
    
    
    
    
    (15,622,495
    )
    
    
    (24,354,491
    )Increase in minority investment in subsidiaries
    
    
    454,931
    
    
    
    4,573,551
    
    
    
    968,732Decrease in minority investment in subsidiaries
    
    
    (9,692,587
    )
    
    
    (766,315
    )
    
    
    (2,225,483
    )Net cash used for financing activities
    
    
    (96,140,191
    )
    
    
    (45,738,017
    )
    
    
    (14,443,560
    )EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS
    
    
    (5,709,573
    )
    
    
    970,064
    
    
    
    1,230,430INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    13,519,292
    
    
    
    43,602,995
    
    
    
    (7,073,386
    )CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    50,199,223
    
    
    
    63,718,515
    
    
    
    107,321,510End of period
    
    $
    63,718,515
    
    
    $
    107,321,510
    
    
    $
    100,248,124SUPPLEMENTAL INFORMATION (see Note 15)
 The accompanying notes are an integral part of the consolidated financial statements. F-6




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CINEMARK, INC. AND SUBSIDIARIES 
  1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business- Cinemark, Inc. and subsidiaries (the Company) are leaders in the motion picture
exhibition industry in terms of both revenues and the number of screens in operation, with theatres
in the United States (U.S.), Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras,
El Salvador, Nicaragua, Costa Rica, Panama and Colombia. The Company also managed additional
theatres in the U.S., Canada, Brazil and Taiwan during the year ended December 31, 2004. Share Exchange- On May 16, 2002, Cinemark, Inc. was formed as the Delaware holding company of
Cinemark USA, Inc. Under a share exchange agreement dated May 17, 2002, and after giving effect to
a reverse stock split, each outstanding share and option to purchase shares of Cinemark USA, Inc.s
common stock was exchanged for 220 shares and options to purchase shares of Cinemark, Inc.s common
stock. Principles of Consolidation- The consolidated financial statements include the accounts of
Cinemark, Inc. and subsidiaries. Majority-owned subsidiaries that the Company has control of are
consolidated while those subsidiaries of which the Company owns between 20% and 50% and does not
control are accounted for as affiliates under the equity method. Those subsidiaries of which the
Company owns less than 20% are accounted for as affiliates under the cost method. The results of
these subsidiaries and affiliates are included in the financial statements effective with their
formation or from their dates of acquisition. Significant intercompany balances and transactions
are eliminated in consolidation. Certain reclassifications have been made to the 2002 and 2003
financial statements to conform to the 2004 presentation. Cash and Cash Equivalents- Cash and cash equivalents consist of operating funds held in
financial institutions, petty cash held by the theatres and highly liquid investments with
remaining maturities of three months or less when purchased. Inventories- Concession and theatre supplies inventories are stated at the lower of cost
(first-in, first-out method) or market. Theatre Properties and Equipment- Theatre properties and equipment are stated at cost less
accumulated depreciation and amortization. Property additions include the capitalization of $0,
$233,582 and $406,760 of interest incurred during the development and construction of theatres in
2002, 2003 and 2004, respectively. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets as follows: Category
    
    Useful LifeBuildings
    
    40 yearsTheatre furniture and equipment
    
    5 to 15 yearsLeasehold interests and improvements
    
    Lesser of lease term or useful life
 The Company evaluates theatre properties and equipment for impairment in conjunction with the
preparation of its quarterly consolidated financial statements or whenever events or changes in
circumstances indicate the carrying amount of the assets may not be fully recoverable. When
estimated undiscounted cash flows will not be sufficient to recover a long-lived assets carrying
amount, an impairment review is performed in which the Company compares the carrying value of the
asset with its estimated fair value, which is determined based on a multiple of cash flows. When
estimated fair value is determined to be lower than the carrying value of the long-lived asset, the
asset is written down to its estimated fair value. Lease Accounting The Company accounts for leased properties under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 13, Accounting for Leases, and other
authoritative accounting literature. SFAS No. 13 requires that the Company evaluate each lease for
classification as either a capital lease or an operating lease. According to SFAS No. 13, if
substantially all of the benefits and risks of ownership have been transferred to the
lessee, the lessee records the lease as a capital lease at its inception. The Company performs
this evaluation at the inception of the lease and when a modification is made to a lease. If the
lease agreement calls for a scheduled rent increase during the lease term, the Company, in
accordance with Financial Accounting Standards Board (FASB) Technical Bulletin 85-3, Accounting
for Operating Leases with Scheduled Rent Increases, recognizes the lease F - 7




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS expense on a straight-line
basis over the lease term as deferred lease expense. The Company determines the straight-line rent
expense impact of an operating lease upon inception of the lease. For leases in which the Company
is involved with construction of the theatre, the Company accounts for the lease during the
construction period under the provisions of Emerging Issues Task Force (EITF) 97-10, The Effect
of Lessee Involvement in Asset Construction. Goodwill and Other Intangible Assets- The excess of cost over fair value of theatre
businesses acquired, less accumulated amortization, goodwill impairment charges and cumulative
foreign currency translation adjustments, is recorded as goodwill. In accordance with SFAS No.
142, Goodwill and Other Intangible Assets, beginning January 1, 2002, goodwill is no longer being
amortized, but instead is being tested for impairment at least annually or whenever events or
changes in circumstances indicate the carrying value may not be recoverable. Factors considered
include significant underperformance relative to historical or projected business and significant
negative industry or economic trends. Goodwill impairment is evaluated using a two-step approach
requiring the Company to compute the fair value of a reporting unit and compare it with its
carrying value. If the carrying value of the reporting unit exceeds its fair value, a second step
would be performed to measure the potential goodwill impairment. Fair value is determined based on
a multiple of cash flows. When estimated fair value is determined to be lower than the carrying
value of the asset, the asset is written down to its estimated fair value. The Company performed
its annual goodwill impairment evaluation as of December 31, 2004. Intangible assets consist of
capitalized licensing fees, which are amortized using the straight-line method over fifteen years,
and other intangible assets, which, if of a definite-lived nature, are amortized over the terms of
the underlying agreements. Intangible assets with indefinite lives are no longer being amortized,
but instead are being tested for impairment at least annually or whenever events or changes in
circumstances indicate the carrying value may not be recoverable. The Company performed its annual
impairment evaluation of indefinite-lived intangible assets as of December 31, 2004. Deferred Charges and Other Assets- Deferred charges and other assets consist of debt issue
costs, foreign advanced rents, construction advances and other deposits, equipment to be placed in
service and other assets. Debt issue costs are amortized using the straight-line method or other
appropriate method over the primary financing terms of the related debt agreement. Foreign advanced
rents represent advance rental payments for long-term foreign leases. These payments are recognized
to facility lease expense generally over 10 to 20 years as leased facilities are utilized. Deferred Revenues- Advances collected on long-term screen advertising and concession
contracts are recorded as deferred revenues. In accordance with the terms of the agreements, the
advances collected on screen advertising contracts are recognized as other revenues during the
period in which the revenue is earned based primarily on the Companys attendance counts or
screenings, which may differ from the period in which the advances are collected. In accordance
with the terms of the agreements, the advances collected on concession contracts are recognized as
a reduction in concession supplies expense during the period in which earned which may differ from
the period in which the advances are collected. Revenue and Expense Recognition- Revenues are recognized when admissions and concession sales
are received at the box office and screen advertising is shown in the theatres. The Company
records proceeds from the sale of gift cards and other advanced sale-type certificates in current
liabilities and recognizes admissions and concession revenue when a holder redeems the card or
certificate. The Company recognizes unredeemed gift cards and other advanced sale-type certificates
as revenue only after such a period of time indicates, based on historical experience, the
likelihood of redemption is remote. Film rental costs are accrued based on the applicable box
office receipts and either the mutually agreed upon firm terms established prior to the opening of
the picture or estimates of the final mutually agreed upon settlement, which occurs at the
conclusion of the picture run, subject to the film licensing arrangement. Estimates are based on the
expected success of a film over the length of its run in the theatres. The success of a film can
typically be determined a few weeks after a film is released when initial box
office performance of the film is known. Accordingly, final settlements typically approximate
estimates since box office receipts are known at the time the estimate is made and the expected
success of a film over the length of its run in the theatres can typically be estimated early in
the films run. The final film settlement amount is negotiated at the conclusion of the films run
based upon how a film actually performs. If actual settlements are higher than those estimated,
additional film rental costs are recorded at that time. The Company recognizes advertising costs
and any sharing arrangements with film distributors in the same accounting period. The Companys
advertising costs are F - 8




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS expensed as incurred. Advertising expenses for the years ended December 31,
2002, 2003 and 2004 totaled $14,164,514, $14,643,308 and $14,316,052, respectively. Stock Option Accounting On May 16, 2002, Cinemark, Inc. was formed as the Delaware holding
company of Cinemark USA, Inc. Under a share exchange agreement dated May 17, 2002, and after giving
effect to a reverse stock split, each outstanding share and option to purchase shares of Cinemark
USA, Inc.s common stock was exchanged for 220 shares and options to purchase shares of Cinemark,
Inc.s common stock. Unearned compensation of $3,810,085 related to Cinemark USA, Inc.s stock options
was contributed to Cinemark, Inc. on May 17, 2002 as part of the share exchange. No unearned
compensation has been recorded subsequent to the share exchange. Compensation expense resulting from the amortization of unearned compensation recorded in the
Companys consolidated statements of income under former stock option plans was $1,103,155,
$1,079,826 and $145,021 in 2002, 2003 and 2004, respectively. During 2004, the Company recorded
additional compensation expense of $1,595,234 related to the write-off of the remaining unearned
compensation for options outstanding as of the date of the Recapitalization and $14,650,036 related
to the cash settlement of these options. The Company applies Accounting Principles Board Opinion (APB) No. 25 and related
interpretations in accounting for stock option plans. Had compensation costs been determined
based on the fair value at the date of grant for awards under the plans, consistent with the method
of SFAS No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for
Stock-Based Compensation Transition and Disclosure, the Companys net income would have been
reduced to the pro-forma amounts indicated below: Years Ended December 31,2002
    
    
    2003
    
    
    2004Net income as reported
    
    $
    35,475,604
    
    
    $
    44,649,513
    
    
    $
    26,624,734Compensation expense included in reported
net income, net of tax1
    
    
    642,036
    
    
    
    707,286
    
    
    
    87,448Compensation expense under fair-value method,
net of tax
    
    
    (902,507
    )
    
    
    (1,054,085
    )
    
    
    (2,218,881
    )Pro-forma net income
    
    $
    35,215,133
    
    
    $
    44,302,714
    
    
    $
    24,493,301Basic earnings per share:As reported
    
    $
    0.88
    
    
    $
    1.10
    
    
    $
    0.86Pro-forma
    
    $
    0.87
    
    
    $
    1.09
    
    
    $
    0.79Diluted earnings per share:As reported
    
    $
    0.87
    
    
    $
    1.09
    
    
    $
    0.86Pro-forma
    
    $
    0.87
    
    
    $
    1.09
    
    
    $
    0.79
   1Excludes compensation expense of $16,245,270 related to the Recapitalization
included in net income. No stock options were granted in 2002. The weighted average fair value per share of stock
options granted during 2003 was $12.76 (all of which had an exercise price equal to the market
value at the date of grant). For each 2003 grant, compensation expense under the fair value method
of SFAS No. 123 was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions: dividend yield of
0 percent; an expected life of 6.5 years; expected volatility of approximately 39 percent; and a
risk-free interest rate of 3.29 percent. The weighted average fair value per share of stock
options granted during 2004 was $22.58 (all of which had an exercise price equal to the market
value at the date of grant). For each 2004 grant, compensation expense under the fair value method
of SFAS No. 123 was estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: dividend yield of 0 percent; an expected life of 6.5 years;
expected volatility of approximately 39 percent; and a risk-free interest rate of 3.79 percent. F - 9




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income Taxes The Company uses an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income taxes are provided when tax laws and financial
accounting standards differ with respect to the amount of income for a year and the bases of assets
and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax
assets unless it is more likely than not that such assets will be realized. Income taxes are
provided on unremitted earnings from foreign subsidiaries unless such earnings are expected to be
indefinitely reinvested. Income taxes have also been provided for potential tax assessments and the
related tax accruals are in the consolidated balance sheets. To the extent tax accruals differ from
actual payments or assessments, the accruals will be adjusted. Use of Estimates- The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the periods
presented. Actual results could differ from those estimates. Derivative Instruments- The Company adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities and its related amendments in its fiscal year beginning January
1, 2001. SFAS No. 133 establishes accounting and reporting standards for derivative instruments
that require every derivative to be recorded on the balance sheet as an asset or liability and
measured at its fair value. The statement also defines the accounting for the change in the fair
value of derivatives depending on their intended use. The Companys derivative activity is not
material to its financial position or results of operations for the periods presented. Foreign Currency Translations- The assets and liabilities of the Companys foreign
subsidiaries are translated into U.S. dollars at current exchange rates as of the balance sheet
date, and revenues and expenses are translated at average monthly exchange rates. The resulting
translation adjustments are recorded as a separate component of stockholders equity. Fair Values of Financial Instruments- Fair values of financial instruments are estimated by
the Company using available market information and other valuation methods. Values are based on
available market quotes or estimates using a discounted cash flow approach based on the interest
rates currently available for similar instruments. The fair values of financial instruments for
which estimated fair value amounts are not specifically presented are estimated to approximate the
related recorded values. 2. NEW ACCOUNTING PRONOUNCEMENTS In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities  an Interpretation of Accounting Research Bulletin (ARB) No. 51. FIN
46 addresses consolidation by business enterprises of variable interest entities. FIN 46 requires a
variable interest entity to be consolidated by a company if that company is subject to a majority
of the risk of loss from the variable interest entitys activities or entitled to receive a
majority of the entitys residual returns or both. The Company adopted FIN 46 on January 1, 2004.
The adoption of FIN 46 did not have a material impact on its consolidated financial statements. In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets-Amendment of
APB Opinion No. 29. SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance, defined as transactions that
are not expected to result in significant changes in the cash
flows of the reporting entity. This statement is effective for exchanges of non-monetary
assets occurring after June 15, 2005. The adoption of SFAS No. 153 is not expected to have a
material impact on the Companys consolidated financial statements. In December 2004, the FASB
issued SFAS No. 123(R), Share-Based Payment, which establishes
accounting standards for all transactions in which an entity exchanges its equity instruments
for goods and services. SFAS No. 123(R) focuses primarily on accounting for transactions with employees, and
carries forward without change prior guidance for share-based payments for transactions with non
employees. SFAS No. 123(R) eliminates the intrinsic value measurement objective in APB Opinion 25
and generally requires us to measure the cost of employee services received in exchange for an
award of equity instruments based on the fair value of the award on the date of the grant. The
standard requires grant date fair value to be estimated F - 10




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS using either an option-pricing model which is consistent with the terms of the award or a
market observed price, if such a price exists. Such cost must be recognized over the period during which an
employee is required to provide service in exchange for the award (which is usually the vesting period).
The standard also requires the Company to estimate the number of instruments that will ultimately
be issued, rather than accounting for forfeitures as they occur. The Company is required to apply
SFAS No. 123(R) to all awards granted, modified or settled in its first annual reporting period
after December 15, 2005. The Company will be required to use the modified prospective method,
under which it must recognize compensation cost for all awards granted after it adopts the standard
and for the unvested portion of previously granted awards that are outstanding on that date. The
Company has commenced its analysis of the impact of SFAS 123(R), but cannot predict with reasonable
certainty the number of options that will be unvested and outstanding on December 31, 2005.
Accordingly, the Company cannot currently quantify with precision the effect that this standard
will have on its financial position or results of operations. FASB Staff Position (FSP) No. 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004 (the Jobs Act)
provides guidance on enterprises income tax expense and deferred tax liability. The Jobs Act was
enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the
financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for
reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109 Accounting
for Income Taxes. The Company has not yet completed evaluating the impact of the repatriation
provisions. The Company is currently performing an earnings and profit study to enable it to model
and evaluate the impact. Results cannot be estimated at this time. Accordingly, as provided for in
FSP 109-2, the Company has not adjusted its tax expense or deferred tax liability to reflect the
repatriation provisions of the Jobs Act. The Company expects to complete its evaluation in 2005. 3. RECAPITALIZATION AND REFINANCING OF CERTAIN LONG-TERM DEBT Recapitalization- On March 12, 2004, the Company entered into an agreement and plan of
merger with a newly formed subsidiary of Madison Dearborn Partners, LLC (Madison). The
transaction was completed on April 2, 2004, at which time the newly formed subsidiary of Madison
was merged with and into the Company, with the Company continuing as the surviving corporation.
Simultaneously, an affiliate of Madison purchased shares of common stock for approximately $518.3
million in cash and became the Companys controlling stockholder owning approximately 83% of the
Companys capital stock. Lee Roy Mitchell, the Companys Chief Executive Officer, and the Mitchell
Special Trust collectively retained approximately 16% ownership of the Companys capital stock with
certain members of management owning the remaining 1%. Based on the terms of the transaction,
including Mr. Mitchells ownership retention, the transaction was accounted for as a
recapitalization, which resulted in the Company retaining its historical book value. Since April
2, 2004, Madison sold approximately 10% of its stock in the Company to outside investors. As of
the date of this report, Madison owned approximately 75% of the Companys capital stock, outside
investors owned approximately 8%, Lee Roy Mitchell and the Mitchell Special Trust owned
approximately 16% and certain members of management owned the remaining 1%. On March 31, 2004, the Company issued $577,173,000 aggregate principal amount at maturity of 9
 3/4% senior discount notes due 2014. The gross proceeds at issuance of $360,000,115 were used to fund
in part the Recapitalization. Interest on the notes accretes until March 15, 2009 up to the
aggregate principal amount of
$577,173,000. Cash interest will accrue and be payable semi-annually in arrears on March 15
and September 15, commencing on September 15, 2009. Due to the holding company status of the
Company, payments of principal and interest under these notes will be dependent on loans, dividends
and other payments from the Companys subsidiaries. At December 31, 2004, the accreted principal
balance of the notes was $386,731,442. Upon a change of control, the Company would be required to
make an offer to repurchase all of the 9 3/4% senior discount notes at a price equal to 101% of the
accreted value of the notes plus accrued and unpaid interest, if any, through the date of purchase.
The Companys subsidiaries have no obligation, contingent or otherwise, to pay the amounts due
under the 9 3/4% senior discount notes or to make funds available to pay those amounts. The 9  3/4%
senior discount notes are general, unsecured senior obligations of the Company that are effectively
subordinated to indebtedness and other liabilities of the Companys subsidiaries. Upon consummation of the Recapitalization on April 2, 2004, all our outstanding stock options
immediately vested and the majority were repurchased, resulting in compensation expense of
$16,245,270 recorded by the F - 11




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company. Compensation expense includes the write-off of the
unamortized unearned compensation expense for options outstanding as of the date of the
Recapitalization and the impact of the cash settlement of these options, and is included in general
and administrative expense on the Companys consolidated statement of income for the year ended
December 31, 2004. As part of the transaction, the Company paid change of control fees and other
management compensation expenses of $15,749,259, which are included in general and administrative
expense on the Companys consolidated statements of income for the year ended December 31, 2004. As a result of the Recapitalization, the Companys Brazilian partners exercised their option
to cause the Company to purchase all of their shares of common stock of Cinemark Brasil S.A., which
represented 47.2% of the total common stock of Cinemark Brasil S.A. See Note 4. Refinancing of Certain Long-Term Debt- On March 16, 2004, in connection with the
Recapitalization, the Company initiated a tender offer for its then outstanding $105 million
aggregate principal amount 8 1/2% senior subordinated notes due 2008 and a consent solicitation to
remove substantially all restrictive covenants in the indenture governing those notes. On March
25, 2004, a supplemental indenture removing substantially all of the covenants was executed and
became effective on the date of the Recapitalization. Additionally, on the date of the
Recapitalization, the Company amended its senior secured credit facility to provide for a $260
million seven year term loan and a $100 million six and one-half year revolving credit line, which
was left undrawn. The net proceeds from the amended senior secured credit facility were used to
repay the term loan under the Companys then existing senior secured credit facility of
approximately $163.8 million and to redeem the approximately $94.2 million aggregate principal
amount of the Companys outstanding $105 million aggregate principal amount of 8 1/2% senior
subordinated notes that were tendered pursuant to the tender offer. The tender offer was made at
104.5% of the principal amount of the notes tendered on or prior to the consent date and at 101.5%
of the principal amount of the notes tendered subsequent to the consent date but prior to the
expiration date. The unamortized bond discount, tender offer repurchase costs, including premiums
paid, and other fees of $4,800,211 related to the retirement of the 8 1/2% notes were recorded as a
loss on early retirement of debt in the Companys consolidated statements of income for the year
ended December 31, 2004. On April 6, 2004, as a result of the consummation of the Recapitalization and in accordance
with the terms of the indenture governing the Companys 9% senior subordinated notes due 2013, the
Company made a change of control offer to purchase the 9% senior subordinated notes at a purchase
price of 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, at the
date of purchase. Approximately $17.8 million aggregate principal amount of the 9% senior
subordinated notes were tendered and not withdrawn in the change of control offer, which expired on
May 26, 2004. Payment of the change of control price was made with available cash by the Company on
June 1, 2004. The unamortized debt issue costs, tender offer repurchase costs, including premiums
paid, and other fees of $776,724 related to the retirement of the 9% notes were recorded as a loss
on early retirement of debt in the Companys consolidated statements of income for the year ended
December 31, 2004. On July 28, 2004, the Company provided notice to the holders of the remaining outstanding 8 1/2%
senior subordinated notes due 2008 of its election to redeem all outstanding notes at a redemption
price of 102.833% of the aggregate principal amount plus accrued interest. On August 27, 2004, the
Company redeemed the remaining notes utilizing available cash and borrowings under the Companys
revolving credit line. The unamortized bond discount, tender offer repurchase costs, including
premiums paid, and other fees of $397,193 related to the retirement of the 8 1/2% notes were
recorded as a loss on early retirement of debt in the Companys consolidated statements of income
for the year ended December 31, 2004. The amended senior secured credit facility was further amended on August 18, 2004 to, among
other things, reduce the interest rate applicable to the term loan. Under the amended term loan,
principal payments of $650,000 are due each calendar quarter through March 31, 2010 and increase to
$61,100,000 each calendar quarter from June 30, 2010 to maturity at March 31, 2011. The
amended term loan bears interest, at the Companys option, at: (A) the base rate equal to the
higher of (i) the prime lending rate as set forth on the British Banking Association Telerate page
5 or (ii) the federal funds effective rate from time to time plus 0.50%, plus a margin of 1.00% per
annum, or (B) a eurodollar rate plus a margin of 2.00% per annum. After the completion of two
fiscal quarters after the closing date, the margin under the amended term loan applicable to base
rate loans ranges from 0.75% per annum to 1.00% per annum and the margin applicable to eurodollar
rate loans ranges from 1.75% per annum to 2.00% per annum, and will be adjusted based upon the
Company achieving certain performance targets. F - 12




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Borrowings under the amended revolving credit line bear interest, at the Companys option, at:
(A) a base rate equal to the higher of (i) the prime lending rate as set forth on the British
Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to time plus
0.50%, plus a margin of 1.50% per annum, or (B) a eurodollar rate plus a margin of 2.50% per
annum. After the completion of two fiscal quarters after the closing date, the margin under the
amended revolving credit line applicable to base rate loans ranges from 1.00% per annum to 1.50%
per annum and the margin applicable to eurodollar rate loans ranges from 2.00% per annum to 2.50%
per annum, and will be adjusted based upon the Company achieving certain performance targets. The
Company is required to pay a commitment fee calculated at the rate of 0.50% per annum on the
average daily unused portion of the amended revolving credit line, payable quarterly in arrears. See Note 10 for further discussion of long-term debt. 4. ACQUISITIONS Interstate Theatres During 2003, the Company accounted for its 50% investment in Interstate Theatres, L.L.C. under
the equity method of accounting. On December 31, 2003, the Company purchased the remaining 50%
interest in Interstate Theatres, L.L.C, which owns 80% of Interstate Theatres II, L.L.C. The
Company accounted for the purchase as a step acquisition. The total purchase price of $1,500,000
was allocated to theatre properties and equipment ($404,083), working capital ($65,515) and
goodwill ($1,030,402). The Companys consolidated balance sheet at December 31, 2003 reflects the
assets and liabilities of Interstate Theatres, L.L.C. and its subsidiary. Results of operations
for Interstate Theatres, L.L.C. and its subsidiary (the Interstate theatres) are included in the
Companys consolidated statements of income for the period from January 1, 2004 through December
23, 2004. On December 23, 2004, the Company sold Interstate Theatres. See Note 5. Mitchell Theatres On December 31, 2003, the Company purchased Mitchell Theatres, Inc., which was 100% owned by
members of Lee Roy Mitchells family (a related party to the Company). The total purchase price of
$681,034 included the assumption of $156,000 in outstanding debt, which was immediately paid off at
the time of purchase. The Companys consolidated balance sheet at December 31, 2003 reflects the
assets and liabilities of Mitchell Theatres, Inc., which consisted of a working capital deficit of
$137,511 and theatre property and equipment of $818,545.
Results of operations for Mitchell Theatres, Inc. are included in the Companys consolidated
statements of income for the year ended December 31, 2004. Cinemark Brasil, S.A. As a result of the Recapitalization, the Companys Brazilian partners exercised their option
to cause the Company to purchase all of their shares of common stock of Cinemark Brasil S.A., which
represented 47.2% of the total common stock of Cinemark Brasil S.A. The Company purchased the
partners shares of Cinemark Brasil S.A. for $44,957,502 with available cash on August 18, 2004.
Prior to the acquisition, Cinemark Brasil, S.A. was reported as a consolidated subsidiary and the
Brazilian partners 47.2% interest was shown as minority interest in subsidiaries in the Companys
consolidated balance sheets. The Company is accounting for the purchase as a step acquisition and,
as a result of the preliminary purchase price allocation, recorded goodwill of $26,923,067 and
eliminated the Brazilian partners minority interest. After the final purchase price allocation is
complete for both book and tax purposes, it is expected that goodwill will be deductible for tax
purposes. As a result of this acquisition, the Company owns 100% of the common stock in Cinemark
Brasil S.A. Cinemark Mexico On September 15, 2004, the Company purchased shares of common stock of Cinemark Mexico USA,
Inc. from its Mexican partners, increasing its ownership interest in this subsidiary from 95.0% to
99.4%. The purchase price was $5,378,768 and was funded with available cash and borrowings on the
Companys revolving credit line. Prior to the acquisition, Cinemark Mexico was reported as a
consolidated subsidiary and the Mexican partners 4.4% interest was shown as minority interest in
subsidiaries on the Companys consolidated balance sheets. The F - 13




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company accounted for the purchase
as a step acquisition and, as a result of the preliminary purchase price allocation, recorded
goodwill of $3,812,916. 5. DISCONTINUED OPERATIONS As of March 31, 2004, the Companys two United Kingdom theatres met the criteria of assets
held for sale in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived
Assets.On April 30, 2004, the Company sold its two United Kingdom theatres through the sale of
all of the capital stock of Cinemark Theatres UK, Ltd., its United Kingdom subsidiary. The Company
received $2,645,812 in proceeds upon closing of the transaction and $539,766 once the final working
capital position was determined in accordance with the stock purchase agreement. The sale resulted
in a loss of $462,807, which is included in income (loss) from discontinued operations, net of
taxes, in the Companys consolidated statements of income. On December 23, 2004, the Company sold eleven discount theatres (Interstate theatres)
through the sale of all of the capital stock of Interstate Holdings, Inc. The Company received
$5,810,000 in proceeds upon closing of the transaction. The final sales price is subject to the
final working capital position to be determined in accordance with the stock purchase agreement.
The sale resulted in a preliminary gain of $2,714,574, which is included in income (loss) from
discontinued operations, net of taxes, in the Companys consolidated statements of income. The results of operations for the United Kingdom and Interstate theatres have been classified
as discontinued operations for all periods presented. Amounts reported as discontinued operations
in the Companys consolidated statements of income include the following components: Year Ended December 31,2002
    
    
    2003
    
    
    2004RevenuesAdmissions
    
    $
    2,129,520
    
    
    $
    4,327,824
    
    
    $
    4,893,155Concession
    
    
    1,006,836
    
    
    
    1,878,259
    
    
    
    5,341,011Other
    
    
    274,978
    
    
    
    512,482
    
    
    
    1,136,555Total revenues
    
    
    3,411,334
    
    
    
    6,718,565
    
    
    
    11,370,721Costs and ExpensesCost of operations:Film rentals and advertising
    
    
    1,079,405
    
    
    
    1,862,841
    
    
    
    2,191,102Concession supplies
    
    
    321,968
    
    
    
    364,571
    
    
    
    905,186Salaries and wages
    
    
    603,983
    
    
    
    1,042,641
    
    
    
    2,266,218Facility lease expense
    
    
    715,020
    
    
    
    1,395,316
    
    
    
    1,683,718Utilities and other
    
    
    1,663,602
    
    
    
    799,161
    
    
    
    2,215,414Total cost of operations
    
    
    4,383,978
    
    
    
    5,464,530
    
    
    
    9,261,638General and administrative expenses
    
    
    368,644
    
    
    
    495,970
    
    
    
    497,584Depreciation and amortization
    
    
    309,606
    
    
    
    656,458
    
    
    
    294,721Impairment of long-lived assets
    
    
    
    
    
    
    2,500,000
    
    
    
    (Gain) loss on sale of assets and other
    
    
    
    
    
    
    540,466
    
    
    
    (2,251,767
    )Total costs and expenses
    
    
    5,062,228
    
    
    
    9,657,424
    
    
    
    7,802,176Operating income (loss)
    
    
    (1,650,894
    )
    
    
    (2,938,859
    )
    
    
    3,568,545Interest income
    
    
    
    
    
    
    
    
    
    
    367Equity in income of affiliates
    
    
    176,985
    
    
    
    323,676
    
    
    
    Minority interests in income of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (40,777
    )Income (loss) before income taxes
    
    
    (1,473,909
    )
    
    
    (2,615,183
    )
    
    
    3,528,135Income tax expense (benefit)
    
    
    68,139
    
    
    
    124,615
    
    
    
    (55,579
    )Income (loss) from discontinued operations
    
    $
    (1,542,048
    )
    
    $
    (2,739,798
    )
    
    $
    3,583,714
 F - 14




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amounts related to the United Kingdom and Interstate theatres included in the Companys
consolidated balance sheets at December 31, 2003 are as follows: Current assets
    
    $
    1,665,926Theatre properties and equipment, net
    
    
    5,328,270Current liabilities
    
    
    (1,542,668
    )
 Net cash flows from operating, investing and financing activities related to the United
Kingdom and Interstate theatres were immaterial for all periods presented. 6. EARNINGS PER SHARE Basic earnings per share is computed by dividing income by the weighted average number of
shares of all classes of common stock outstanding during the period. Diluted earnings per share is
computed by dividing income by the weighted average number of shares of common stock and
potentially dilutive common equivalent shares outstanding determined under the treasury stock
method. The following table sets forth the computation of basic and diluted earnings per share: 2002
    
    
    2003
    
    
    2004Income from continuing operations before
accounting change
    
    $
    40,407,431
    
    
    $
    47,389,311
    
    
    $
    23,041,020Basic:Weighted average common shares outstanding
    
    
    40,512,560
    
    
    
    40,516,078
    
    
    
    30,865,316Income from continuing operations before
accounting change per common share
    
    $
    1.00
    
    
    $
    1.17
    
    
    $
    0.75Diluted:Weighted average common shares outstanding
    
    
    40,512,560
    
    
    
    40,516,078
    
    
    
    30,865,316Common equivalent shares for stock options
    
    
    112,611
    
    
    
    278,835
    
    
    
    Weighted average common and common
equivalent shares outstanding
    
    
    40,625,171
    
    
    
    40,794,913
    
    
    
    30,865,316Income from continuing operations before
accounting change per common and common
equivalent share
    
    $
    0.99
    
    
    $
    1.16
    
    
    $
    0.75
 F - 15




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. GOODWILL AND OTHER INTANGIBLE ASSETS  NET The Companys goodwill is as follows: U.S.
    
    
    Brazil
    
    
    Mexico
    
    
    Argentina
    
    
    Chile
    
    
    Peru
    
    
    TotalBalance at December
31, 2002
    
    $
    5,281,512
    
    
    $
    
    
    
    $
    
    
    
    $
    207,997
    
    
    $
    2,699,951
    
    
    $
    2,562,384
    
    
    $
    10,751,844Interstate
Theatres, L.L.C.
acquisition
    
    
    1,030,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,030,402Impairment of
long-lived assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (196,235
    )
    
    
    (62,820
    )
    
    
    (259,055
    )Foreign currency
translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,829
    
    
    
    490,213
    
    
    
    38,862
    
    
    
    559,904Balance at December
31, 2003
    
    
    6,311,914
    
    
    
    
    
    
    
    
    
    
    
    238,826
    
    
    
    2,993,929
    
    
    
    2,538,426
    
    
    
    12,083,095Acquisitions
    
    
    
    
    
    
    26,923,067
    
    
    
    3,812,916
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,735,983Write-off related
to theatre closure
    
    
    (349,744
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (349,744
    )Sale of Interstate
Theatres, L.L.C.
    
    
    (1,030,402
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,030,402
    )Foreign currency
translation
adjustment
    
    
    
    
    
    
    3,146,359
    
    
    
    71,545
    
    
    
    (2,656
    )
    
    
    211,725
    
    
    
    140,078
    
    
    
    3,567,051Balance at December
31, 2004
    
    $
    4,931,768
    
    
    $
    30,069,426
    
    
    $
    3,884,461
    
    
    $
    236,170
    
    
    $
    3,205,654
    
    
    $
    2,678,504
    
    
    $
    45,005,983
 During the year ended December 31, 2004, the Company wrote off $349,744 of goodwill for
one theatre that closed upon the expiration of the lease. See Note 5 regarding the sale of
Interstate Theatres, L.L.C. As of December 31, intangible assets-net, consisted of the following: 2003
    
    
    2004Capitalized licensing fees
    
    $
    9,000,000
    
    
    $
    7,750,000Other intangible assets
    
    
    442,561
    
    
    
    437,939Less: Accumulated amortization
    
    
    (1,593,430
    )
    
    
    (2,120,101
    )Amortized intangible assets
    
    
    7,849,131
    
    
    
    6,067,838Unamortized intangible assets
    
    
    16,163
    
    
    
    16,163Total
    
    $
    7,865,294
    
    
    $
    6,084,001
 During the year ended December 31, 2004, the Company wrote off $1,500,000 of capitalized
licensing fees due to the termination of the related license agreement. The write-off is included
in (gain) loss on sale of assets and other in the Companys consolidated statements of income.
During the year ended December 31, 2004, the Company recorded $250,000 of additional capitalized
licensing fees associated with a new licensing agreement. Aggregate amortization expense of
$652,787 for the year ended December 31, 2004 consisted of $526,671 of amortization of intangible
assets and $126,116 of amortization of other assets. Estimated aggregate future amortization expense for intangible assets is as follows: For the year ended December 31, 2005
    
    $
    547,506For the year ended December 31, 2006
    
    
    547,506For the year ended December 31, 2007
    
    
    547,506For the year ended December 31, 2008
    
    
    547,506For the year ended December 31, 2009
    
    
    547,506Thereafter
    
    
    3,330,308Total
    
    $
    6,067,838
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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. IMPAIRMENT OF LONG-LIVED ASSETS In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, the Company reviews long-lived assets for impairment on a quarterly basis or whenever
events or changes in circumstances indicate the carrying amount of the assets may not be fully
recoverable. The Company considers actual theatre level cash flows, future years budgeted theatre level
cash flows, theatre property and equipment carrying values, goodwill carrying values, the age of a
recently built theatre, competitive theatres in the marketplace, the sharing of a market with other
Company theatres, changes in foreign currency exchange rates, the impact of recent ticket price
changes, available lease renewal options and other factors in its assessment of impairment of
individual theatre assets. Long-lived assets are evaluated for impairment on an individual theatre
basis or a group basis if the group of theatres shares the same marketplace, which the Company
believes is the lowest applicable level for which there are identifiable cash flows. The impairment
evaluation is based on the estimated undiscounted cash flows from continuing use through the
remainder of the theatres useful life. The remainder of the useful life correlates with the
available remaining lease period for leased properties and a period of twenty years for fee owned
properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived
assets carrying value, the Company then compares the carrying value of the asset with its
estimated fair value, which is determined based on a multiple of cash flows. When estimated fair
value is determined to be lower than the carrying value of the long-lived asset, the asset is
written down to its estimated fair value and the impairment loss is recognized in the Companys
consolidated statements of income. The Companys long-lived asset impairment losses are summarized in the following table: Years Ended December 31,Theatre properties and equipment
    
    2002
    
    
    2003
    
    
    2004United StatesTheatre properties
    
    $
    (1,576,781
    )
    
    $
    (820,493
    )
    
    $
    (1,666,703
    )Land parcels
    
    
    (242,380
    )
    
    
    (2,200,000
    )
    
    
    Chile theatre properties
    
    
    (1,268,394
    )
    
    
    (529,300
    )
    
    
    El Salvador theatre properties
    
    
    (223,378
    )
    
    
    
    
    
    
    Mexico theatre properties
    
    
    
    
    
    
    (1,240,351
    )
    
    
    Subtotal
    
    
    (3,310,933
    )
    
    
    (4,790,144
    )
    
    $
    (1,666,703
    )Goodwill
(Note 7)
    
    
    (558,398
    )
    
    
    (259,055
    )
    
    
    Total impairment loss
    
    $
    (3,869,331
    )
    
    $
    (5,049,199
    )
    
    $
    (1,666,703
    )
 9. DEFERRED CHARGES AND OTHER ASSETS  NET As of December 31, deferred charges and other assets  net consisted of the following: 2003
    
    
    2004Debt issue costs
    
    $
    15,952,916
    
    
    $
    40,188,209Less: Accumulated amortization
    
    
    (2,068,842
    )
    
    
    (5,901,558
    )Subtotal
    
    
    13,884,074
    
    
    
    34,286,651Foreign advanced rents
    
    
    6,797,228
    
    
    
    6,626,182Construction advances and other deposits
    
    
    1,507,297
    
    
    
    1,728,346Equipment to be placed in service
    
    
    3,089,228
    
    
    
    3,599,404Other
    
    
    4,733,936
    
    
    
    5,898,520Total
    
    $
    30,011,763
    
    
    $
    52,139,103
 During 2004, as a result of the Recapitalization, the Company refinanced a portion of its
long-term debt resulting in the early retirement of its 8 1/2% senior subordinated notes and a
portion of its 9% senior subordinated notes and the repayment of its then existing term loan. As
part of the long-term debt refinancing, the Company F - 17




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS amended its senior secured credit facility and
capitalized $7,903,020 of new debt issue costs related to the refinancing during 2004. The Company
wrote-off $509,042 of debt issue costs, net of accumulated amortization, associated with the early
retirement of the senior subordinated notes. 10. LONG-TERM DEBT Long-term debt at December 31 consisted of the following: 2003
    
    
    2004Cinemark,
Inc. 9 3/4% senior discount notes due 2014
    
    $
    
    
    
    $
    386,731,442Cinemark USA, Inc. 9% senior subordinated notes due 2013
    
    
    374,208,262
    
    
    
    354,894,050Cinemark USA, Inc. 8 1/2% senior subordinated notes due 2008
    
    
    104,541,667
    
    
    
    Cinemark USA, Inc. Term Loan
    
    
    164,175,000
    
    
    
    258,050,000Cinemark Chile S.A. Notes Payable with Bank
    
    
    8,066,837
    
    
    
    7,323,813Cinemark Brasil S.A. Notes Payable with Bank
    
    
    3,457,264
    
    
    
    2,190,571Other long-term debt
    
    
    3,981,951
    
    
    
    4,485,113Total long-term debt
    
    
    658,430,981
    
    
    
    1,013,674,989Less current portion
    
    
    6,744,842
    
    
    
    6,539,206Long-term debt, less current portion
    
    $
    651,686,139
    
    
    $
    1,007,135,783
 New Senior Discount Notes On March 31, 2004, the Company issued $577,173,000 aggregate principal amount at maturity of 9
3/4% senior discount notes due 2014. The gross proceeds at issuance of $360,000,116 were used to fund
in part the Recapitalization. Interest on the notes accretes until March 15, 2009 up to the
aggregate principal amount of $577,173,000. Cash interest will accrue and be payable semi-annually
in arrears on March 15 and September 15, commencing on September 15, 2009. Due to the holding
company status of the Company, payments of principal and interest under these notes will be
dependent on loans, dividends and other payments from the Companys subsidiaries. At December 31,
2004, the accreted principal balance of the notes was $386,731,442. Upon a change of control, the
Company would be required to make an offer to repurchase all of the 9 3/4% senior discount notes at a
price equal to 101% of the accreted value of the notes plus accrued and unpaid interest, if any,
through the date of purchase. The Companys subsidiaries have no obligation, contingent or
otherwise, to pay the amounts due under the 9 3/4% senior discount notes or to make funds available
to pay those amounts. The 9 3/4% senior discount notes are general, unsecured senior obligations of
the Company that are effectively subordinated to indebtedness and other liabilities of the
Companys subsidiaries. New Senior Subordinated Notes Issuance and Retirement of Outstanding Senior Subordinated
Notes On February 11, 2003, the Company issued $150 million principal amount of 9% senior
subordinated notes due 2013, which are referred to elsewhere herein as the original 9% notes. On
May 7, 2003, the Company issued an
additional $210 million aggregate principal amount of 9% senior subordinated notes due 2013,
which are referred to elsewhere herein as the new 9% notes. The original 9% notes and the new 9%
notes constitute a single class of debt securities under the indenture and are together referred to
herein as the existing 9% notes. In July 2003, the Company completed an offer to exchange $360
million aggregate principal amount of 9% senior subordinated notes due 2013 (also referred to
herein as the existing 9% notes), which were registered under the Securities Act of 1933 for a
like principal amount of the existing 9% notes. Interest is payable on February 1 and August 1 of
each year, beginning August 1, 2003. The existing 9% notes mature on February 1, 2013. The net
proceeds of $145.9 million from the issuance of the original 9% notes were used to repay a portion
of the Companys then existing Credit Facility. The net proceeds of $226.7 million from the
issuance of the new 9% notes, which included a premium of $15.2 million, and additional borrowings
under the Companys then existing senior secured credit facility were utilized to fund the purchase
on May 16, 2003 of approximately $233 million aggregate principal amount of outstanding 9 5/8%
senior subordinated notes tendered as of midnight on May 15, 2003 pursuant to a tender offer
announced on April 18, 2003. F - 18




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On September 18, 2003, the Company redeemed the remaining $42 million principal amount of
outstanding 9 5/8% senior subordinated notes utilizing the net proceeds of its senior secured
credit facility term loan that was amended on August 18, 2003, along with additional borrowings
under the Companys then existing revolving credit line. On March 16, 2004, in connection with the Recapitalization, the Company initiated a tender
offer for its then outstanding $105 million aggregate principal amount 8 1/2% senior subordinated
notes due 2008 and a consent solicitation to remove substantially all restrictive covenants in the
indenture governing those notes. On March 25, 2004, a supplemental indenture removing
substantially all of the covenants was executed and became effective on the date of the
Recapitalization. Additionally, on the date of the Recapitalization, the Company amended its then
existing senior secured credit facility to provide for a $260 million seven year term loan and a
$100 million six and one-half year revolving credit line, which was left undrawn. The net proceeds
from the amended senior secured credit facility were used to repay the term loan under the
Companys then existing senior secured credit facility of approximately $163.8 million and to
redeem the approximately $94.2 million aggregate principal amount of the Companys outstanding $105
million aggregate principal amount of 8 1/2% senior subordinated notes that were tendered pursuant to
the tender offer. The tender offer was made at 104.5% of the principal amount of the notes
tendered on or prior to the consent date and at 101.5% of the principal amount of the notes
tendered subsequent to the consent date but prior to the expiration date. The unamortized bond
discount, tender offer repurchase costs, including premiums paid, and other fees of $4,800,211
related to the retirement of the 8 1/2% notes were recorded as a loss on early retirement of debt in
the Companys consolidated statements of income for the year ended December 31, 2004. On April 6, 2004, as a result of the consummation of the Recapitalization and in accordance
with the terms of the indenture governing the Companys 9% senior subordinated notes due 2013, the
Company made a change of control offer to purchase the 9% senior subordinated notes at a purchase
price of 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, at the
date of purchase. Approximately $17.8 million aggregate principal amount of the 9% senior
subordinated notes were tendered and not withdrawn in the change of control offer, which expired on
May 26, 2004. Payment of the change of control price was made with available cash by the Company on
June 1, 2004. The unamortized debt issue costs, tender offer repurchase costs, including premiums
paid, and other fees of $776,724 related to the retirement of the 9% notes were recorded as a loss
on early retirement of debt in the Companys consolidated statements of income for the year ended
December 31, 2004. On July 28, 2004, the Company provided notice to the holders of the remaining outstanding 8 1/2%
senior subordinated notes due 2008 of its election to redeem all outstanding notes at a redemption
price of 102.833% of the aggregate principal amount plus accrued interest. On August 27, 2004, the
Company redeemed the remaining notes utilizing available cash and borrowings under the Companys
revolving credit line. The unamortized bond discount,
tender offer repurchase costs, including premiums paid, and other fees of $397,193 related to
the retirement of the 8 1/2% notes were recorded as a loss on early retirement of debt in the
Companys consolidated statements of income for the year ended December 31, 2004. Senior Subordinated Notes As of December 31, 2004, the Company had outstanding $342.3 million aggregate principal amount
of 9% senior subordinated notes due 2013. Interest is payable on February 1 and August 1 of each
year. The Company may redeem all or part of the existing 9% notes on or after February 1, 2008.
Prior to February 1, 2006, the Company may redeem up to 35% of the aggregate principal amount of
the existing 9% notes from the proceeds of certain equity offerings. The senior subordinated notes are general, unsecured obligations and are subordinated in right
of payment to the amended senior secured credit facility or other senior indebtedness. The notes
are guaranteed by certain of the Companys domestic subsidiaries. The guarantees are subordinated
to the senior debt of the subsidiary guarantors and rank pari passu with the senior subordinated
debt of the Companys guarantor subsidiaries. The notes are effectively subordinated to the
indebtedness and other liabilities of the Companys non-guarantor subsidiaries. The indentures governing the senior subordinated notes contain covenants that limit, among
other things, dividends, transactions with affiliates, investments, sale of assets, mergers,
repurchases of the Companys capital stock, liens and additional indebtedness. Upon a change of
control, the Company would be required to make an F - 19




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS offer to repurchase the senior subordinated notes
at a price equal to 101% of the principal amount outstanding plus accrued and unpaid interest
through the date of repurchase. The indentures governing the senior subordinated notes allow the
Company to incur additional indebtedness if it satisfies the coverage ratio specified in each
indenture, after giving effect to the incurrence of the additional indebtedness, and in certain
other circumstances. Senior Secured Credit Facility On February 14, 2003, the Company entered into a senior secured credit facility consisting of
a $75 million five year revolving credit line and a $125 million term loan with Lehman Commercial
Paper, Inc. for itself and as administrative agent for a syndicate of lenders. The net proceeds
from the senior secured credit facility were used to repay, in full, certain debt agreements,
including the Companys then existing credit facility. On August 18, 2003, the Company amended the senior secured credit facility to provide a $165
million term loan expiring on March 31, 2008. The net proceeds of the $165 million term loan and
additional borrowings under the $75 million five year revolving credit line were used to (i) repay
$124.7 million of term loans outstanding under the Companys senior secured credit facility entered
into February 14, 2003 and (ii) redeem the remaining $42 million aggregate principal amount of the
Companys then outstanding 9 5/8% senior subordinated notes on September 18, 2003. On April 2, 2004, the Company amended its senior secured credit facility in connection with
the Recapitalization. The amended senior secured credit facility provides for a $260 million seven
year term loan and a $100 million six and one-half year revolving credit line. The net proceeds
from the amended senior secured credit facility were used to repay the existing term loan of
approximately $163.8 million and to redeem the approximately $94.2 million aggregate principal
amount of the then outstanding $105 million aggregate principal
amount 8 1/2% senior subordinated
notes due 2008 that were tendered pursuant to the tender offer. The amended senior secured credit facility was further amended on August 18, 2004 to, among
other things, reduce the interest rate applicable to the term loan. Under the amended term loan,
principal payments of $650,000 are due each calendar quarter through March 31, 2010 and increase to
$61,100,000 each calendar quarter from June 30, 2010 to maturity at March 31, 2011. The amended
term loan bears interest, at the Companys option, at: (A) the base rate equal to the higher of (i)
the prime lending rate as set forth on the British Banking Association Telerate page 5 or (ii) the
federal funds effective rate from time to time plus 0.50%, plus a margin of 1.00% per annum, or
(B) a eurodollar rate plus a margin of 2.00% per annum. After the completion of two fiscal
quarters after the closing date, the margin under the amended term loan applicable to base rate
loans ranges from 0.75% per annum to 1.00% per annum and the margin applicable to eurodollar rate
loans ranges from 1.75% per annum to 2.00% per annum, and will be adjusted based upon the Company
achieving certain performance targets. Borrowings under the amended revolving credit line bear interest, at the Companys option, at:
(A) a base rate equal to the higher of (i) the prime lending rate as set forth on the British
Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to time plus
0.50%, plus a margin of 1.50% per annum, or (B) a eurodollar rate plus a margin of 2.50% per
annum. After the completion of two fiscal quarters after the closing date, the margin under the
amended revolving credit line applicable to base rate loans ranges from 1.00% per annum to 1.50%
per annum and the margin applicable to eurodollar rate loans ranges from 2.00% per annum to 2.50%
per annum, and will be adjusted based upon the Company achieving certain performance targets. The
Company is required to pay a commitment fee calculated at the rate of 0.50% per annum on the
average daily unused portion of the amended revolving credit line, payable quarterly in arrears. The Companys obligations under the amended senior secured credit facility are guaranteed by
Cinemark, Inc., CNMK Holding, Inc. and certain of its subsidiaries and are secured by mortgages on
certain fee and leasehold properties and security interests in substantially all of the Companys
domestic personal and intangible property, including without limitation, pledges of all of its
capital stock, all of the capital stock of CNMK Holding, Inc. and certain of the Companys domestic
subsidiaries and 65% of the voting stock of certain of the Companys foreign subsidiaries. At December 31, 2004, there was approximately $258.1 million outstanding under the amended
term loan and no borrowings outstanding under the amended revolving credit line. Approximately
$99.9 million was available for F - 20




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS borrowing under the amended revolving credit line, giving effect to
a $0.1 million letter of credit outstanding. The average interest rate on outstanding borrowings
under the amended senior secured credit facility at December 31, 2004 was 4.4% per annum. Cinemark Brasil Notes Payable As of December 31, 2004, Cinemark Brasil S.A. had four main types of funding sources executed
as follows: (1) Banco Nacional de Desenvolvimento Econômico e Social (BNDES, the Brazilian National
Development Bank) credit line in the U.S. dollar equivalent in Brazilian reais of US$3.8 million.
Interest accrues at a BNDES basket rate, which is a multiple currency rate based on the rate at
which the bank borrows, plus a spread amounting to 11.4%. At December 31, 2004, there was
approximately US$0.2 million outstanding, which matures in April 2005. (2) BNDES credit line in the U.S. dollar equivalent in Brazilian reais of US$1.9 million
executed in November 2001 with a maturity date of October 2006. Interest accrues at a BNDES basket
rate plus a spread amounting to 11.2%. At December 31, 2004, there was approximately US$0.9
million outstanding under this credit line. (3) Project developer financing executed with two engineering companies in September 2000 in
the amount of US$1.8 million with a maturity date of September 2005. Interest accrues at a rate of
TJLP+5% (Taxa de Juros de Longo Prazo (a long-term interest rate published by the Brazilian
government)). At December 31, 2004, there was approximately US$0.4 million outstanding under this
financing arrangement. (4) Project developer financing executed with a mall developer in February 2004 in the amount
of US$0.7 million with a maturity date of February 2009. Interest accrues at a rate of TJLP + 5.5%
(Taxa de Juros de Longo Prazo (a long-term interest rate published by the Brazilian government)).
At December 31, 2004, there was approximately US$0.7 million outstanding under this financing
arrangement. These sources are secured by a variety of instruments, including comfort letters from Cinemark
International, L.L.C., promissory notes for up to 130% of the value, a revenue reserve account and
equipment collateral. As of December 31, 2004, an aggregate of approximately US$2.2 million was
outstanding. Cinemark Chile Notes Payable On March 26, 2002, Cinemark Chile S.A. entered into a Debt Acknowledgment, Rescheduling and
Joint Guarantee and Co-Debt Agreement with Scotiabank Sud Americano and three local banks. Under
this agreement, Cinemark Chile S.A. borrowed the U.S. dollar equivalent of approximately $10.6
million in Chilean pesos (adjusted for inflation pursuant to the Unidades de Fomento). Cinemark
Chile S.A. was required to make 24 equal quarterly installments of principal plus accrued and
unpaid interest, commencing March 27, 2002. On September 29, 2004, Cinemark Chile S.A. refinanced
the outstanding debt under an amended debt agreement with two of the original local banks,
Corpbanca and Banco Security. The amended debt agreement requires 24 equal quarterly installments
of principal plus accrued and unpaid interest, commencing December 31, 2004. The agreement
requires Cinemark Chile S.A. to maintain certain financial ratios and contains other restrictive
covenants typical for agreements of this type such as a limitation on dividends. Funds borrowed
under this agreement bear interest at the 90 day TAB Banking rate as published by the Association
of Banks and Financial Institutions Act plus 1.5%. At December 31, 2004, US$7.3 million was
outstanding under this agreement. F - 21




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Companys long-term debt at December 31, 2004 matures as follows: 2005
    
    $
    6,539,2062006
    
    
    6,582,1922007
    
    
    4,973,8742008
    
    
    4,046,4492009
    
    
    3,902,498Thereafter
    
    
    1,178,072,328
    (1)$
    1,204,116,547
 (1) Includes the 93⁄4%
senior discount notes in the aggregate principal amount at maturity
of $577,173,000. The
estimated fair value of the Companys long-term debt of $1,204.1 million at December 31,
2004 was approximately $1,012.4 million. Such amounts do not include prepayment penalties which
would be incurred upon the early extinguishment of certain debt issues. As of December 31, 2004, the Company was in full compliance with all agreements governing its
outstanding debt. Debt issue costs of $40,188,209, net of accumulated amortization of $5,901,558, related to the
senior discount notes, the senior subordinated notes, the amended senior secured credit facility
and other debt agreements, are included in deferred charges and other assets  net, on the
consolidated balance sheets at December 31, 2004. The Company recorded a loss on early retirement of debt of $5,974,128 during the year ended
December 31, 2004, which included (i) $5,197,404 of unamortized bond discounts, tender offer
repurchase costs, including premiums paid, and other fees associated with the repurchase and
subsequent retirement of $105 million aggregate principal amount of outstanding 8 1/2% senior
subordinated notes; and (ii) $776,724 of unamortized debt issue costs, tender offer repurchase
costs, including premiums paid, and other fees associated with the redemption of the $17.8 million
aggregate principal amount of the Companys 9% senior subordinated notes. 11. FOREIGN CURRENCY TRANSLATION The accumulated other comprehensive loss account in stockholders equity of $86,544,422 and
$77,121,825 as of December 31, 2003 and December 31, 2004, respectively, primarily relates to the
cumulative foreign currency adjustments from translating the financial statements of Cinemark
Argentina, S.A., Cinemark Brasil S.A. and Cinemark de Mexico, S.A. de C.V. into U.S. dollars. In 2003 and 2004, all foreign countries where the Company has operations, including Argentina,
Brazil and Mexico were deemed non-highly inflationary. Thus, any fluctuation in the currency
results in a cumulative foreign currency translation adjustment to the accumulated other
comprehensive loss account recorded as an increase in, or reduction of, stockholders equity. On December 31, 2004, the exchange rate for the Brazilian real was 2.65 reais to the U.S.
dollar (the exchange rate was 2.89 reais to the U.S. dollar at December 31, 2003). As a result, the
effect of translating the December 31, 2004 Brazilian financial statements into U.S. dollars is
reflected as a cumulative foreign currency translation adjustment to the accumulated other
comprehensive loss account as an increase in stockholders equity of $8,711,434. At December 31,
2004, the total assets of the Companys Brazilian subsidiaries were U.S. $101,268,957. On December 31, 2004, the exchange rate for the Mexican peso was 11.22 pesos to the U.S.
dollar (the exchange rate was 11.20 pesos to the U.S. dollar at December 31, 2003). The effect of
translating the December 31, 2004 Mexican financial statements into U.S. dollars was immaterial to
the change in the accumulated other
comprehensive loss account. At December 31, 2004, the total assets of the Companys Mexican
subsidiaries were U.S. $100,886,012. On December 31, 2004, the exchange rate for the Argentine peso was 2.97 pesos to the U.S.
dollar (the exchange rate was 2.94 pesos to the U.S. dollar at December 31, 2003). The effect of
translating the December 31, F - 22




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2004 Argentine financial statements into U.S. dollars was immaterial
to the change in the accumulated other comprehensive loss account. At December 31, 2004, the total
assets of the Companys Argentine subsidiaries were U.S. $16,880,777. During 2004, the Company sold its United Kingdom theatres, which resulted in a reduction of
stockholders equity upon the realization of $1,075,684 of cumulative foreign currency translation
adjustments previously recorded in the accumulated other comprehensive loss account. 12. INVESTMENTS IN AND ADVANCES TO AFFILIATES The Company had the following investments in and advances to affiliates at December 31: 2003
    
    
    2004Entertainment Amusement Enterprises, Inc.  investment, at equity
    
    $
    1,031,537
    
    
    $
    Brainerd Ltd.  investment, at equity
    
    
    265,015
    
    
    
    161,314Cinemark Theatres Alberta, Inc.  investment, at equity
    
    
    218,928
    
    
    
    292,871Fandango, Inc.  investment, at cost
    
    
    171,000
    
    
    
    171,000Cinemark  Core Pacific, Ltd. (Taiwan)  investment, at cost
    
    
    337,984
    
    
    
    337,984Other
    
    
    309,681
    
    
    
    255,829Total
    
    $
    2,334,145
    
    
    $
    1,218,988
 In January 2004, the Companys 50% investment in Entertainment Amusement Enterprises, Inc. was
sold for $1,500,000. The Company received proceeds of $1,250,000 in cash and a three-year note for
the remainder of the sales price, resulting in a gain of $423,463. 13. MINORITY INTERESTS IN SUBSIDIARIES Minority ownership interests in subsidiaries of the Company are as follows at December 31: 2003
    
    
    2004Cinemark Brasil S.A. - 47.2% interest at December 31, 2003
    
    $
    17,995,060
    
    
    $
    Cinemark Partners II - 49.2% interest
    
    
    7,653,855
    
    
    
    8,494,281Cinemark Equity Holdings Corp. (Central America) - 49.9% interest
    
    
    2,989,475
    
    
    
    3,227,404Cinemark Colombia, S.A. - 49.0% interest
    
    
    1,788,474
    
    
    
    2,056,386Greeley Ltd.  49.0% interest
    
    
    830,416
    
    
    
    1,585,593Cinemark del Ecuador, S.A. - 40.0% interest
    
    
    935,171
    
    
    
    827,133Cinemark de Mexico, S.A. de C.V. - 5.0% interest at December 31,
2003 and 0.6% interest at December 31, 2004
    
    
    1,391,224
    
    
    
    204,268Others
    
    
    348,508
    
    
    
    302,253Total
    
    $
    33,932,183
    
    
    $
    16,697,318
 On August 18, 2004, the Company purchased the partners shares of Cinemark Brasil S.A. for
$44,957,502 with available cash. The Company accounted for the purchase as a step acquisition.
See Note 4. On September 15, 2004, the Company purchased shares of common stock of its Mexican subsidiary
from its Mexican partners, increasing its ownership interest in the Mexican subsidiary from 95.0%
to 99.4%. The purchase
price was $5,378,768 and was funded with available cash and borrowings on the Companys revolving
credit line. The Company accounted for the purchase as a step acquisition. See Note 4. 14. CAPITAL STOCK Common
and Preferred Stock  Class A and Class B common stockholders are entitled to vote
together as a class on all matters submitted to a vote of the Companys stockholders, except that
the holders of Class A common stock are entitled to one vote for each share held and the holders of
Class B common stock are entitled to ten votes F - 23




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for each share held. Other than these voting rights,
the holders of Class A common stock and Class B common stock have identical rights and privileges
in every respect. Each share of Class B common stock is convertible into one share of Class A
common stock at the option of the holder or automatically upon a transfer of the holders Class B
common stock, other than to certain transferees. The Companys common stockholders do not have
cumulative voting rights. Subject to the rights of holders of any then outstanding shares of the
Companys preferred stock, the Companys common stockholders are entitled to any dividends that may
be declared by the Board of Directors. Holders of the Companys common stock are entitled to share
ratably in the Companys net assets upon the Companys dissolution or liquidation after payment or
provision for all liabilities and any preferential liquidation rights of the Companys preferred
stock then outstanding. The Companys common stockholders have no preemptive rights to purchase
shares of the Companys stock. The shares of the Companys common stock are not subject to any
redemption provisions and, other than the Class B common stock, are not convertible into any other
shares of the Companys capital stock. The rights, preferences and privileges of holders of the
Companys common stock will be subject to those of the holders of any shares of the Companys
preferred stock the Company may issue in the future. The Company has 50,000,000 shares of preferred stock, $0.001 par value, authorized with no
shares issued or outstanding. The rights and preferences of preferred stock will be determined by
the Board of Directors at the time of issuance. The Companys ability to pay dividends is effectively limited by its status as a holding
company and the terms of its indentures and senior secured credit facility, which also
significantly restrict the ability of certain of the Companys subsidiaries to pay dividends
directly or indirectly to the Company. Furthermore, certain of the Companys foreign subsidiaries
currently have a deficit in retained earnings which prevents the Company from declaring and paying
dividends from those subsidiaries. Stock Option Plans On May 16, 2002, Cinemark, Inc. was formed as the Delaware holding
company of Cinemark USA, Inc. Under a share exchange agreement dated May 17, 2002, and after giving
effect to a reverse stock split, each outstanding share and option to purchase shares of Cinemark
USA, Inc.s common stock was exchanged for 220 shares and options to purchase shares of Cinemark,
Inc.s common stock. Unearned compensation of $3,810,085 related to Cinemark USA, Inc.s stock
options was contributed to the Company on May 17, 2002 as part of the share exchange. No unearned
compensation has been recorded subsequent to the share exchange. Employee Stock Option Plan  Under terms of the Companys former Employee Stock Option Plan,
nonqualified options to purchase up to 2,350,700 shares of the Companys Class A common stock were
available for grant to key employees. As of December 31, 2002 and 2003, no shares were available
for issuance under the Companys Employee Stock Option Plan and there were no outstanding options
to purchase shares of stock under this Plan, as all outstanding options were either exercised or
forfeited during 2001. The Employee Stock Option Plan was terminated upon the consummation of the
Recapitalization on April 2, 2004. Independent
Director Stock Options  Under terms of the Companys former Independent Director
Stock Option Plan, the Company granted its unaffiliated directors options to purchase up to an
aggregate of 176,000 shares of the Companys Class A common stock. The Independent Director Stock
Option Plan was terminated upon the consummation of the Recapitalization on April 2, 2004. A
summary of the Companys Independent Director Stock Option Plan activity and related information
for the years ended December 31, 2002, 2003 and 2004 is as follows: 2002
    2003
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at January 1
    
    
    132,000
    
    
    $
    0.0045
    
    
    
    132,000
    
    
    $
    0.0045
    
    
    
    44,000
    
    
    $
    0.0045Granted
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Forfeited
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    
    
    
    
    (88,000
    )
    
    $
    0.0045
    
    
    
    
    
    
    $
    Repurchased
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    (44,000
    )
    
    $
    0.0045Outstanding at December 31
    
    
    132,000
    
    
    $
    0.0045
    
    
    
    44,000
    
    
    $
    0.0045
    
    
    
    
    
    
    $
    Options exercisable at
December 31
    
    
    88,000
    
    
    $
    0.0045
    
    
    
    44,000
    
    
    $
    0.0045
    
    
    
    
    
    
    $
    
 F - 24




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Long
Term Incentive Plan Under terms of the Companys former Long Term Incentive Plan, the
Compensation Committee, in its sole discretion, was able to grant employees incentive stock
options, non-qualified stock options, stock appreciation rights, restricted stock awards,
performance units, performance shares or phantom stock up to an aggregate of 2,154,680 shares of
the Companys Class A common stock. The Long Term Incentive Plan was terminated upon the
consummation of the Recapitalization on April 2, 2004. A summary of the Companys Long Term
Incentive Plan activity and related information for the years ended December 31, 2002, 2003 and
2004 is as follows: 2002
    2003
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at January 1
    
    
    1,279,300
    
    
    $
    6.01
    
    
    
    1,248,500
    
    
    $
    5.97
    
    
    
    1,251,500
    
    
    $
    6.45Granted
    
    
    
    
    
    $
    
    
    
    
    63,500
    
    
    $
    12.76
    
    
    
    
    
    
    $
    Forfeited
    
    
    (30,800
    )
    
    $
    7.61
    
    
    
    (47,300
    )
    
    $
    1.93
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    
    
    
    
    (13,200
    )
    
    $
    7.61
    
    
    
    (132,692
    )
    
    $
    1.50Repurchased
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    (1,118,808
    )
    
    $
    7.04Outstanding at December 31
    
    
    1,248,500
    
    
    $
    5.97
    
    
    
    1,251,500
    
    
    $
    6.45
    
    
    
    
    
    
    $
    Options exercisable at
December 31
    
    
    797,500
    
    
    $
    7.10
    
    
    
    1,013,100
    
    
    $
    6.91
    
    
    
    
    
    
    $
    
 The Company believed the market value of a share of Class A common stock on the date of grant
for the 63,500 options granted during October 2003 did not exceed the option price of $12.76 per
share and therefore no unearned compensation was recorded. Compensation expense resulting from the amortization of unearned compensation recorded in the
Companys consolidated statements of income under these former stock option plans was $1,103,155, $1,079,826 and $145,021 in 2002, 2003 and 2004, respectively. Upon consummation of the
Recapitalization on April 2, 2004, all of the Companys stock options outstanding prior to the
Recapitalization immediately vested and the majority were repurchased and the then existing stock
option plans were terminated. During 2004, the Company recorded additional compensation expense of
$1,595,234 related to the write-off of the remaining unearned compensation for options outstanding
as of the date of the Recapitalization and $14,650,036 related to the cash settlement of these
options. On September 30, 2004, the Board of Directors and the majority of the Companys stockholders
approved the 2004 Long Term Incentive Plan (the Plan) under which 3,074,991 shares of Class A
common stock are available for issuance to selected employees, directors and consultants of the
Company. The Plan provides for restricted share grants, incentive option grants and nonqualified
option grants. On September 30, 2004, the Company granted options to purchase 2,361,590 shares of
Class A common stock under the Plan at an exercise price of $22.58 per
option. The exercise price was equal to the fair market value on the date of grant. Options to
purchase 234,219 shares vested immediately and the remaining options granted in 2004 vest daily
over the period ending April 1, 2009. The options expire ten years from the grant date. There were
options to purchase 2,361,590 shares of Class A common stock outstanding under the Plan as of
December 31, 2004. A participants options under the Plan are forfeited if the participants service to the
Company or any of its subsidiaries is terminated for cause. At any time before the Class A common
stock becomes listed or admitted to
unlisted trading privileges on a national securities exchange
or designated as a national market system security on an interdealer quotation system by the
National Association of Securities Dealers or if sale or bid and other offer quotations are
reported for that class of common stock on the NASDAQ National Market, the Company or a designee
shall have the right to purchase any shares of Class A common stock acquired on exercise of an
option, any restricted shares issued under the Plan and any exercisable options granted under the
Plan. The purchase price in such event shall be determined as provided in the Plan. A summary of the Companys 2004 Long Term Incentive Plan activity for the year ended December
31, 2004 is as follows: Weighted AverageExerciseShares
    
    
    PriceOutstanding at January 1
    
    
    
    
    
    $
    Granted
    
    
    2,361,590
    
    
    $
    22.58Forfeited
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    Outstanding at December 31
    
    
    2,361,590
    
    
    $
    22.58Options exercisable at December 31
    
    
    354,533
    
    
    $
    22.58
 All options outstanding at December 31, 2004 have a remaining contractual life of approximately
9.75 years. 15. SUPPLEMENTAL CASH FLOW INFORMATION The following is provided as supplemental information to the consolidated statements of cash
flows: Years Ended December 31,2002
    
    
    2003
    
    
    2004Cash paid for interest
    
    $
    54,097,745
    
    
    $
    50,992,168
    
    
    $
    46,686,246Cash paid for income taxes (net of refunds)
    
    $
    14,639,084
    
    
    $
    17,330,386
    
    
    $
    16,681,572Noncash activities:Construction lease obligation related to
construction of two theatres in Mexico
    
    $
    
    
    
    $
    
    
    
    $
    6,463,014Issuance of
stock to existing stockholders
    
    $
    
    
    
    $
    
    
    
    $
    106,754,987
 F - 25




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. INCOME TAXES Income from continuing operations before income taxes below includes the cumulative effect of
a change in accounting principle in 2002 of $(3,389,779) and consisted of the following: 2002
    
    
    2003
    
    
    2004Income from continuing
operations before income
taxes:U.S.
    
    $
    56,409,587
    
    
    $
    65,348,295
    
    
    $
    12,390,111Foreign
    
    
    9,699,957
    
    
    
    7,082,402
    
    
    
    27,952,602Total
    
    $
    66,109,544
    
    
    $
    72,430,697
    
    
    $
    40,342,713Current:Federal
    
    $
    9,365,327
    
    
    $
    16,280,324
    
    
    $
    2,728,597Foreign
    
    
    3,990,006
    
    
    
    5,885,184
    
    
    
    4,008,385State
    
    
    850,223
    
    
    
    1,012,994
    
    
    
    460,141Total current expense
    
    
    14,205,556
    
    
    
    23,178,502
    
    
    
    7,197,123Deferred:Federal
    
    
    13,912,188
    
    
    
    2,898,322
    
    
    
    4,825,147Foreign
    
    
    206,782
    
    
    
    (1,053,368
    )
    
    
    5,473,219State
    
    
    767,366
    
    
    
    17,930
    
    
    
    (193,796
    )Total deferred expense
    
    
    14,886,336
    
    
    
    1,862,884
    
    
    
    10,104,570Income tax expense
    
    $
    29,091,892
    
    
    $
    25,041,386
    
    
    $
    17,301,693
 A reconciliation between income tax expense and taxes computed by applying the applicable
statutory federal income tax rate to income from continuing operations before income taxes follows: 2002
    
    
    2003
    
    
    2004Computed normal tax expense
    
    $
    23,138,340
    
    
    $
    25,350,744
    
    
    $
    14,119,950Goodwill
    
    
    1,317,122
    
    
    
    (20,294
    )
    
    
    (42,281
    )Foreign inflation adjustments
    
    
    (1,090,408
    )
    
    
    11,549
    
    
    
    (99,931
    )State and local income taxes, net of federal income tax benefit
    
    
    1,617,590
    
    
    
    666,135
    
    
    
    173,124Foreign losses not benefited and other changes in valuation
allowance
    
    
    4,646,981
    
    
    
    221,416
    
    
    
    (3,201,512
    )Foreign tax rate differential
    
    
    469,375
    
    
    
    883,313
    
    
    
    (116,838
    )Other  net
    
    
    (1,007,108
    )
    
    
    (2,071,477
    )
    
    
    6,469,181Income tax expense
    
    $
    29,091,892
    
    
    $
    25,041,386
    
    
    $
    17,301,693
 The tax effects of significant temporary differences and tax loss and tax credit carryforwards
comprising the net long-term deferred income tax liability at December 31, 2003 and 2004 consisted
of the following: 2003
    
    
    2004Deferred liabilities:Theatre properties and equipment
    
    $
    31,937,196
    
    
    $
    40,134,168Deferred intercompany sale
    
    
    2,632,883
    
    
    
    2,984,487Total
    
    $
    34,570,079
    
    
    $
    43,118,655Deferred assets:Deferred lease expenses
    
    $
    9,768,255
    
    
    $
    10,154,676Theatre properties and equipment
    
    
    7,975,368
    
    
    
    4,012,313Deferred gain on sale leasebacks
    
    
    2,125,817
    
    
    
    1,985,853Deferred screen advertising revenues
    
    
    
    
    
    
    107,100Tax loss carryforward
    
    
    14,158,469
    
    
    
    14,501,440AMT and other credit carryforwards
    
    
    2,411,179
    
    
    
    1,146,904Other expenses, not currently deductible for tax purposes
    
    
    (1,884,675
    )
    
    
    (2,111,379
    )Total
    
    $
    34,554,413
    
    
    $
    29,796,907Net long-term deferred income tax liability before valuation allowance
    
    $
    15,666
    
    
    $
    13,321,748Valuation allowance
    
    
    13,017,347
    
    
    
    9,815,835Net long-term deferred income tax liability
    
    $
    13,033,013
    
    
    $
    23,137,583Net deferred tax asset  Foreign
    
    $
    (8,236,376
    )
    
    $
    (2,763,157
    )Net deferred tax liability  U.S.
    
    
    21,269,389
    
    
    
    25,900,740Total of all deferrals
    
    $
    13,033,013
    
    
    $
    23,137,583
 The Companys AMT credit carryforward was utilized in 2002. The foreign credit carryforwards
begin expiring in 2008. The foreign net operating losses began expiring in 2002; however, some
losses may be carried forward indefinitely. The federal net operating loss was utilized in 2002;
however, the state losses remaining will expire in 2005 through 2024. Management continues to reinvest the undistributed earnings of its foreign subsidiaries.
Accordingly, deferred U.S. federal and state income taxes are not provided on the undistributed
earnings of these foreign subsidiaries. The cumulative amount of undistributed earnings of these
foreign subsidiaries on which the Company has not recognized income taxes is approximately $44
million. The Companys valuation allowance decreased from $13,017,347 at December 31, 2003 to
$9,815,835 at December 31, 2004. This change was primarily due to an overall decrease in the
deferred tax asset associated with the Companys United Kingdom subsidiary, which was sold during
2004 and reported as a discontinued operation, and a decrease in the deferred tax asset in Brazil,
which remains fully reserved. The decrease in the Brazil deferred tax asset was mainly due to the
decrease in the net operating loss carryover, which was partially utilized, and increases in other
deferred tax liabilities. F - 26




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company is routinely under audit in various jurisdictions and is currently under
examination by the IRS and in Mexico. The Company believes that it is adequately reserved for the
probable outcome of these exams. 17. COMMITMENTS AND CONTINGENCIES Leases  The Company conducts a significant part of its theatre operations in leased
properties under noncancelable operating leases with terms generally ranging from 10 to 25 years.
In addition to the minimum annual lease payments, some of these leases provide for contingent
rentals based on operating results of the underlying theatre and most require the payment of taxes,
insurance and other costs applicable to the property. The Company can renew, at its option, a
substantial portion of the leases at defined or then market rental rates for various periods. Some
leases also provide for escalating rent payments throughout the lease term. Deferred lease expenses
of $27,652,702 and $27,961,902 at December 31, 2003 and 2004, respectively, have been provided to
account for lease expenses on a straight-line basis, where lease payments are not made on such
basis. Rent expense for the years ended December 31, is as follows: 2002
    
    
    2003
    
    
    2004Fixed rent expense
    
    $
    96,583,919
    
    
    $
    100,561,449
    
    
    $
    104,954,036Contingent rent expense
    
    
    19,003,888
    
    
    
    18,955,233
    
    
    
    21,688,698Facility lease expense
    
    
    115,587,807
    
    
    
    119,516,682
    
    
    
    126,642,734Corporate office rent expense
    
    
    1,346,540
    
    
    
    1,401,065
    
    
    
    1,405,986Total rent expense
    
    $
    116,934,347
    
    
    $
    120,917,747
    
    
    $
    128,048,720
 The Company deferred the total gains of $5,960,759 from three sale leaseback transactions that
occurred during 1998 and 1999 and is recognizing them evenly over the lives of the leases (ranging
from 10 to 20 years). As of December 31, 2004, $2,319,979 of the total deferred gains has been
recognized leaving an aggregate deferred gain of $3,640,780 remaining to be amortized. Future minimum lease payments under noncancelable operating leases (including leases under the
aforementioned sale leaseback transactions) with initial or remaining terms in excess of one year
at December 31, 2004 are due as follows: OperatingLeases2005
    
    $
    111,590,9352006
    
    
    117,067,4272007
    
    
    116,675,1102008
    
    
    113,685,3412009
    
    
    110,273,194Thereafter
    
    
    904,014,113Total
    
    $
    1,473,306,120
 Employment Agreements- On March 12, 2004, the Company entered into new employment agreements
with certain executives which became effective upon the consummation of the Recapitalization on
April 2, 2004. In addition, in connection with the Recapitalization, the Company paid a one-time
special bonus in the amount of F - 27




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS $2,400,000 to Lee Roy Mitchell and in the amount of $50,000 to each of Alan Stock, Tim Warner
and Robert Copple. Set forth below is a summary of the new agreements. Lee Roy Mitchell The Company entered into an employment agreement with Lee Roy Mitchell pursuant to which Mr.
Mitchell serves as the Companys Chief Executive Officer. The employment agreement became effective
upon the consummation of the Recapitalization. The initial term of the employment agreement is
three years, subject to an automatic extension for a one-year period, unless the employment
agreement is terminated. Mr. Mitchell receives a base salary of $716,625 per year, which is subject
to annual review for increase (but not decrease) each year by the Companys Board of Directors or
committee or delegate thereof. In addition, Mr. Mitchell is eligible to receive an annual cash
incentive bonus upon the Company meeting certain performance targets established by the board or
the compensation committee for the fiscal year. Mr. Mitchell is also entitled to additional fringe
benefits including life insurance benefits of not less than $5 million, disability benefits of not
less than 66% of base salary, a luxury automobile and a membership at a country club. The
employment agreement provides for severance payments upon termination of employment, the amount and
nature of which depends upon the reason for the termination of employment. If Mr. Mitchell resigns
for good reason or is terminated by the Company without cause (as defined in the agreement), Mr.
Mitchell will receive: accrued compensation (which includes base salary and a pro rata bonus)
through the date of termination; any previously vested stock options and accrued benefits, such as
retirement benefits, in accordance with the terms of the plan or agreement pursuant to which such
options or benefits were granted; his annual base salary as in effect at the time of termination
for a period of twelve months following such termination; and an amount equal to the most recent
annual bonus he received prior to the date of termination. Mr. Mitchells equity-based or
performance-based awards will become fully vested and exercisable upon such termination or
resignation. Mr. Mitchell may choose to continue to participate in the Companys benefit plans and
insurance programs on the same terms as other actively employed senior executives for a one-year
period. Furthermore, so long as Mr. Mitchell remains Chief Executive Officer, he will possess
approval rights over certain significant transactions that may be pursued by the Company. In the event Mr. Mitchells employment is terminated due to his death or disability, Mr.
Mitchell or his estate will receive: accrued compensation (which includes base salary and a pro
rata bonus) through the date of termination; any previously vested stock options and accrued
benefits, such as retirement benefits, in accordance with the terms of the plan or agreement
pursuant to which such options or benefits were granted; his annual base salary as in effect at the
time of termination for a period of six months following such termination; a lump sum payment equal
to an additional six months of base salary payable six months after the date of termination; and
any benefits payable to Mr. Mitchell and or his beneficiaries in accordance with the terms of any
applicable benefit plan. In the event Mr. Mitchells employment is terminated by the Company for cause or under a
voluntary termination (as defined in the agreement), Mr. Mitchell will receive: accrued base salary
through the date of termination; and any previously vested rights under a stock option or similar
incentive compensation plan in accordance with the terms of such plan. Mr. Mitchell will also be entitled, for a period of five years, to tax preparation assistance
upon termination of his employment for any reason other than for cause or under a voluntary
termination. The employment agreement contains various covenants, including covenants related to
confidentiality, non-competition (other than certain permitted activities as defined therein) and
non-solicitation. Tandy Mitchell, Alan Stock, Robert Copple, Timothy Warner, Robert Carmony, John Lundin and
Michael Cavalier The Company entered into executive employment agreements with each of Tandy Mitchell, Alan
Stock, Robert Copple, Timothy Warner, Robert Carmony, John Lundin and Michael Cavalier pursuant to
which Mrs. Mitchell and Messrs. Stock, Copple, Warner, Carmony, Lundin and Cavalier serve,
respectively, as the Companys Executive Vice President, President and Chief
Operating Officer, Senior Vice President and Chief Financial Officer, Senior Vice President, Senior
Vice President of Operations, Vice President of Film Licensing and Vice President and General
Counsel. The employment agreements became effective upon the consummation of the Recapitalization.
The initial term of each employment agreement is three years, subject to automatic extensions for a F - 28




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS one-year period at the end of each year of the term, unless the agreement is terminated. Pursuant
to the employment agreements, each of these individuals receives a base salary, which is subject to
annual review for increase (but not decrease) each year by the Companys Board of Directors or
committee or delegate thereof. In addition, each of these executives is eligible to receive an
annual cash incentive bonus upon the Companys meeting certain performance targets established by
the Board of Directors or the compensation committee for the fiscal year. The Companys Board of Directors has adopted a stock option plan and granted each executive
stock options to acquire such number of shares as set forth in that executives employment
agreement. The executives stock options vest and become exercisable twenty percent per year on a
daily pro rata basis and shall be fully vested and exercisable on
April 1, 2009, as long as the executive remains continuously employed by Cinemark, Inc. Upon consummation
of a sale of the Company, the executives stock options will accelerate and become fully vested. The employment agreement with each executive provides for severance payments on substantially
the same terms as the employment agreement for Mr. Mitchell, except that if the executive resigns
for good reason or is terminated by the Company without cause (as defined in the agreements) prior
to the first anniversary of the effectiveness of the employment agreement, the executive will
receive his or her annual base salary in effect at the time of termination for a period commencing
on the date of termination and ending on the second anniversary of the effective date (rather than
for twelve months); and an amount equal to the most recent annual bonus he or she received prior to
the date of termination pro rated for the number of days between such termination and the second
anniversary of the effective date (rather than a single annual bonus). Each executive will also be entitled to office space and support services for a period of not
more than three months following the date of any termination except for termination for cause. The
employment agreements contain various covenants, including covenants related to confidentiality,
non-competition and non-solicitation. Retirement Savings Plan- The Company has a 401(k) retirement savings plan for the benefit of
all employees and makes contributions as determined annually by the Board of Directors.
Contribution payments of $1,152,212 and $1,105,214 were made in 2003 (for plan year 2002) and 2004
(for plan year 2003), respectively. A liability of $1,450,330 has been recorded at December 31,
2004 for contribution payments to be made in 2005 (for plan year 2004). Letters of Credit and Collateral- The Company had outstanding letters of credit of $68,557,
in connection with property and liability insurance coverage, at December 31, 2003 and 2004. Litigation and Litigation Settlements- DOJ Litigation- In March 1999, the Department of
Justice (DOJ) filed suit in the U.S. District Court, Northern District of Ohio, Eastern Division,
against the Company alleging certain violations of the Americans with Disabilities Act of 1990 (the
ADA) relating to the Companys wheelchair seating arrangements and seeking remedial action. An
order granting summary judgment to the Company was issued in November 2001. The Department of
Justice appealed the district courts ruling with the Sixth Circuit Court of Appeals. On November
7, 2003, the Sixth Circuit Court of Appeals reversed the summary judgment and sent the case back to
the district court for further review without deciding whether wheelchair seating at the Companys
theatres comply with the ADA. The Sixth Circuit Court of Appeals also stated that if the district
court found that the theatres did not comply with the ADA, any remedial action should be
prospective only. The Company and the United States have resolved this lawsuit. A Consent Order
was entered by the U.S. District Court for the Northern District of Ohio, Eastern Division, on
November 17, 2004. This Consent Order fully and finally resolves the United States v. Cinemark
USA, Inc.lawsuit, and all claims asserted against the Company in that lawsuit have been dismissed
with prejudice. Under the Consent Order, over the next five years, the Company will make
modifications to wheelchair seating locations in fourteen stadium-style movie theatres within the
Sixth Circuit and elsewhere, and spacing and companion seating modifications at 67 auditoriums at
other stadium-styled movie theatres. Upon completion of these modifications, such theatres will
comply with all existing and pending ADA wheelchair seating requirements, and no further
modifications will be necessary to remaining stadium-style movie theatres in the United States to
comply with the wheelchair seating requirements of the ADA. Under the Consent Order, the DOJ
approved the seating plans for nine stadium-styled movie theatres under construction. The Company
and the DOJ have also created a safe harbor framework for the Company to construct all of its
future stadium-style movie theatres. The DOJ has stipulated that all theatres built in compliance
with the Consent Order will comply with the F - 29




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##### Table of Contents



CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS wheelchair seating requirements of the ADA. Management believes that its obligations under the
Consent Order are not material in the aggregate to its financial position, results of operations,
and cash flows. Mission, Texas Litigation- In July 2001, Sonia Rivera-Garcia and Valley Association for
Independent Living filed suit in the 93rd Judicial District Court of Hidalgo County,
Texas alleging certain violations of the Human Resources Code, the Texas Architectural Barriers
Act, the Texas Accessibility Standards and the Deceptive Trade Practices Act relating to
accessibility of movie theatres for patrons using wheelchairs at one theatre in the Mission, Texas
market. The plaintiffs are seeking remedial action and unspecified damages. A jury in a similar
case in Austin, Texas found that the Company did not violate the Human Resources Code, the Texas
Architectural Business Act or the Texas Accessibility Standards. The judge in that case dismissed
the claim under the Deceptive Trade Practices Act. The Company has filed an answer denying the
allegations and is vigorously defending this suit. The Company is unable to predict the outcome of
this litigation or the range of potential loss, however, management believes that based upon
current precedent the Companys potential liability with respect to such proceeding is not material
in the aggregate to the Companys financial position, results of operations and cash flows.
Accordingly, the Company has not established a reserve for loss in connection with this proceeding. From time to time, the Company is involved in other various legal proceedings arising from the
ordinary course of it business operations, such as personal injury claims, employment matters and
contractual disputes, most of which are covered by insurance. The Company believes its potential
liability with respect to proceedings currently pending is not material, individually or in the
aggregate, to the Companys financial position, results of operations and cash flows. 18. FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS The Company operates in one business segment as a motion picture exhibitor. The Company has
operations in the U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El
Salvador, Nicaragua, Costa Rica, Panama and Colombia, which are reflected in the consolidated
financial statements. Below is a breakdown of select financial information by geographic area: Years Ended December 31,Revenues(1)
    
    2002
    
    
    2003
    
    
    2004U.S. and Canada
    
    $
    727,918,466
    
    
    $
    743,843,186
    
    
    $
    783,393,942Mexico
    
    
    84,376,090
    
    
    
    70,246,112
    
    
    
    76,148,274Brazil
    
    
    65,195,568
    
    
    
    74,853,097
    
    
    
    90,871,729Other foreign countries
    
    
    59,312,008
    
    
    
    63,475,171
    
    
    
    75,199,980Eliminations
    
    
    (948,257
    )
    
    
    (1,545,406
    )
    
    
    (1,372,120
    )Total
    
    $
    935,853,875
    
    
    $
    950,872,160
    
    
    $
    1,024,241,805
 Theatre properties and equipment, net(2)
    
    December 31,2003
    
    
    December 31,2004U.S. and Canada
    
    $
    616,729,729
    
    
    $
    622,578,225Mexico
    
    
    61,893,971
    
    
    
    61,043,258Brazil
    
    
    44,903,308
    
    
    
    51,981,711Other foreign countries
    
    
    52,353,050
    
    
    
    49,991,836Total
    
    $
    775,880,058
    
    
    $
    785,595,030
  (1)
    Revenues for all periods do not include results of the two United Kingdom theatres
or the eleven Interstate theatres, which were sold during 2004.  (2)
    Amount at December 31, 2003 includes $4,520,104 for the two United Kingdom
theatres and $808,166 for the eleven Interstate theatres sold during 2004. F - 30




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. OTHER RELATED PARTY TRANSACTIONS In addition to transactions discussed in other notes to the consolidated financial statements,
the following transactions with related companies are included in the Companys consolidated
financial statements: 2002
    
    
    2003
    
    
    2004Facility lease expense -
theatre and equipment leases
with shareholder affiliates
    
    $
    289,287
    
    
    $
    288,138
    
    
    $
    137,723Management fee revenues for
property and theatre
management:Equity investee
    
    
    256,007
    
    
    
    395,153
    
    
    
    168,600Other related parties
    
    
    58,263
    
    
    
    32,317
    
    
    
    
 The
Company leases one theatre from Plitt Plaza Joint Venture (Plitt Plaza) on a month-to-month basis. Plitt Plaza is indirectly owned by Lee Roy Mitchell. Annual rent is approximately
$118,000 plus certain taxes, maintenance expenses and insurance. The Company recorded $137,723 of
facility expenses payable to Plitt Plaza joint venture during the year ended December 31, 2004. The Company manages one theatre for Laredo Theatre, Ltd. (Laredo). The Company is the sole
general partner and owns 75% of the limited partnership interests of Laredo. Lone Star Theatres,
Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr.
David Roberts, Lee Roy Mitchells son-in-law. Under the agreement, management fees are paid by
Laredo to the Company at a rate of 5% of annual theatre revenues up to $50,000,000 and 3% of annual
theatre revenues in excess of $50,000,000. The Company recorded $190,834 of management fee revenues
and received $562,500 of distributions from Laredo during the year ended December 31, 2004. All
such amounts are included in the Companys consolidated financial statements with the intercompany
amounts eliminated in consolidation. The Company entered into an amended and restated profit participation agreement on March 12,
2004 with its President, Alan Stock, which became effective upon consummation of the
Recapitalization and amends a profit participation agreement with Mr. Stock in effect since May
2002. Under the agreement, Mr. Stock receives a profit interest in two theatres once the Company
has recovered its capital investment in these theatres plus its borrowing costs. During the year
ended December 31, 2004, the Company recorded $599,818 in profit participation expense payable to
Mr. Stock, which is included in general and administrative expense in the Companys consolidated
statements of income. The Company paid $364,699 of this amount to Mr. Stock as of December 31,
2004. In the event that Mr. Stocks employment is terminated without cause, profits will be
distributed according to a formula set forth in the profit participation agreement. The Company paid approximately $72,000 to Addison Jet Management, Inc. for use of an airplane
during 2004. Lee Roy Mitchell owns 50% of the airplane and leases the plane to Addison Jet
Management, Inc. Madison Dearborn Partners, LLC or an affiliate received a fee of approximately $12.5 million
plus out-of-pocket expenses incurred at the closing of the Recapitalization. In conjunction with the Recapitalization, the Company paid fees of approximately $6 million to
Allen & Company LLC. Mr. Enrique Senior is a member of the Board of Directors and is a
Managing Director of Allen & Company LLC. F - 31




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CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20. INITIAL PUBLIC OFFERING FEES AND COSTS In 2002, the Company incurred legal, accounting and other professional fees and costs of
$3,080,511 associated with the Companys proposed initial public offering. The proposed initial public
offering was subsequently postponed due to unfavorable market conditions. These legal, accounting
and other professional fees and costs were written off during the fourth quarter of 2002 since the
proposed initial public offering was not consummated. 21. VALUATION AND QUALIFYING ACCOUNTS The Companys valuation allowance for deferred tax assets for the years ended December 31,
2002, 2003 and 2004 is as follows: Valuation AllowanceforDeferred Tax AssetsBalance at December 31, 2001
    
    $
    11,821,489Additions
    
    
    596,209Deductions
    
    
    (650,368
    )Balance at December 31, 2002
    
    $
    11,767,330Additions
    
    
    2,876,165Deductions
    
    
    (1,626,148
    )Balance at December 31, 2003
    
    $
    13,017,347Additions
    
    
    999,296Deductions
    
    
    (4,200,808
    )Balance at December 31, 2004
    
    $
    9,815,835
 F - 32




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EXHIBITS TO FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR CINEMARK, INC. FOR FISCAL YEAR ENDED
DECEMBER 31, 2004 E - 1




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EXHIBIT INDEX 2.1
    
    
    Agreement and Plan of Merger dated March 12, 2004, by and between
Cinemark, Inc. and Popcorn Merger Corp. (incorporated by
reference to Exhibit 2.1 to the Companys Registration Statement
on Form S-4 (File No. 333-116292) filed June 8, 2004).2.2
    
    
    Stock Purchase Agreement dated as of March 12, 2004 by and
between Cinemark, Inc. and Madison Dearborn Capital Partners IV,
L.P. (incorporated by reference to Exhibit 2.2 to the Companys
Registration Statement on Form S-4 (File No. 333-116292) filed
June 8, 2004).3.1
    
    
    Second Amended and Restated Certificate of Incorporation of
Cinemark, Inc. filed with the Delaware Secretary of State on
April 2, 2004 (incorporated by reference to Exhibit 3.1 to the
Companys Registration Statement on Form S-4 (File No.
333-116292) filed June 8, 2004).3.2
    
    
    Amended and Restated Bylaws of Cinemark, Inc. (incorporated by
reference to Exhibit 3.2 to the Companys Registration Statement
on Form S-4 (File No. 333-116292) filed June 8, 2004).4.1
    
    
    Exchange and Registration Rights Agreement dated March 31, 2004
among Cinemark, Inc., certain subsidiary guarantors party thereto
and the initial purchasers named therein (incorporated by
reference to Exhibit 4.1 to the Companys Registration Statement
on Form S-4 (File No. 333-116292) filed June 8, 2004).4.2(a)
    
    
    Indenture dated as of March 31, 2004 between Cinemark, Inc. and
The Bank of New York Trust Company, N.A. governing the 9 3/4%
senior discount notes issued thereunder (incorporated by
reference to Exhibit 4.2(a) to the Companys Registration
Statement on Form S-4 (File No. 333-116292) filed June 8, 2004).4.2(b)
    
    
    Form of 9 3/4% senior discount notes (contained in the indenture
listed as Exhibit 4.2(a) above) (incorporated by reference to
Exhibit 4.2(b) to the Companys Registration Statement on Form
S-4 (File No. 333-116292) filed June 8, 2004).4.2(c)
    
    
    Indenture dated February 11, 2003 between Cinemark USA, Inc. and
The Bank of New York Trust Company of Florida, N.A. governing the
9% Senior Subordinated Notes issued thereunder (incorporated by
reference to Exhibit 10.2(b) to Cinemark USA, Inc.s Annual
Report on Form 10-K (File No. 033-47040) filed March 19, 2003).4.2(d)
    
    
    First Supplemental Indenture dated as of May 7, 2003 between
Cinemark USA, Inc., the subsidiary guarantors party thereto and
The Bank of New York Trust Company of Florida, N.A. (incorporated
by reference to Exhibit 4.2(i) to Cinemark USA, Inc.s
Registration Statement on Form S-4 (File No. 333-104940) filed
May 28, 2003).4.2(e)
    
    
    Second Supplemental Indenture dated as of November 11, 2004
between Cinemark USA, Inc., the subsidiary guarantors party
thereto and The Bank of New York Trust Company of Florida, N.A.
(incorporated by reference to Exhibit 4.2(c) to Cinemark USA,
Inc.s Annual Report on Form 10-K (File No. 033-047040) filed
March 28, 2005).4.2(d)
    
    
    Form of 9% Note (contained in the Indenture listed as Exhibit
4.2(h) above) (incorporated by reference to Exhibit 10.2(b) to
Cinemark USA, Inc.s Annual Report on Form 10-K (File 033-47040)
filed March 19, 2003).10.1(a)
    
    
    Management Agreement, dated as of July 28, 1993, between Cinemark
USA, Inc. and Cinemark Mexico (USA) (incorporated by reference to
Exhibit 10.1(a) to Cinemark, Inc.s Registration Statement on
Form S-1 (File No. 333-88618) filed May 17, 2002).10.1(b)
    
    
    Management Agreement, dated as of September 10, 2002, between
Cinemark USA, Inc. and Cinemark de Mexico (incorporated by
reference to Exhibit 10.8 to Cinemark Mexico (USA)s Registration
Statement on Form S-4 (File No. 033-72114) filed on November 24,
1994).10.1(c)
    
    
    Management Agreement, dated December 10, 1993, between Laredo
Theatre, Ltd. and Cinemark USA, Inc. (incorporated by reference
to Exhibit 10.14(b) to Cinemark USA, Inc.s Annual Report on Form
10-K (File No. 033-47040) filed March 31, 1994).10.1(d)
    
    
    First Amendment to Management Agreement of Laredo Theatre, Ltd.
effective as of December 10, 2003 between CNMK Texas Properties,
Ltd. (successor in interest to Cinemark USA, Inc.) and Laredo
Theatre Ltd. (incorporated by reference to Exhibit 10.1(d) to
Cinemark, Inc.s Registration Statement on Form S-4 (File No.
333-116292) filed June 8, 2004).10.1(e)
    
    
    Management Agreement, dated September 1, 1994, between Cinemark
Partners II, Ltd. and Cinemark USA, Inc. (incorporated by
reference to Exhibit 10.4(i) to Cinemark USA, Inc.s Annual
Report on Form 10-K (File No. 033-47040) filed March 29, 1995).
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##### Table of Contents



10.1(f)
    
    
    First Amendment to Management Agreement of Cinemark Partners II,
Ltd. dated as of January 5, 1998 by and between Cinemark USA,
Inc. and Cinemark Partners II, Ltd. (incorporated by reference to
Exhibit 10.1(f) to the Companys Registration Statement on Form
S-4 (File No. 333-116292) filed June 8, 2004).10.1(g)
    
    
    Management Services Agreement dated April 10, 2003 between
Greeley Partners L.P. and CNMK Texas Properties, Ltd.
(incorporated by reference to Exhibit 10.1(g) to the Companys
Registration Statement on Form S-4 (File No. 333-116292) filed
June 8, 2004).10.2
    
    
    Amended and Restated Agreement to Participate in Profits and
Losses, dated as of March 12, 2004, between Cinemark USA, Inc.
and Alan W. Stock (incorporated by reference to Exhibit 10.2 to
Cinemark USA, Inc.s Quarterly Report on Form 10-Q (File No.
033-47040) filed May 14, 2004).10.3(a)
    
    
    License Agreement, dated December 10, 1993, between Laredo Joint
Venture and Cinemark USA, Inc. (incorporated by reference to
Exhibit 10.14(c) to Cinemark USA, Inc.s Annual Report on Form
10-K (File No. 033-47040) filed March 31, 1994).10.3(b)
    
    
    License Agreement, dated September 1, 1994, between Cinemark
Partners II, Ltd. and Cinemark USA, Inc. (incorporated by
reference to Exhibit 10.10(c) to Cinemark USA, Inc.s Annual
Report on Form 10-K (File No. 033-47040) filed March 29, 1995).10.4(a)
    
    
    Tax Sharing Agreement, between Cinemark USA, Inc. and Cinemark
International, L.L.C. (f/k/a Cinemark II, Inc. ), dated as of
June 10, 1992 (incorporated by reference to Exhibit 10.22 to
Cinemark USA, Inc.s Annual Report on Form 10-K (File No.
033-47040) filed March 31, 1993).10.4(b)
    
    
    Tax Sharing Agreement, dated as of July 28, 1993, between
Cinemark USA, Inc. and Cinemark Mexico (USA) (incorporated by
reference to Exhibit 10.10 to Cinemark Mexico (USA)s
Registration Statement on Form S-4 (File No. 033-72114) filed on
November 24, 1993).10.5
    
    
    Form of Indemnification Agreement (incorporated by reference to
Exhibit 10.6 to the Companys Registration Statement on Form S-1
(File No. 333-88618) filed on May 17, 2002).10.6(a)
    
    
    Senior Secured Credit Agreement dated December 4, 1995 among
Cinemark International, L.L.C. (f/k/a Cinemark II, Inc., Cinemark
Mexico (USA) and Cinemark de Mexico (incorporated by reference to
Exhibit 10.18 to Cinemark USA, Inc.s Annual Report on Form 10-K
(File No. 033-47040) filed April 1, 1996).10.6(b)
    
    
    First Amendment to Senior Secured Credit Agreement, dated as of
September 30, 1996, by and among Cinemark II, Inc., Cinemark
Mexico (USA), Inc. and Cinemark de Mexico, S.A. de C.V.
(incorporated by reference to Exhibit 10.11(b) to Cinemark,
Inc.s Registration Statement on Form S-1 (File No. 333-88618)
filed on May 17, 2002).10.6(c)
    
    
    Second Amendment to Senior Secured Credit Agreement, dated as of
September 28, 2000, by and among Cinemark II, Inc., Cinemark
Mexico (USA), Inc. and Cinemark de Mexico, S.A. de C.V.
(incorporated by reference to Exhibit 10.11(c) to Cinemark,
Inc.s Registration Statement on Form S-1 (File No. 333-88618)
filed on May 17, 2002).10.7(a)
    
    
    Employment Agreement, dated as of March 12, 2004, between
Cinemark, Inc. and Lee Roy Mitchell (incorporated by reference to
Exhibit 10.14(a) to Cinemark USA, Inc.s Quarterly Report on Form
10-Q (File No. 033-47040) filed May 14, 2004).10.7(b)
    
    
    Employment Agreement, dated as of March 12, 2004, between
Cinemark, Inc. and Alan Stock (incorporated by reference to
Exhibit 10.14(b) to Cinemark USA, Inc.s Quarterly Report on Form
10-Q (File No. 033-47040) filed May 14, 2004).10.7(c)
    
    
    Employment Agreement, dated as of March 12, 2004, between
Cinemark, Inc. and Tim Warner (incorporated by reference to
Exhibit 10.14(c) to Cinemark USA, Inc.s Quarterly Report on Form
10-Q (File No. 033-47040) filed May 14, 2004).10.7(d)
    
    
    Employment Agreement, dated as of March 12, 2004, between
Cinemark, Inc. and Robert Copple (incorporated by reference to
Exhibit 10.14(d) to Cinemark USA, Inc.s Quarterly Report on Form
10-Q (File No. 033-47040) filed May 14, 2004).10.7(e)
    
    
    Employment Agreement, dated as of March 12, 2004, between
Cinemark, Inc. and Rob Carmony (incorporated by reference to
Exhibit 10.14(e) to Cinemark USA, Inc.s Quarterly Report on Form
10-Q (File No. 033-47040) filed May 14, 2004).10.7(f)
    
    
    Employment Agreement, dated as of March 12, 2004, between
Cinemark, Inc. and Tandy Mitchell (incorporated by reference to
Exhibit 10.14(f) to Cinemark USA, Inc.s Quarterly Report on Form
10-Q (File No. 033-47040) filed May 14, 2004).10.8(a)
    
    
    Amended and Restated Credit Agreement, dated April 2, 2004, among
Cinemark, Inc., CNMK Holdings, Inc., Cinemark USA, Inc., the
several lenders from time to time parties thereto, Lehman
Brothers Inc. and Goldman Sachs Credit Partners LP, as Joint
Legal Arrangers, Goldman Sachs Credit Partners LP, as
Syndication Agent, Deutsche Bank Securities, Inc., The Bank of
New York, General Electric Capital Corporation and CIBC Inc. as
Documentation Agents and Lehman Commercial Paper Inc. as
Administrative Agent (incorporated by reference to Exhibit 10.15
to Cinemark USA, Inc.s Quarterly Report on Form 10-Q (File No.
033-47040) filed May 14, 2004).
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##### Table of Contents



10.8(b)
    
    
    First Amendment to the Amended and Restated Credit Agreement,
dated August 18, 2004, among Cinemark, Inc., CNMK Holdings, Inc.,
Cinemark USA, Inc., the several lenders from time to time parties
thereto, Lehman Brothers Inc. and Goldman Sachs Credit Partners
LP, as Joint Lead Arrangers, Goldman Sachs Credit Partners LP,
as Syndication Agent, Deutsche Bank Securities, Inc., The Bank of
New York, General Electric Capital Corporation and CIBC Inc. as
Documentation Agents and Lehman Commercial Paper Inc. as
Administrative Agent (incorporated by reference to Exhibit
10.15(b) to Cinemark USA, Inc.s Quarterly Report on Form 10-Q
(File No. 033-47040) filed November 10, 2004).10.9
    
    
    Amended and Restated Guaranty and Collateral Agreement, dated
April 2, 2004, among Cinemark, Inc., CNMK Holdings Inc., Cinemark
USA, Inc. and certain of it subsidiaries in favor of Lehman
Commercial Paper, Inc., as administrative agent (incorporated by
reference to Exhibit 10.16 to Cinemark USA, Inc.s Quarterly
Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).10.10(a)
    
    
    Cinemark, Inc. Stockholders Agreement dated as of March 12, 2004,
among Madison Dearborn Capital Partners IV, L.P., each of the
investors listed on the Schedule of Mitchell Investors and each
of the executives listed on the Schedule of Executives
(incorporated by reference to Exhibit 10.9 to the Companys
Registration Statement on Form S-4 (File No. 333-116292) filed
June 8, 2004).10.10(b)
    
    
    Amended and Restated Stockholders Agreement dated as of December
30, 2004 among Cinemark, Inc., Madison Dearborn Partners IV, LP,
Lee Roy Mitchell, The Mitchell Special Trust, Quadrangle Capital
Partners LP, Quadrangle Select Partners LP, Quadrangle Capital
Partners, A LP and the other stockholders party thereto
(incorporated by reference to Exhibit 3.1 to the Companys
Current Report on Form 8-K (File No. 333-116292) filed January 4,
2005).10.11(a)
    
    
    Registration Agreement dated as of March 12, 2004 among the
Company, Madison Dearborn Capital Partners IV, L.P., Lee Roy
Mitchell and The Mitchell Special Trust (incorporated by
reference to Exhibit 10.10 to the Companys Registration
Statement on Form S-4 (File No. 333-116292) filed June 8, 2004).10.11(b)
    
    
    First Amendment to Registration Agreement dated as of December
30, 2004 among Cinemark, Inc., Madison Dearborn Partners IV, LP,
Lee Roy Mitchell, The Mitchell Special Trust, Quadrangle Capital
Partners LP, Quadrangle Select Partners LP, Quadrangle Capital
Partners, A LP and the other stockholders party thereto
(incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K (File No. 333-116292) filed January 4,
2005).10.12(a)
    
    
    Cinemark, Inc. Long Term Incentive Plan Document, dated September
30, 2004 (incorporated by reference to Exhibit 10.19(a) to the
Companys Quarterly Report on Form 10-Q (File No. 333-116292)
filed November 10, 2004).10.12(b)
    
    
    Form of Stock Option Agreement (incorporated by reference to
Exhibit 10.19(b) to the Companys Quarterly Report on Form 10-Q
(File No. 333-116292) filed November 10, 2004).10.13(a)
    
    
    Stock Purchase Agreement dated as of August 18, 2004, among
Cinemark Empreendimentos e Participacoes, Ltda, Venture II Equity
Holdings Corporation, Inc. and Kristal Holdings Limited
(incorporated by reference to Exhibit 10.20(a) to the Companys
Quarterly Report on Form 10-Q (File No. 333-116292) filed
November 10, 2004).10.13(b)
    
    
    Stock Purchase Agreement dated as of August 18, 2004, among
Cinemark Empreendimentos e Participacoes, Ltda, Prona Global
Ltd., Messrs. Edgar Gleich, Riccardo Arduini, Moises Pinsky,
Eduardo Alalou, and Robert Luis Leme Klabin (incorporated by
reference to Exhibit 10.20(b) to the Companys Quarterly Report
on Form 10-Q (File No. 333-116292) filed November 10, 2004).*12
    
    
    Calculation of Earnings to Fixed Charges*21
    
    
    Subsidiaries of the Registrant*31.1
    
    
    Certification of Chief Executive Officer of Cinemark, Inc.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2
    
    
    Certification of Chief Financial Officer of Cinemark, Inc.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
    
    
    Certification of the Chief Executive Officer of Cinemark, Inc.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32.2
    
    
    Certification of the Chief Financial Officer of Cinemark, Inc.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 * Filed herewith. E - 4