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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2004 Commission File Number: 033-47040 CINEMARK USA, INC. (Exact name of registrant as specified in its charter)
 Texas
(State or other jurisdiction
of incorporation or organization)
    
    75-2206284
(I.R.S. Employer
Identification No.)
 3900 Dallas Parkway
Suite 500
Plano, Texas
(Address of principal executive offices)
    
    75093
(Zip Code)
 Registrants telephone number, including area code: (972) 665-1000 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X] As of May 12, 2004, 1,500 shares of Class A common stock and 182,648
shares of Class B common stock were outstanding.




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CINEMARK USA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003
    
    
    3Condensed Consolidated Statements of Operations (unaudited) for the three month periods ended March 31, 2004 and 2003
    
    
    4Condensed Consolidated Statements of Cash Flows (unaudited) for the three month periods ended March 31, 2004 and 2003
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4.
    
    Controls and Procedures
    
    
    31PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    32Item 5.
    
    Other Information
    
    
    32Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    36SIGNATURES
    
    
    39Second Supplemental IndentureAmended and Restated AgreementEmployment Agreement - Lee Roy MitchellEmployment Agreement - Alan StockEmployment Agreement - Tim WarnerEmployment Agreement - Robert CoppleEmployment Agreement - Rob CarmonyEmployment Agreement - Tandy MitchellAmended and Restated Credit AgreementAmended/Restated Guaranty and Collateral AgreementCertification 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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PART I - FINANCIAL INFORMATION 
 Item 1. Financial Statements
 CINEMARK USA, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,2004
    
    December 31,(unaudited)
    
    2003ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    83,844,013
    
    
    $
    107,319,285Inventories
    
    
    4,105,071
    
    
    
    4,323,687Accounts receivable
    
    
    13,668,342
    
    
    
    15,440,048Prepaid expenses and other
    
    
    6,255,808
    
    
    
    5,476,066Total current assets
    
    
    107,873,234
    
    
    
    132,559,086THEATRE PROPERTIES AND EQUIPMENT
    
    
    1,252,215,612
    
    
    
    1,237,896,969Less accumulated depreciation and amortization
    
    
    (478,930,561
    )
    
    
    (462,016,911
    )Theatre properties and equipment - net
    
    
    773,285,051
    
    
    
    775,880,058OTHER ASSETSGoodwill
    
    
    11,976,538
    
    
    
    12,083,095Intangible assets - net
    
    
    7,744,278
    
    
    
    7,865,294Investments in and advances to affiliates
    
    
    6,073,711
    
    
    
    2,347,104Deferred charges and other - net
    
    
    32,549,513
    
    
    
    30,011,763Total other assets
    
    
    58,344,040
    
    
    
    52,307,256TOTAL ASSETS
    
    $
    939,502,325
    
    
    $
    960,746,400LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESCurrent portion of long-term debt
    
    $
    6,572,689
    
    
    $
    6,744,842Income tax payable
    
    
    5,403,236
    
    
    
    5,521,581Accounts payable and accrued expenses
    
    
    104,102,229
    
    
    
    135,659,950Total current liabilities
    
    
    116,078,154
    
    
    
    147,926,373LONG-TERM LIABILITIESSenior credit agreements
    
    
    171,244,352
    
    
    
    172,936,210Senior subordinated notes
    
    
    478,383,876
    
    
    
    478,749,929Deferred lease expenses
    
    
    27,715,952
    
    
    
    27,652,702Deferred gain on sale leasebacks
    
    
    3,915,220
    
    
    
    4,006,700Deferred income taxes
    
    
    15,091,585
    
    
    
    13,033,013Deferred revenues and other long-term liabilities
    
    
    5,711,300
    
    
    
    5,665,863Total long-term liabilities
    
    
    702,062,285
    
    
    
    702,044,417COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    MINORITY INTERESTS IN SUBSIDIARIES
    
    
    34,433,721
    
    
    
    33,932,183SHAREHOLDERS EQUITYClass A common stock, $.01 par value: 10,000,000 shares
authorized, 1,500 shares issued and outstanding
    
    
    15
    
    
    
    15Class B common stock, no par value: 1,000,000 shares
authorized, 239,893 shares issued and outstanding
    
    
    49,543,427
    
    
    
    49,543,427Additional paid-in-capital
    
    
    13,199,707
    
    
    
    13,054,686Retained earnings
    
    
    134,956,729
    
    
    
    125,022,611Treasury stock, 57,245 Class B shares at cost
    
    
    (24,232,890
    )
    
    
    (24,232,890
    )Accumulated other comprehensive loss
    
    
    (86,538,823
    )
    
    
    (86,544,422
    )Total shareholders equity
    
    
    86,928,165
    
    
    
    76,843,427TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    939,502,325
    
    
    $
    960,746,400
 The accompanying notes are an integral part of the condensed consolidated financial statements. 3




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CINEMARK USA, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended March 31,2004
    
    2003REVENUESAdmissions
    
    $
    149,687,946
    
    
    $
    127,711,567Concession
    
    
    73,273,870
    
    
    
    63,939,446Other
    
    
    12,150,273
    
    
    
    10,822,134Total revenues
    
    
    235,112,089
    
    
    
    202,473,147COSTS AND EXPENSESCost of operations:Film rentals and advertising
    
    
    78,972,387
    
    
    
    66,877,565Concession supplies
    
    
    12,113,197
    
    
    
    9,786,686Salaries and wages
    
    
    24,316,846
    
    
    
    22,324,839Facility lease expense
    
    
    31,088,145
    
    
    
    28,450,585Utilities and other
    
    
    26,579,739
    
    
    
    25,073,403Total cost of operations
    
    
    173,070,314
    
    
    
    152,513,078General and administrative expenses
    
    
    11,799,620
    
    
    
    9,439,981Depreciation and amortization
    
    
    16,888,907
    
    
    
    15,995,714Asset impairment loss
    
    
    1,000,000
    
    
    
    Gain on sale of assets and other
    
    
    (513,134
    )
    
    
    (616,429
    )Total costs and expenses
    
    
    202,245,707
    
    
    
    177,332,344OPERATING INCOME
    
    
    32,866,382
    
    
    
    25,140,803OTHER INCOME (EXPENSE)Interest expense
    
    
    (11,876,318
    )
    
    
    (13,295,608
    )Amortization of debt issue cost
    
    
    (589,986
    )
    
    
    (583,620
    )Interest income
    
    
    491,233
    
    
    
    658,629Foreign currency exchange gain
    
    
    169,826
    
    
    
    16,131Loss on early retirement of debt
    
    
    
    
    
    
    (1,645,759
    )Equity in income of affiliates
    
    
    37,058
    
    
    
    196,356Minority interests in income of subsidiaries
    
    
    (1,452,328
    )
    
    
    (770,205
    )Total other expenses
    
    
    (13,220,515
    )
    
    
    (15,424,076
    )INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    19,645,867
    
    
    
    9,716,727Income taxes
    
    
    7,948,524
    
    
    
    3,948,671INCOME FROM CONTINUING OPERATIONS
    
    
    11,697,343
    
    
    
    5,768,056Loss from discontinued operations, net of income tax benefit of
$191,250 in 2004 and $0 in 2003.
    
    
    (1,763,225
    )
    
    
    (315,130
    )NET INCOME
    
    $
    9,934,118
    
    
    $
    5,452,926EARNINGS PER SHARE:Basic and Diluted:Income from continuing operations
    
    $
    63.52
    
    
    $
    31.32Loss from discontinued operations
    
    
    (9.57
    )
    
    
    (1.71
    )Net income
    
    $
    53.95
    
    
    $
    29.61
 The accompanying notes are an integral part of the condensed consolidated financial statements. 4




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CINEMARK USA, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,2004
    
    2003OPERATING ACTIVITIESNet income
    
    $
    9,934,118
    
    
    $
    5,452,926Noncash items in net income:Depreciation
    
    
    16,729,004
    
    
    
    15,841,076Depreciation - assets held for sale
    
    
    58,878
    
    
    
    141,200Amortization of intangible and other assets
    
    
    159,903
    
    
    
    154,638Amortization of foreign advanced rents
    
    
    497,056
    
    
    
    423,607Amortized compensation - stock options
    
    
    145,021
    
    
    
    274,297Amortization of debt issue costs
    
    
    589,986
    
    
    
    583,620Amortization of gain on sale leasebacks
    
    
    (91,480
    )
    
    
    (91,480
    )Amortization of debt discount and premium
    
    
    (366,053
    )
    
    
    (7,127
    )Amortization of deferred revenues
    
    
    (55,000
    )
    
    
    (1,168,226
    )Loss on impairment of assets
    
    
    1,000,000
    
    
    
    Loss on assets held for sale
    
    
    1,800,000
    
    
    
    Gain on sale of assets and other
    
    
    (513,134
    )
    
    
    (616,429
    )Loss on early retirement of debt
    
    
    
    
    
    
    1,645,759Deferred lease expenses
    
    
    63,250
    
    
    
    379,502Deferred income tax expenses
    
    
    2,058,572
    
    
    
    3,820,017Equity in income of affiliates
    
    
    (37,058
    )
    
    
    (196,356
    )Minority interests in income of subsidiaries
    
    
    1,452,328
    
    
    
    770,205Cash provided by (used for) operating working capital:Inventories
    
    
    218,616
    
    
    
    (517
    )Accounts receivable
    
    
    1,771,706
    
    
    
    1,064,933Prepaid expenses and other
    
    
    (779,742
    )
    
    
    (431,308
    )Other assets
    
    
    (3,255,280
    )
    
    
    (2,227,076
    )Advances with affiliates
    
    
    (4,848,586
    )
    
    
    312,451Accounts payable and accrued expenses
    
    
    (31,198,633
    )
    
    
    (40,518,413
    )Other long-term liabilities
    
    
    100,437
    
    
    
    (27,842
    )Income tax receivable/payable
    
    
    (118,345
    )
    
    
    (1,232,133
    )Net cash used for operating activities
    
    
    (4,684,436
    )
    
    
    (15,652,676
    )INVESTING ACTIVITIESAdditions to theatre properties and equipment
    
    
    (17,850,452
    )
    
    
    (8,603,274
    )Proceeds from sale of theatre properties and equipment
    
    
    262,509
    
    
    
    1,490,574Proceeds from sale of equity investment
    
    
    1,250,000
    
    
    
    Investment in affiliates
    
    
    
    
    
    
    (3,314
    )Dividends/capital returned from affiliates
    
    
    127,500
    
    
    
    Net cash used for investing activities
    
    
    (16,210,443
    )
    
    
    (7,116,014
    )FINANCING ACTIVITIESIssuance of senior subordinated notes
    
    
    
    
    
    
    150,000,000Increase in long-term debt
    
    
    691,741
    
    
    
    226,004,596Decrease in long-term debt
    
    
    (2,266,727
    )
    
    
    (364,361,185
    )Increase in debt issue cost
    
    
    (10,000
    )
    
    
    (10,712,267
    )Increase in minority investment in subsidiaries
    
    
    171,129
    
    
    
    894,354Decrease in minority investment in subsidiaries
    
    
    (1,121,919
    )
    
    
    (280,821
    )Net cash provided by (used for) financing activities
    
    
    (2,535,776
    )
    
    
    1,544,677EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
    
    
    (44,617
    )
    
    
    154,072DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (23,475,272
    )
    
    
    (21,069,941
    )CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    107,319,285
    
    
    
    63,718,515End of period
    
    $
    83,844,013
    
    
    $
    42,648,574
 The accompanying notes are an integral part of the condensed consolidated financial statements. 5




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CINEMARK USA, INC. AND SUBSIDIARIES 
    1.
    
    The Company and Basis of Presentation Cinemark USA, Inc. and its subsidiaries (the Company) is one of the
leaders in the motion picture exhibition industry in terms of both revenues and
the number of screens in operation, with theatres in the United States
(U.S.), Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El
Salvador, Nicaragua, Costa Rica, Panama, Colombia and the United Kingdom. The
Company also manages additional theatres in the U.S. and Taiwan at March 31,
2004. On May 16, 2002, Cinemark, Inc. was formed as the Delaware holding company
of Cinemark USA, Inc., at which time the outstanding common stock and
outstanding stock options of the Company were exchanged for common stock and
stock options of Cinemark, Inc. (the Share Exchange). The condensed consolidated financial statements have been prepared by the
Company, without audit, according to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, these
interim financial statements reflect all adjustments necessary to state fairly
the financial position and results of operations as of, and for, the periods
indicated. The condensed consolidated financial statements include the
accounts of Cinemark USA, Inc. and its subsidiaries. Majority-owned
subsidiaries that the Company controls are consolidated while those
subsidiaries of which the Company owns between 20% and 50% and does not control
are accounted for as affiliates under the equity method. Those subsidiaries of
which the Company owns less than 20% are accounted for as affiliates under the
cost method. The results of these subsidiaries and affiliates are included in
the condensed consolidated financial statements effective with their formation
or from their dates of acquisition. Significant intercompany balances and
transactions are eliminated in consolidation. Certain reclassifications have
been made to the 2003 financial statements to conform to the 2004 presentation. These condensed consolidated financial statements should be read in
conjunction with the audited annual consolidated financial statements and the
notes thereto for the year ended December 31, 2003, included in the Annual
Report filed March 17, 2004 on Form 10-K by the Company under the Securities
Exchange Act of 1934. Operating results for the three month period ended March
31, 2004 are not necessarily indicative of the results to be achieved for the
full year.  2.
    
    Recapitalization of Cinemark, Inc. and Refinancing of Certain Long-Term
Debt Recapitalization of Cinemark, Inc.- On March 12, 2004, the Companys
parent, Cinemark, Inc., entered into an agreement and plan of merger with a
Delaware corporation and newly formed subsidiary of Madison Dearborn Partners,
LLC (Madison). The transaction was completed on April 2, 2004, at which time
the newly formed subsidiary of Madison was merged with and into Cinemark, Inc.,
with Cinemark, Inc. continuing as the surviving corporation. Simultaneously,
an affiliate of Madison purchased shares of common stock of Cinemark, Inc. for
approximately $518.3 million in cash and became the controlling stockholder of
Cinemark, Inc., owning approximately 83% of Cinemark, Inc.s capital stock.
Lee Roy Mitchell, the Companys Chief Executive Officer, and the Mitchell
Special Trust collectively retained approximately 16% ownership of Cinemark,
Inc.s capital stock and certain members of management own the remaining 1%.
As part of the transaction, Cinemark, Inc. paid change of control fees and
other management compensation expenses of approximately $15 million, which will
be recorded by the Company in April 2004. Based on the terms of the
transaction, including Mr. Mitchells ownership retention, the transaction will
be accounted for as a recapitalization, which results in Cinemark, Inc. and its
subsidiaries retaining their historical book values. On
March 31, 2004, Cinemark, Inc. issued $577,173,000 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 beginning
on September 15, 2009. Due to the holding company status of Cinemark, Inc.,
payments of principal and interest under these notes will be dependent on
loans, dividends and other payments from the Company to Cinemark, Inc. The
Company has 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 that are
effectively subordinated to indebtedness and other liabilities of the Company. 6




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CINEMARK USA, INC. AND SUBSIDIARIES   Upon
consummation of the Recapitalization on April 2, 2004, all outstanding stock options
of Cinemark, Inc. immediately vested and the majority were repurchased,
resulting in compensation expense of approximately $16 million, which will be
recorded by the Company in April 2004. Refinancing of Certain Long-Term Debt- On March 16, 2004, the Company
initiated a tender offer for its outstanding $105 million 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
existing senior secured credit facility of approximately $163.8 million and to
redeem the approximately $94.2 million principal amount of the Companys
outstanding $105 million 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 premium
fees paid, the unamortized bond discount related to the tendered notes and
other related fees will be recorded by the Company as a loss on early
retirement of debt of approximately $5 million in April 2004. 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 1.25% per annum, or (B) a eurodollar
rate plus a margin of 2.25% per annum. After the completion of two fiscal quarters after the closing date, the margin
under the term loan applicable to base rate loans ranges from 1.00% per annum
to 1.25% per annum and the margin applicable to eurodollar rate loans ranges
from 2.00% per annum to 2.25% 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 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 will
also be 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. 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. The Company
expects that the purchase of any amounts tendered by the holders of the 9% senior subordinated notes will be financed through additional borrowings.  3.
    
    Acquisitions and Divestitures 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 condensed 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 are included in the Companys
condensed consolidated statement of operations for the three month period ended
March 31, 2004. 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 condensed 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 condensed consolidated statement of operations for
the three 7




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CINEMARK USA, INC. AND SUBSIDIARIES   month period ended March 31, 2004. In January 2004, the Company sold its 50% investment in Entertainment
Amusement Enterprises, Inc. for $1,500,000. The Company received proceeds of
$1,250,000 in cash and a three-year $250,000 note, resulting in a gain of
$468,463. The note receivable is included in deferred charges and other assets
on the Companys condensed consolidated balance sheet. The gain is included in
gain on sale of assets and other on the Companys condensed consolidated
statement of operations.  4.
    
    Assets Held for Sale As of March 31, 2004, the Companys two United Kingdom theatres met the
criteria of assets held for sale in accordance with Statement of Financial
Accounting Standards (SFAS) No. 144, Accounting for Impairment or Disposal
of Long-Lived Assets, thus, the results of operations of the United Kingdom
theatres have been classified as discontinued operations for all periods
presented. Amounts reported as discontinued operations in the Companys condensed
consolidated statements of operations include the following components: Three months endedMarch 31,2004
    
    2003REVENUESAdmissions
    
    $
    1,175,796
    
    
    $
    969,570Concession
    
    
    490,525
    
    
    
    433,794Other
    
    
    187,506
    
    
    
    125,248Total revenues
    
    
    1,853,827
    
    
    
    1,528,612COSTS AND EXPENSESCost of operations:Film rentals and advertising
    
    
    462,275
    
    
    
    371,642Concession supplies
    
    
    138,477
    
    
    
    126,888Salaries and wages
    
    
    300,284
    
    
    
    284,910Facility lease expense
    
    
    435,078
    
    
    
    363,545Utilities and other
    
    
    335,851
    
    
    
    405,724Total cost of operations
    
    
    1,671,965
    
    
    
    1,552,709General and administrative expenses
    
    
    277,459
    
    
    
    149,833Depreciation and amortization
    
    
    58,878
    
    
    
    141,200Loss on sale of assets and other
    
    
    1,800,000
    
    
    
    Total costs and expenses
    
    
    3,808,302
    
    
    
    1,843,742OPERATING LOSS
    
    
    (1,954,475
    )
    
    
    (315,130
    )Income tax benefit
    
    
    191,250
    
    
    
    Loss from discontinued operations
    
    $
    (1,763,225
    )
    
    $
    (315,130
    )
 Amounts related to the United Kingdom theatres included in the Companys
condensed consolidated balance sheets are as follows: March 31,
    
    December 31,2004
    
    2003Current assets
    
    $
    832,360
    
    
    $
    1,262,892Theatre properties and equipment, net
    
    
    2,782,654
    
    
    
    4,520,104Current liabilities
    
    
    (854,290
    )
    
    
    (1,336,145
    )
 8




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CINEMARK USA, INC. AND SUBSIDIARIES   On April 30, 2004, the Company sold the United Kingdom theatres for
approximately $2.9 million. The divestiture resulted in a pre-tax loss of
approximately $1.8 million.  5.
    
    Earnings Per Share Basic earnings per share is computed by dividing income by the weighted
average number of shares of common stock of all classes 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 stock outstanding determined under the treasury stock method. The
weighted average number of shares of common stock outstanding for the three
month periods ended March 31, 2004 and 2003 was 184,148. As a result of the
Share Exchange, the Company no longer has any options outstanding under
existing stock option plans and its weighted average common and common
equivalent shares outstanding for the three month periods ended March 31, 2004
and 2003 do not include options to purchase shares of Cinemark, Inc.s common
stock.  6.
    
    Stock Option Accounting As a result of the Share Exchange, the Company no longer has any options
outstanding under existing stock option plans. However, compensation expense
resulting from amortization of unearned compensation related to outstanding
stock options of Cinemark, Inc. is reflected in the Companys condensed
consolidated statements of operations. The Company applies Accounting Principles Board Opinion 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 and earnings
per share would have been reduced to the pro-forma amounts indicated below: Three months endedMarch 31,2004
    
    2003Net income as reported
    
    $
    9,934,118
    
    
    $
    5,452,926Compensation expense included in
reported net income, net of tax
    
    
    88,463
    
    
    
    167,321Compensation expense under fair
value method, net of tax
    
    
    (162,402
    )
    
    
    (339,414
    )Pro-forma net income
    
    $
    9,860,179
    
    
    $
    5,280,833Basic and diluted earnings per
share:As reported
    
    $
    53.95
    
    
    $
    29.61Pro-forma
    
    $
    53.54
    
    
    $
    28.68
 The weighted average fair value per share of stock options granted by
Cinemark, Inc. during 2003 was $12.76 (all of which had an exercise price equal
to the market value at the date of grant). No stock options were granted
during the three month period ended March 31, 2004. The fair value of each 2003
option grant 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. Upon consummation of the Recapitalization on April 2, 2004, all
outstanding stock options of Cinemark, Inc. immediately vested and the majority
were repurchased, resulting in compensation expense of approximately $16
million, which will be recorded by the Company in April 2004. 9




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CINEMARK USA, INC. AND SUBSIDIARIES    7.
    
    Goodwill and Other Intangible Assets No additional goodwill was recorded during the three month period ended
March 31, 2004. The Company recorded foreign currency translation adjustments
to goodwill for the three month period ended March 31, 2004, which resulted in
a net decrease to goodwill of $106,557. Intangible assets consisted of the following: March 31,
    
    December 31,2004
    
    2003Capitalized licensing fees
    
    $
    9,000,000
    
    
    $
    9,000,000Other intangible assets
    
    
    453,465
    
    
    
    442,561Less: Accumulated amortization
    
    
    (1,725,350
    )
    
    
    (1,593,430
    )Amortized intangible assets
    
    
    7,728,115
    
    
    
    7,849,131Unamortized intangible assets
    
    
    16,163
    
    
    
    16,163Total
    
    $
    7,744,278
    
    
    $
    7,865,294
 Aggregate amortization expense of $159,903 for the three month period
ended March 31, 2004 consisted of $131,920 of amortization of intangible assets
and $27,983 of amortization of other assets. Estimated aggregate future
amortization expense for intangible assets is as follows: For the nine months ended December 31, 2004
    
    $
    395,760For the twelve months ended December 31, 2005
    
    
    527,680For the twelve months ended December 31, 2006
    
    
    527,680For the twelve months ended December 31, 2007
    
    
    527,680For the twelve months ended December 31, 2008
    
    
    527,680Thereafter
    
    
    5,221,635Total
    
    $
    7,728,115
  8.
    
    Asset Impairment 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 flow, future years
budgeted theatre level cash flow, theatre property and equipment values,
goodwill 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. Assets are evaluated for impairment on
an individual theatre basis or a group of theatres that share the same
marketplace, which the Company believes 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 an assets carrying amount, the Company then compares
the carrying value of the asset with its fair value, which is determined based
on estimated undiscounted 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. During the three month period ended March 31, 2004,
the Company recorded an asset impairment charge of $1.0 million to write-down
one theatre in the United States to its estimated fair value. 10




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CINEMARK USA, INC. AND SUBSIDIARIES    9.
    
    Foreign Currency Translation The accumulated other comprehensive loss account in shareholders equity
of $86,538,823 and $86,544,422 at March 31, 2004 and December 31, 2003,
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, shareholders equity. On March 31, 2004, the exchange rate for the Argentine peso was 2.86 pesos
to the U.S. dollar (the exchange rate was 2.94 pesos to the U.S. dollar at
December 31, 2003). As a result, the effect of translating the March 31, 2004
Argentine financial statements into U.S. dollars is reflected as a cumulative
foreign currency translation adjustment to the accumulated other comprehensive
loss account as an increase in shareholders equity of $391,306. At March 31,
2004, the total assets of the Companys Argentine subsidiaries were U.S.
$16,429,320. On March 31, 2004, the exchange rate for the Brazilian real was 2.91 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 March 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 a reduction of shareholders equity of $143,375. At March 31,
2004, the total assets of the Companys Brazilian subsidiaries were U.S.
$61,760,243. On March 31, 2004, the exchange rate for the Mexican peso was 11.21 pesos
to the U.S. dollar (the exchange rate was 11.20 pesos to the U.S. dollar at
December 31, 2003). As a result, the effect of translating the March 31, 2004
Mexican financial statements into U.S. dollars is reflected as a cumulative
foreign currency translation adjustment to the accumulated other comprehensive
loss account as a reduction of shareholders equity of $102,672. At March 31,
2004, the total assets of the Companys Mexican subsidiaries were U.S.
$85,456,418.  10.
    
    Comprehensive Income SFAS No. 130, Reporting Comprehensive Income, establishes standards for
the reporting and display of comprehensive income and its components in the
financial statements. The Companys comprehensive income was as follows: Three Months EndedMarch 31,2004
    
    2003Net income
    
    $
    9,934,118
    
    
    $
    5,452,926Foreign currency translation adjustment
    
    
    5,599
    
    
    
    845,679Comprehensive income
    
    $
    9,939,717
    
    
    $
    6,298,605
  11.
    
    Supplemental Cash Flow Information The following is provided as supplemental information to the condensed
consolidated statements of cash flows: Three Months EndedMarch 31,2004
    
    2003Cash paid for interest
    
    $
    23,307,417
    
    
    $
    21,162,524Cash paid for income taxes (net of refunds)
    
    $
    5,069,595
    
    
    $
    1,396,057
 11




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CINEMARK USA, INC. AND SUBSIDIARIES    12.
    
    Financial Information About Geographic Areas The Company operates in one business segment as a motion picture
exhibitor. The Company has operations in the U.S., Canada, Mexico, Argentina,
Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica,
Panama, Colombia and the United Kingdom, which are reflected in the condensed
consolidated financial statements. Below is a breakdown of select financial
information by geographic area: Three Months EndedMarch 31,Revenues
    
    2004
    
    2003U.S. and Canada
    
    $
    177,049,934
    
    
    $
    157,593,144Brazil
    
    
    21,774,510
    
    
    
    15,074,834Mexico
    
    
    17,800,772
    
    
    
    15,672,170Other foreign countries (1)
    
    
    18,889,403
    
    
    
    14,623,582Eliminations
    
    
    (402,530
    )
    
    
    (490,583
    )Total
    
    $
    235,112,089
    
    
    $
    202,473,147
 March 31,
    
    December 31,Theatre Properties and Equipment, net
    
    2004
    
    2003U.S. and Canada
    
    $
    619,289,873
    
    
    $
    616,729,729Mexico
    
    
    60,108,908
    
    
    
    61,893,971Brazil
    
    
    44,984,139
    
    
    
    44,903,308Other foreign countries (2)
    
    
    48,902,131
    
    
    
    52,353,050Total
    
    $
    773,285,051
    
    
    $
    775,880,058
  (1)
    
    Revenues for both periods do not include results of the
United Kingdom theatres, as these theatres were classified as held
for sale as of March 31, 2004.  (2)
    
    Amounts include $2,782,654 and $4,520,104 for the United
Kingdom theatres at March 31, 2004 and December 31, 2003,
respectively.  13.
    
    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 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 condensed consolidated financial statements.  14.
    
    Related Party Transactions The Company has paid certain fees and expenses on behalf of its parent,
Cinemark, Inc., that are included in investments in and advances to affiliates
on the Companys condensed consolidated balance sheets. At March 31, 2004, the
total amount of advances to Cinemark, Inc. was $4,397,994. A majority of this
amount, $4,290,000, represented a transfer to an escrow account on March 31,
2004 in connection with the $577,173,000 principal amount at maturity of 9 3/4% senior
discount notes due 2014 that were issued by Cinemark, Inc. on that date. The
funds transferred to the escrow account were returned to the Company on April
2, 2004 upon consummation of the Recapitalization. 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 12




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CINEMARK USA, INC. AND SUBSIDIARIES   $50,000,000 and 3% of annual theatre revenues in excess of $50,000,000.
The Company recorded $39,991 of management fee revenues and received $150,000
of distributions from Laredo during the three month period ended March 31,
2004. All such amounts are included in the Companys condensed consolidated
financial statements with the intercompany amounts eliminated in consolidation. The Company leases one theatre from Plitt Plaza Joint Venture (Plitt
Plaza). Plitt Plaza is indirectly owned by Lee Roy Mitchell. Annual rent is
approximately $118,000 plus certain taxes, maintenance expenses and insurance.
The Company recorded $30,024 of facility lease expense payable to Plitt Plaza
joint venture during the three month period ended March 31, 2004. 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. Under this agreement, operating losses and disposition losses
for any year are allocated 100% to the Company. Operating profits and
disposition profits for these theatres for any fiscal year are allocated first
to the Company to the extent of total operating losses and losses from any
disposition of these theatres. Thereafter, net cash from operations from these
theatres or from any disposition of these theatres is paid first to the Company
until such payments equal the Companys investment in these theatres, plus
interest, and then 51% to the Company and 49% to Mr. Stock. No amounts have
been paid to Mr. Stock to date pursuant to the profit participation agreement.
During the three month period ended March 31, 2004, the Company recorded
approximately $50,000 in profit sharing expense payable to Mr. Stock, which is
included in general and administrative expense and other current liabilities on
the Companys condensed consolidated financial statements. In the event that
Mr. Stocks employment is terminated without cause, profits will be distributed
according to this formula without first allowing the Company to recoup its
investment plus interest thereon. Upon consummation of an initial public
offering of Cinemark, Inc.s common stock, the Company will have the option to
purchase Mr. Stocks interest in the theatres for a price equal to the greater
of (i) stated price reduced by any payments received during the term and (ii)
49% of adjusted theatre level cash flow multiplied by seven. The Company does
not intend to enter into similar arrangements with its executive officers in
the future.  15.
    
    Litigation DOJ Litigation- In March 1999, the Department of Justice (DOJ) filed suit in
the U.S. District Court, Northern District of Ohio, Eastern Division, against
the Company alleging certain violations of the Americans with Disabilities Act
of 1990 (the ADA) relating to the Companys wheelchair seating arrangements
and seeking remedial action. An order granting summary judgment to the Company
was issued in November 2001. The Department of Justice appealed the district
courts ruling with the Sixth Circuit Court of Appeals. On November 7, 2003,
the Sixth Circuit Court of Appeals reversed the summary judgment and sent the
case back to the district court for further review without deciding whether
wheelchair seating at the Companys theatres comply with the ADA. The Sixth
Circuit Court of Appeals also stated that if the district court found that the
theatres did not comply with the ADA, any remedial action should be prospective
only. If the Company loses this litigation, the Companys financial position,
results of operations and cash flows may be materially and adversely affected.
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. To date, there have been three divergent opinions published by federal
circuit courts addressing whether wheelchair seating locations in stadium-style
movie theatres must comply with an alleged viewing angle requirement
purportedly interpreted from the lines of sight comparable clause of Section
4.33.3 of the ADA Accessibility Guidelines. On April 6, 2000, the Fifth Circuit Court of Appeals issued its decision
in Lara v. Cinemark, in which it rejected an interpretation by the United
States Department of Justice that Section 4.33.3 imposes a viewing angle
requirement, and held that wheelchair seating locations in the sloped-floor
areas of stadium-style movie theatres that provide unobstructed views of the
movie screen comply with the lines of sight comparable language of Section
4.33.3 as a matter of law. Lara v. Cinemark USA, Inc., 207 F.3d 783, 788-89
(5th Cir. 2000). On August 13, 2003, the Ninth Circuit Court of Appeals issued
its divided decision in Stewmon v. Regal, in which the majority deferred to an
interpretation by the DOJ that Section 4.33.3 imposes a viewing angle
requirement, and held that wheelchair seating locations in the sloped-floor 13




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CINEMARK USA, INC. AND SUBSIDIARIES   areas of stadium-style movie theatres did not provide comparable viewing
angles of the movie screen and thus were unlawful. Stewmon v. Regal Cinemas,
Inc., 339 F.3d 1126, 1133 (9th Cir. 2003). On November 6, 2003, the Sixth
Circuit Court of Appeals issued its opinion in United States v. Cinemark, in
which it deferred in part to an interpretation by the DOJ that compliance with
Section 4.33.3 includes a consideration of the quality of the viewing angle
of the movie screen, but remanded the case to the district court to determine
liability and remedies issues with dicta suggesting that any remedy should be
given prospective application only. United States of America v. Cinemark USA,
Inc., 348 F.3d 569, 579, 582-83 (6th Cir. 2003). These decisions have created
three-way circuit conflicts on issues concerning interpreting federal
accessibility law, deferring to the DOJs purported interpretations of federal
accessibility law, and whether federal courts should retroactively apply such
interpretations after construction of the subject facilities. Due to the
circuit conflicts, the Company and Regal Cinemas have each filed petitions for
writs of certiorari with the United States Supreme Court. Those petitions for
certiorari are currently pending. The Company is unable to predict whether the
United States Supreme Court will grant its petition for certiorari. 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. The Company has filed an answer denying the allegations and is
vigorously defending this suit. The Company is unable to predict the outcome
of this litigation or the range of potential loss, however, management believes
that based upon current precedent the Companys potential liability with
respect to such proceeding is not material in the aggregate to the Companys
financial position, results of operations and cash flows. Accordingly, the
Company has not established a reserve for loss in connection with this
proceeding. From time to time, the Company is involved in other various legal
proceedings arising from the ordinary course of its business operations, such
as personal injury claims, employment matters and contractual disputes, most of
which are covered by insurance. The Company believes its potential liability
with respect to proceedings currently pending is not material, individually or
in the aggregate, to the Companys financial position, results of operations
and cash flows.  16.
    
    Condensed Consolidating Financial Statements of Subsidiary Guarantors As of March 31, 2004, the Company had outstanding $105 million principal
amount of 8 1/2% senior subordinated notes due 2008 and $360 million principal
amount of 9% senior subordinated notes due 2013. These senior subordinated
notes are fully and unconditionally guaranteed, jointly and severally, on a
senior subordinated unsecured basis by the following subsidiaries of Cinemark
USA, Inc.: Cinemark, L.L.C., Sunnymead Cinema Corp., Cinema Properties, Inc., Greeley
Holdings, Inc. (formerly known as Cinemark Paradiso, Inc.), Trans Texas Cinema,
Inc., Missouri City Central 6, Inc., Cinemark Mexico (USA), Inc., Cinemark
Leasing Company, Cinemark Partners I, Inc., Multiplex Properties, Inc.,
Multiplex Services, Inc., CNMK Investments, Inc., CNMK Delaware Investments I,
L.L.C., CNMK Delaware Investments II, L.L.C., CNMK Delaware Investments
Properties, L.P., CNMK Texas Properties, Ltd., Laredo Theatre, Ltd. and
Cinemark Investments Corporation. The following supplemental condensed consolidating financial statements
present:  1.
    
    Condensed consolidating balance sheets as of March 31, 2004 and
December 31, 2003 and condensed consolidating statements of operations
and cash flows for each of the three month periods ended March 31, 2004
and 2003.  2.
    
    Cinemark USA, Inc. (the Parent and Issuer), combined Guarantor
Subsidiaries and combined Non-Guarantor Subsidiaries with their
investments in subsidiaries accounted for using the equity method of
accounting and therefore, the Parent column reflects the equity income
(loss) of its Guarantor Subsidiaries and Non-Guarantor Subsidiaries,
which are also separately reflected in the stand-alone Guarantor
Subsidiaries and Non-Guarantor Subsidiaries column. Additionally, the
Guarantor Subsidiaries column reflects the equity income (loss) of its
Non-Guarantor Subsidiaries, which are also separately reflected in the
stand-alone Non-Guarantor Subsidiaries column.3.
    
    Elimination entries necessary to consolidate the Parent and all of
its Subsidiaries. 14




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SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
MARCH 31, 2004 Parent
    
    Subsidiary
    
    SubsidiaryCompany
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    28,047,006
    
    
    $
    1,925,289
    
    
    $
    53,871,718
    
    
    $
    
    
    
    $
    83,844,013Inventories
    
    
    1,828,400
    
    
    
    1,110,839
    
    
    
    1,165,832
    
    
    
    
    
    
    
    4,105,071Accounts receivable
    
    
    46,051,828
    
    
    
    (5,785,120
    )
    
    
    4,964,652
    
    
    
    (31,563,018
    )
    
    
    13,668,342Income tax receivable
    
    
    731,332
    
    
    
    44,635
    
    
    
    394,194
    
    
    
    (1,170,161
    )
    
    
    Prepaid expenses and other
    
    
    2,543,606
    
    
    
    440,124
    
    
    
    3,272,078
    
    
    
    
    
    
    
    6,255,808Total current assets
    
    
    79,202,172
    
    
    
    (2,264,233
    )
    
    
    63,668,474
    
    
    
    (32,733,179
    )
    
    
    107,873,234THEATRE PROPERTIES AND EQUIPMENT - net
    
    
    301,829,579
    
    
    
    296,605,628
    
    
    
    174,849,844
    
    
    
    
    
    
    
    773,285,051OTHER ASSETSGoodwill
    
    
    7,834,692
    
    
    
    412,327
    
    
    
    3,910,042
    
    
    
    (180,523
    )
    
    
    11,976,538Investments in and advances to affiliates
    
    
    469,565,880
    
    
    
    385,517,608
    
    
    
    1,186,207
    
    
    
    (850,195,984
    )
    
    
    6,073,711Intangible assets, deferred charges and other - net
    
    
    21,584,303
    
    
    
    1,436,137
    
    
    
    74,377,045
    
    
    
    (57,103,694
    )
    
    
    40,293,791Total other assets
    
    
    498,984,875
    
    
    
    387,366,072
    
    
    
    79,473,294
    
    
    
    (907,480,201
    )
    
    
    58,344,040TOTAL ASSETS
    
    $
    880,016,626
    
    
    $
    681,707,467
    
    
    $
    317,991,612
    
    
    $
    (940,213,380
    )
    
    $
    939,502,325LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESCurrent portion of long-term debt
    
    $
    1,705,629
    
    
    $
    
    
    
    $
    4,867,060
    
    
    $
    
    
    
    
    6,572,689Income tax payable
    
    
    5,252,518
    
    
    
    491,485
    
    
    
    829,394
    
    
    
    (1,170,161
    )
    
    
    5,403,236Accounts payable and accrued expenses
    
    
    59,710,686
    
    
    
    31,522,402
    
    
    
    39,929,539
    
    
    
    (27,060,398
    )
    
    
    104,102,229Total current liabilities
    
    
    66,668,833
    
    
    
    32,013,887
    
    
    
    45,625,993
    
    
    
    (28,230,559
    )
    
    
    116,078,154LONG-TERM LIABILITIESLong-term debt, less current portion
    
    
    649,638,128
    
    
    
    43,737,910
    
    
    
    79,427,381
    
    
    
    (123,175,191
    )
    
    
    649,628,228Deferred income taxes
    
    
    18,454,701
    
    
    
    4,734,076
    
    
    
    (8,097,192
    )
    
    
    
    
    
    
    15,091,585Other long-term liabilities and deferrals
    
    
    29,157,053
    
    
    
    70,189,039
    
    
    
    7,986,380
    
    
    
    (69,990,000
    )
    
    
    37,342,472Total long-term liabilities
    
    
    697,249,882
    
    
    
    118,661,025
    
    
    
    79,316,569
    
    
    
    (193,165,191
    )
    
    
    702,062,285COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MINORITY INTERESTS IN SUBSIDIARIES
    
    
    
    
    
    
    1,244,467
    
    
    
    33,189,254
    
    
    
    
    
    
    
    34,433,721SHAREHOLDERS EQUITYCommon stock
    
    
    49,543,442
    
    
    
    19,120
    
    
    
    96,584,705
    
    
    
    (96,603,825
    )
    
    
    49,543,442Other shareholders equity
    
    
    66,554,469
    
    
    
    529,768,968
    
    
    
    63,275,091
    
    
    
    (622,213,805
    )
    
    
    37,384,723Total shareholders equity
    
    
    116,097,911
    
    
    
    529,788,088
    
    
    
    159,859,796
    
    
    
    (718,817,630
    )
    
    
    86,928,165TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    880,016,626
    
    
    $
    681,707,467
    
    
    $
    317,991,612
    
    
    $
    (940,213,380
    )
    
    $
    939,502,325
 15




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##### Table of Contents



SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
THREE MONTHS ENDED MARCH 31, 2004 Parent
    
    Subsidiary
    
    SubsidiaryCompany
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedREVENUES
    
    $
    107,909,194
    
    
    $
    79,630,215
    
    
    $
    63,929,014
    
    
    $
    (16,356,334
    )
    
    $
    235,112,089COSTS AND EXPENSESCost of operations
    
    
    93,638,064
    
    
    
    49,753,149
    
    
    
    46,149,377
    
    
    
    (16,470,276
    )
    
    
    173,070,314General and administrative expenses
    
    
    767,861
    
    
    
    7,225,897
    
    
    
    3,691,920
    
    
    
    113,942
    
    
    
    11,799,620Depreciation and amortization
    
    
    5,281,754
    
    
    
    5,615,242
    
    
    
    5,991,911
    
    
    
    
    
    
    
    16,888,907Asset impairment loss
    
    
    
    
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Gain on sale of assets and other
    
    
    (468,463
    )
    
    
    
    
    
    
    (44,671
    )
    
    
    
    
    
    
    (513,134
    )Total costs and expenses
    
    
    99,219,216
    
    
    
    63,594,288
    
    
    
    55,788,537
    
    
    
    (16,356,334
    )
    
    
    202,245,707OPERATING INCOME
    
    
    8,689,978
    
    
    
    16,035,927
    
    
    
    8,140,477
    
    
    
    
    
    
    
    32,866,382OTHER INCOME (EXPENSE)Interest expense
    
    
    (11,646,180
    )
    
    
    (872,446
    )
    
    
    (1,784,390
    )
    
    
    2,426,698
    
    
    
    (11,876,318
    )Amortization of debt issue cost
    
    
    (566,107
    )
    
    
    
    
    
    
    (23,879
    )
    
    
    
    
    
    
    (589,986
    )Interest income
    
    
    1,095,952
    
    
    
    1,409,422
    
    
    
    412,557
    
    
    
    (2,426,698
    )
    
    
    491,233Foreign currency exchange gain
    
    
    
    
    
    
    
    
    
    
    169,826
    
    
    
    
    
    
    
    169,826Equity in income (loss) of affiliates
    
    
    16,341,077
    
    
    
    2,175,905
    
    
    
    25,793
    
    
    
    (18,505,717
    )
    
    
    37,058Minority interests in income of subsidiaries
    
    
    
    
    
    
    (37,985
    )
    
    
    (1,414,343
    )
    
    
    
    
    
    
    (1,452,328
    )Total other income (expense)
    
    
    5,224,742
    
    
    
    2,674,896
    
    
    
    (2,614,436
    )
    
    
    (18,505,717
    )
    
    
    (13,220,515
    )INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
    
    
    13,914,720
    
    
    
    18,710,823
    
    
    
    5,526,041
    
    
    
    (18,505,717
    )
    
    
    19,645,867Income taxes
    
    
    3,980,602
    
    
    
    2,867,220
    
    
    
    1,100,702
    
    
    
    
    
    
    
    7,948,524INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    9,934,118
    
    
    
    15,843,603
    
    
    
    4,425,339
    
    
    
    (18,505,717
    )
    
    
    11,697,343Loss from discontinued operations, net of income tax
benefit of $191,250
    
    
    
    
    
    
    
    
    
    
    (1,763,225
    )
    
    
    
    
    
    
    (1,763,225
    )NET INCOME (LOSS)
    
    $
    9,934,118
    
    
    $
    15,843,603
    
    
    $
    2,662,114
    
    
    $
    (18,505,717
    )
    
    $
    9,934,118
 16




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##### Table of Contents



SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
THREE MONTHS ENDED MARCH 31, 2004 Parent
    
    Subsidiary
    
    SubsidiaryCompany
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedOPERATING ACTIVITIESNet income (loss)
    
    $
    9,934,118
    
    
    $
    15,843,603
    
    
    $
    2,662,114
    
    
    $
    (18,505,717
    )
    
    $
    9,934,118Noncash items in net income (loss):Depreciation and amortization
    
    
    5,480,349
    
    
    
    5,615,242
    
    
    
    6,571,724
    
    
    
    
    
    
    
    17,667,315Loss on impairment of assets
    
    
    
    
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Loss on assets held for sale
    
    
    
    
    
    
    
    
    
    
    1,800,000
    
    
    
    
    
    
    
    1,800,000Gain on sale of assets and other
    
    
    (468,463
    )
    
    
    
    
    
    
    (44,671
    )
    
    
    
    
    
    
    (513,134
    )Deferred lease expenses
    
    
    322,866
    
    
    
    (3,061
    )
    
    
    (256,555
    )
    
    
    
    
    
    
    63,250Deferred income tax expenses
    
    
    (978,447
    )
    
    
    2,849,959
    
    
    
    187,060
    
    
    
    
    
    
    
    2,058,572Equity in (income) loss of affiliates
    
    
    (16,341,077
    )
    
    
    (2,325,905
    )
    
    
    (25,793
    )
    
    
    18,655,717
    
    
    
    (37,058
    )Minority interests in income of subsidiaries
    
    
    
    
    
    
    37,985
    
    
    
    1,414,343
    
    
    
    
    
    
    
    1,452,328Cash provided by (used for) operating working capital
    
    
    (43,117,934
    )
    
    
    6,870,205
    
    
    
    (2,222,544
    )
    
    
    360,446
    
    
    
    (38,109,827
    )Net cash provided by (used for) operating activities
    
    
    (45,168,588
    )
    
    
    29,888,028
    
    
    
    10,085,678
    
    
    
    510,446
    
    
    
    (4,684,436
    )INVESTING ACTIVITIESAdditions to theatre properties and equipment
    
    
    (7,832,233
    )
    
    
    (5,294,264
    )
    
    
    (4,723,955
    )
    
    
    
    
    
    
    (17,850,452
    )Proceeds from sale of theatre properties and equipment
    
    
    
    
    
    
    
    
    
    
    262,509
    
    
    
    
    
    
    
    262,509Proceeds from sale of equity investment
    
    
    1,250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250,000Net transactions with affiliates
    
    
    33,301,036
    
    
    
    (31,521,943
    )
    
    
    53,263
    
    
    
    (1,704,856
    )
    
    
    127,500Net cash provided by (used for) investing activities
    
    
    26,718,803
    
    
    
    (36,816,207
    )
    
    
    (4,408,183
    )
    
    
    (1,704,856
    )
    
    
    (16,210,443
    )FINANCING ACTIVITIESIncrease in long-term debt
    
    
    
    
    
    
    3,821
    
    
    
    687,920
    
    
    
    
    
    
    
    691,741Decrease in long-term debt
    
    
    (412,500
    )
    
    
    (623,093
    )
    
    
    (1,231,134
    )
    
    
    
    
    
    
    (2,266,727
    )Increase in debt issue cost
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Change in intercompany notes
    
    
    
    
    
    
    
    
    
    
    (1,194,410
    )
    
    
    1,194,410
    
    
    
    Increase in minority investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    171,129
    
    
    
    
    
    
    
    171,129Decrease in minority investment in subsidiaries
    
    
    
    
    
    
    (50,000
    )
    
    
    (1,071,919
    )
    
    
    
    
    
    
    (1,121,919
    )Net cash provided by (used for) financing activities
    
    
    (422,500
    )
    
    
    (669,272
    )
    
    
    (2,638,414
    )
    
    
    1,194,410
    
    
    
    (2,535,776
    )EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS
    
    
    
    
    
    
    
    
    
    
    (44,617
    )
    
    
    
    
    
    
    (44,617
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (18,872,285
    )
    
    
    (7,597,451
    )
    
    
    2,994,464
    
    
    
    
    
    
    
    (23,475,272
    )CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    46,919,291
    
    
    
    9,522,740
    
    
    
    50,877,254
    
    
    
    
    
    
    
    107,319,285End of period
    
    $
    28,047,006
    
    
    $
    1,925,289
    
    
    $
    53,871,718
    
    
    $
    
    
    
    $
    83,844,013
 17




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##### Table of Contents



SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 2003 Parent
    
    Subsidiary
    
    SubsidiaryCompany
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    46,919,291
    
    
    $
    9,522,740
    
    
    $
    50,877,254
    
    
    $
    
    
    
    $
    107,319,285Inventories
    
    
    1,941,400
    
    
    
    1,158,809
    
    
    
    1,223,478
    
    
    
    
    
    
    
    4,323,687Accounts receivable
    
    
    16,099,027
    
    
    
    18,666,355
    
    
    
    7,337,334
    
    
    
    (26,662,668
    )
    
    
    15,440,048Income tax receivable
    
    
    661,332
    
    
    
    43,600
    
    
    
    
    
    
    
    (704,932
    )
    
    
    Prepaid expenses and other
    
    
    6,605,385
    
    
    
    2,089,981
    
    
    
    1,802,389
    
    
    
    (5,021,689
    )
    
    
    5,476,066Total current assets
    
    
    72,226,435
    
    
    
    31,481,485
    
    
    
    61,240,455
    
    
    
    (32,389,289
    )
    
    
    132,559,086THEATRE PROPERTIES AND EQUIPMENT - net
    
    
    299,179,099
    
    
    
    297,926,605
    
    
    
    178,774,354
    
    
    
    
    
    
    
    775,880,058OTHER ASSETSGoodwill
    
    
    7,834,692
    
    
    
    412,327
    
    
    
    4,024,330
    
    
    
    (188,254
    )
    
    
    12,083,095Investments in and advances to affiliates
    
    
    487,113,511
    
    
    
    375,329,715
    
    
    
    28,494,989
    
    
    
    (888,591,111
    )
    
    
    2,347,104Intangible assets, deferred charges and other - net
    
    
    21,958,723
    
    
    
    1,236,729
    
    
    
    71,838,834
    
    
    
    (57,157,229
    )
    
    
    37,877,057Total other assets
    
    
    516,906,926
    
    
    
    376,978,771
    
    
    
    104,358,153
    
    
    
    (945,936,594
    )
    
    
    52,307,256TOTAL ASSETS
    
    $
    888,312,460
    
    
    $
    706,386,861
    
    
    $
    344,372,962
    
    
    $
    (978,325,883
    )
    
    $
    960,746,400LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESCurrent portion of long-term debt
    
    $
    1,705,629
    
    
    $
    
    
    
    $
    5,039,213
    
    
    $
    
    
    
    $
    6,744,842Income tax payable
    
    
    4,683,517
    
    
    
    491,485
    
    
    
    1,051,511
    
    
    
    (704,932
    )
    
    
    5,521,581Accounts payable and accrued expenses
    
    
    77,572,911
    
    
    
    47,276,056
    
    
    
    39,022,470
    
    
    
    (28,211,487
    )
    
    
    135,659,950Total current liabilities
    
    
    83,962,057
    
    
    
    47,767,541
    
    
    
    45,113,194
    
    
    
    (28,916,419
    )
    
    
    147,926,373LONG-TERM LIABILITIESLong-term debt, less current portion
    
    
    641,412,860
    
    
    
    43,737,910
    
    
    
    81,904,971
    
    
    
    (115,369,602
    )
    
    
    651,686,139Deferred income taxes
    
    
    19,433,148
    
    
    
    1,884,117
    
    
    
    (8,284,252
    )
    
    
    
    
    
    
    13,033,013Other long-term liabilities and deferrals
    
    
    28,480,667
    
    
    
    73,667,100
    
    
    
    8,642,498
    
    
    
    (73,465,000
    )
    
    
    37,325,265Total long-term liabilities
    
    
    689,326,675
    
    
    
    119,289,127
    
    
    
    82,263,217
    
    
    
    (188,834,602
    )
    
    
    702,044,417COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MINORITY INTERESTS IN SUBSIDIARIES
    
    
    
    
    
    
    1,256,482
    
    
    
    32,675,701
    
    
    
    
    
    
    
    33,932,183SHAREHOLDERS EQUITYCommon stock
    
    
    49,546,776
    
    
    
    25,787
    
    
    
    96,590,704
    
    
    
    (96,619,825
    )
    
    
    49,543,442Other shareholders equity
    
    
    65,476,952
    
    
    
    538,047,924
    
    
    
    87,730,146
    
    
    
    (663,955,037
    )
    
    
    27,299,985Total shareholders equity
    
    
    115,023,728
    
    
    
    538,073,711
    
    
    
    184,320,850
    
    
    
    (760,574,862
    )
    
    
    76,843,427TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    888,312,460
    
    
    $
    706,386,861
    
    
    $
    344,372,962
    
    
    $
    (978,325,883
    )
    
    $
    960,746,400
 18




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##### Table of Contents



SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
THREE MONTHS ENDED MARCH 31, 2003 Parent
    
    Subsidiary
    
    SubsidiaryCompany
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedREVENUES
    
    $
    97,727,633
    
    
    $
    70,797,068
    
    
    $
    48,746,121
    
    
    $
    (14,797,675
    )
    
    $
    202,473,147COSTS AND EXPENSESCost of operations
    
    
    87,109,837
    
    
    
    44,162,240
    
    
    
    36,158,289
    
    
    
    (14,917,288
    )
    
    
    152,513,078General and administrative expenses
    
    
    862,824
    
    
    
    5,581,358
    
    
    
    2,876,186
    
    
    
    119,613
    
    
    
    9,439,981Depreciation and amortization
    
    
    5,345,673
    
    
    
    5,443,162
    
    
    
    5,206,879
    
    
    
    
    
    
    
    15,995,714(Gain) loss on sale of assets and other
    
    
    49,562
    
    
    
    (666,782
    )
    
    
    791
    
    
    
    
    
    
    
    (616,429
    )Total costs and expenses
    
    
    93,367,896
    
    
    
    54,519,978
    
    
    
    44,242,145
    
    
    
    (14,797,675
    )
    
    
    177,332,344OPERATING INCOME
    
    
    4,359,737
    
    
    
    16,277,090
    
    
    
    4,503,976
    
    
    
    
    
    
    
    25,140,803OTHER INCOME (EXPENSE)Interest expense
    
    
    (12,454,151
    )
    
    
    (1,648,630
    )
    
    
    (1,921,381
    )
    
    
    2,728,554
    
    
    
    (13,295,608
    )Amortization of debt issue cost
    
    
    (430,657
    )
    
    
    (130,329
    )
    
    
    (22,634
    )
    
    
    
    
    
    
    (583,620
    )Interest income
    
    
    1,270,261
    
    
    
    1,528,837
    
    
    
    588,085
    
    
    
    (2,728,554
    )
    
    
    658,629Foreign currency exchange gain
    
    
    
    
    
    
    
    
    
    
    16,131
    
    
    
    
    
    
    
    16,131Loss on early retirement of debt
    
    
    (762,137
    )
    
    
    (883,622
    )
    
    
    
    
    
    
    
    
    
    
    (1,645,759
    )Equity in income (loss) of affiliates
    
    
    14,352,675
    
    
    
    1,498,941
    
    
    
    128,334
    
    
    
    (15,783,594
    )
    
    
    196,356Minority interests in income of subsidiaries
    
    
    
    
    
    
    (15,004
    )
    
    
    (755,201
    )
    
    
    
    
    
    
    (770,205
    )Total other income (expense)
    
    
    1,975,991
    
    
    
    350,193
    
    
    
    (1,966,666
    )
    
    
    (15,783,594
    )
    
    
    (15,424,076
    )INCOME
(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    6,335,728
    
    
    
    16,627,283
    
    
    
    2,537,310
    
    
    
    (15,783,594
    )
    
    
    9,716,727Income taxes
    
    
    864,600
    
    
    
    2,562,379
    
    
    
    521,692
    
    
    
    
    
    
    
    3,948,671INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    5,471,128
    
    
    
    14,064,904
    
    
    
    2,015,618
    
    
    
    (15,783,594
    )
    
    
    5,768,056Loss from discontinued operations, net of income tax
benefit of $0
    
    
    
    
    
    
    
    
    
    
    (315,130
    )
    
    
    
    
    
    
    (315,130
    )NET INCOME (LOSS)
    
    $
    5,471,128
    
    
    $
    14,064,904
    
    
    $
    1,700,488
    
    
    $
    (15,783,594
    )
    
    $
    5,452,926
 19




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##### Table of Contents



SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
THREE MONTHS ENDED MARCH 31, 2003 Parent
    
    Subsidiary
    
    SubsidiaryCompany
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedOPERATING ACTIVITIESNet income (loss)
    
    $
    5,471,128
    
    
    $
    14,064,904
    
    
    $
    1,700,488
    
    
    $
    (15,783,594
    )
    
    $
    5,452,926Noncash items in net income (loss):Depreciation and amortization
    
    
    4,783,794
    
    
    
    5,573,491
    
    
    
    5,794,320
    
    
    
    
    
    
    
    16,151,605(Gain) loss on sale of assets and other
    
    
    49,562
    
    
    
    (666,782
    )
    
    
    791
    
    
    
    
    
    
    
    (616,429
    )Loss on early retirement of debt
    
    
    1,645,759
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,645,759Deferred lease expenses
    
    
    7,958,915
    
    
    
    (7,539,575
    )
    
    
    (39,838
    )
    
    
    
    
    
    
    379,502Deferred income tax expenses
    
    
    5,733,619
    
    
    
    (2,505,646
    )
    
    
    592,044
    
    
    
    
    
    
    
    3,820,017Equity in (income) loss of affiliates
    
    
    (14,352,675
    )
    
    
    (1,498,941
    )
    
    
    (128,334
    )
    
    
    15,783,594
    
    
    
    (196,356
    )Minority interests in income of subsidiaries
    
    
    
    
    
    
    15,004
    
    
    
    755,201
    
    
    
    
    
    
    
    770,205Cash provided by (used for) operating working capital
    
    
    (49,580,775
    )
    
    
    14,775,869
    
    
    
    (3,137,738
    )
    
    
    (5,117,261
    )
    
    
    (43,059,905
    )Net cash provided by (used for) operating activities
    
    
    (38,290,673
    )
    
    
    22,218,324
    
    
    
    5,536,934
    
    
    
    (5,117,261
    )
    
    
    (15,652,676
    )INVESTING ACTIVITIESAdditions to theatre properties and equipment
    
    
    (1,919,479
    )
    
    
    (1,674,120
    )
    
    
    (5,009,675
    )
    
    
    
    
    
    
    (8,603,274
    )Proceeds from sale of theatre properties and equipment
    
    
    
    
    
    
    1,484,619
    
    
    
    5,955
    
    
    
    
    
    
    
    1,490,574Net transactions with affiliates
    
    
    (40,408,341
    )
    
    
    8,762,445
    
    
    
    6,235,944
    
    
    
    25,406,638
    
    
    
    (3,314
    )Net cash provided by (used for) investing activities
    
    
    (42,327,820
    )
    
    
    8,572,944
    
    
    
    1,232,224
    
    
    
    25,406,638
    
    
    
    (7,116,014
    )FINANCING ACTIVITIESIssuance of senior subordinated notes
    
    
    150,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000,000Increase in long-term debt
    
    
    226,004,596
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226,004,596Decrease in long-term debt
    
    
    (285,664,100
    )
    
    
    (74,335,900
    )
    
    
    (4,361,185
    )
    
    
    
    
    
    
    (364,361,185
    )Increase in debt issue cost
    
    
    (10,712,267
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,712,267
    )Change in intercompany notes
    
    
    
    
    
    
    21,640,000
    
    
    
    (1,350,623
    )
    
    
    (20,289,377
    )
    
    
    Increase in minority investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    894,354
    
    
    
    
    
    
    
    894,354Decrease in minority investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (280,821
    )
    
    
    
    
    
    
    (280,821
    )Net cash provided by (used for) financing activities
    
    
    79,628,229
    
    
    
    (52,695,900
    )
    
    
    (5,098,275
    )
    
    
    (20,289,377
    )
    
    
    1,544,677EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS
    
    
    
    
    
    
    
    
    
    
    154,072
    
    
    
    
    
    
    
    154,072INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (990,264
    )
    
    
    (21,904,632
    )
    
    
    1,824,955
    
    
    
    
    
    
    
    (21,069,941
    )CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    9,487,744
    
    
    
    23,835,491
    
    
    
    30,395,280
    
    
    
    
    
    
    
    63,718,515End of period
    
    $
    8,497,480
    
    
    $
    1,930,859
    
    
    $
    32,220,235
    
    
    $
    
    
    
    $
    42,648,574
 20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations The following discussion and analysis should be read in conjunction with
our condensed consolidated financial statements, including the notes thereto,
appearing elsewhere in this report. We are one of the leaders in the motion picture exhibition industry, in
terms of revenues and 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, Colombia and the United Kingdom. We
generate revenues primarily from box office receipts and concession sales with
additional revenues from screen advertising sales and other ancillary 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 the
first quarter of 2004 included the blockbuster The Passion of the Christ, which
has exceeded the $300 million level in U.S. box office receipts. Films
scheduled for release during the remainder of 2004 include highly anticipated
sequels such as Shrek 2, Harry Potter and the Prisoner of Azkabanand
Spider-Man 2as well as other anticipated blockbusters such as Van Helsingand
The Day After Tomorrow. 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 borne by us, 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 ads is based on, among other things, the size of the directory
and the frequency and size of the newspapers circulation. The internet is
quickly becoming the primary way to check movie times, replacing the
traditional newspaper advertisements. Over time, the internet may allow us to
reduce our advertising costs associated with newspaper directory
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
our facility leases generally require a fixed monthly minimum rent payment.
Certain leases are also subject to additional percentage 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 condensed consolidated financial statements in conformity
with accounting principles generally accepted in the U.S. As such, we are
required to make certain estimates, judgments and assumptions that we believe
are reasonable based upon the information available. These estimates,
judgments 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 financial results include the following: 21




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Revenue and Expense Recognition Revenues are recognized when admissions and concession sales are received
at the box office and screen advertising is shown at 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 a gift card or other advanced sale-type certificate. We
recognize unredeemed gift cards and other advanced sale-type certificates as
other revenue only after such a period of time indicates, based on our
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 or estimates of the final
settlement depending on the film licensing arrangement. Estimates are made
based on the expected success of a film over the length of its run. 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 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. When participating in co-operative advertising, we
share the total advertising costs to promote a film with the film distributor
on a negotiated basis and our advertising expenses are presented net of the
portion of advertising costs reimbursed to us. We recognize advertising costs
and any sharing arrangements with film distributors in the same accounting
period. Advertising costs borne by us are expensed as incurred. Asset Impairment Loss 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 flow;  
    
    future years budgeted theatre level cash flow;  
    
    theatre property and equipment values;  
    
    goodwill 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. Assets are evaluated for impairment on an individual theatre basis or a
group of theatres that share 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 an assets
carrying amount, we then compare the carrying value of the asset with its fair
value, which is determined based on estimated undiscounted 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. 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 22




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##### Table of Contents



for potential tax assessments and the related tax accruals are in the
condensed consolidated balance sheets. To the extent tax accruals differ from
actual payments or assessments, the accruals will be adjusted. Results of Operations The following table sets forth, for the periods indicated, the percentage
of revenues represented by certain items reflected in our condensed
consolidated statements of operations: % of RevenuesThree months endedMarch 31,2004
    
    2003RevenuesAdmissions
    
    
    63.7
    %
    
    
    63.1
    %Concession
    
    
    31.2
    
    
    
    31.6Other
    
    
    5.1
    
    
    
    5.3Total revenues
    
    
    100.0
    
    
    
    100.0Cost of operations
    
    
    73.6
    
    
    
    75.3General and administrative expenses
    
    
    5.0
    
    
    
    4.7Depreciation and amortization
    
    
    7.2
    
    
    
    7.9Asset impairment loss
    
    
    0.4
    
    
    
    Gain on sale of assets and other
    
    
    (0.2
    )
    
    
    (0.3
    )Total costs and expenses
    
    
    86.0
    
    
    
    87.6Operating income
    
    
    14.0
    %
    
    
    12.4
    %
 Three month periods ended March 31, 2004 and 2003 Revenues Revenues for the three month period ended March 31, 2004 (the first
quarter of 2004) increased to $235.1 million from $202.5 million for the three
month period ended March 31, 2003 (the first quarter of 2003), representing
a 16.1% increase. Attendance increased 10.9% from 38.0 million patrons for the
first quarter of 2003 to 42.1 million patrons for the first quarter of 2004.
The increase in attendance and revenues for the first quarter of 2004 is
primarily due to quality film product, including the first quarter release of
the blockbuster The Passion of the Christ, which has exceeded the $300 million
level in U.S. box office receipts. Our average ticket price was $3.55 for the
first quarter of 2004 compared to $3.36 for the first quarter of 2003, an
increase of 5.7%. Concession revenues per patron was $1.74 for the first
quarter of 2004 compared to $1.68 for the first quarter of 2003, an increase of
3.4%. Revenues per screen increased 12.1% to $75,417 for the first quarter of
2004 from $67,295 for the first quarter of 2003. Cost of Operations Cost of operations, as a percentage of revenues, decreased to 73.6% for
the first quarter of 2004 from 75.3% for the first quarter of 2003. The
decrease, as a percentage of revenues, was primarily due to the 16.1% increase
in revenues and our ability to effectively control our theatre operating costs,
many of which are primarily fixed in nature, such as salaries and wages,
facility lease expense and utilities and other costs. Film rentals and advertising costs increased to 52.8% of admissions
revenues for the first quarter of 2004 from 52.4% for the first quarter of
2003, primarily related to stronger film product during the first quarter of
2004. Concession supplies increased to 16.5% of concession revenues for the
first quarter of 2004 from 15.3% for the first quarter of 2003, primarily
related to increased costs on certain concession products. Salaries and wages increased to $24.3 million for the first quarter of
2004 from $22.3 million for the first quarter of 2003 due to the increase in
attendance. Facility lease expense increased to $31.1 million for the first
quarter of 2004 from 23




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$28.5 million for the first quarter of 2003 primarily due to new theatre
openings and increased percentage rent expense. Utilities and other costs
increased to $26.6 million for the first quarter of 2004 from $25.1 million for
the first quarter of 2003 primarily due to increased utility rates in certain
regions in which we operate. General and Administrative Expenses General and administrative expenses increased to $11.8 million for the
first quarter of 2004 from $9.4 million for the first quarter of 2003. The
increase was due to a $1.2 million increase in corporate salaries and benefits
including incentive bonus expense, a $0.8 million increase in international
overhead expenses, a $0.2 million increase in professional fees and a $0.2
million increase in credit card and bank service charges. Depreciation and Amortization Depreciation and amortization expense was $16.9 million for the first
quarter of 2004 compared to $16.0 million for the first quarter of 2003. The
increase is primarily due to an increase in our asset base since the first
quarter of 2003 due to new theatre development. Asset Impairment Loss During the first quarter of 2004, we wrote down the long-lived assets of
one theatre located in the U.S. to estimated fair value, which resulted in an
asset impairment charge of $1.0 million. Interest Expense Interest costs incurred, which includes amortization of debt issue costs,
was $12.5 million for the first quarter of 2004 compared to $13.9 million for
the first quarter of 2003. The decrease is primarily due to a decrease in
average outstanding debt. Loss on Early Retirement of Debt During the first quarter of 2003, we recorded a loss on early retirement
of debt of $1.6 million which represented the write-off of unamortized debt
issue costs associated with the retirement of certain debt agreements,
including our then existing credit facility. Income Taxes Income tax expense of $7.9 million was recorded for the first quarter of
2004 compared to income tax expense of $3.9 million recorded for the first
quarter of 2003. Our effective tax rate for the first quarter of 2004 was
40.5% compared to 40.6% for the first quarter of 2003. Loss from Discontinued Operations We recorded a loss from discontinued operations, net of income
tax benefit, of $1.8 million during the first quarter of 2004 and $0.3 million
during the first quarter of 2003. The losses recorded for both periods reflect
results of operations for our two United Kingdom theatres for the respective
periods. Included in the loss recorded during the first quarter of 2004, is a
loss on assets held for sale of $1.8 million recorded to write down these
theatres to their estimated fair market value less costs to sell, in accordance
with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived
Assets. See Note 4 to the condensed consolidated financial statements. Liquidity and Capital Resources Operating Activities We primarily collect our revenues in cash, mainly through box office
receipts and the sale of concession supplies. We also continue to expand the
number of theatres that provide the patron a choice of using a credit card, in
place of cash, which we convert to cash in approximately three to four days.
Because our revenues are received in cash prior to the 24




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##### Table of Contents



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 used for operating activities, as reflected in the
condensed consolidated statements of cash flows, amounted to $4.7 million for
the three month period ended March 31, 2004 compared to $15.7 million for the
three month period ended March 31, 2003. The decrease in cash used for
operating activities in 2004 is primarily due to the timing of payment of
accounts payable and accrued expenses. Investing Activities Our investing activities have been principally related to the development
and acquisition of additional theatres. New theatre openings and acquisitions
historically have been financed with internally generated cash and by debt
financing, including borrowings under our senior secured credit facility. Cash
used for investing activities, as reflected in the condensed consolidated statements of
cash flows, amounted to $16.2 million for the three month period ended March
31, 2004 compared to $7.1 million for the three month period ended March 31,
2003. We are continuing to expand our U.S. theatre circuit. We opened three new
theatres with 33 screens during the three month period ended March 31, 2004,
bringing our total domestic screen count to 2,323 screens (12 of which are in
Canada). At March 31, 2004, we had signed commitments to open nine new
theatres with 108 screens and add four screens to two existing
theatres by the end of 2004 and open six new theatres with 63
screens subsequent to 2004. We estimate the remaining
capital expenditures for the development of these 175 screens will be
approximately $55 million. Actual expenditures for continued theatre
development and acquisitions are subject to change based upon the availability
of attractive opportunities. We are also continuing to expand our international theatre circuit. At
March 31, 2004, we operated 97 international theatres with 852 screens and had
signed commitments to open five new theatres with 35 screens in international markets by the end of 2004 and open five new theatres with 44
screens in international markets subsequent to 2004. We
estimate the remaining capital expenditures for the development of these 79
screens in international markets 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 from
cash flow from operations, borrowings under our senior secured credit facility,
subordinated note borrowings, proceeds from sale leaseback transactions and/or
sales of excess real estate. Additionally, we may from time to time, subject
to compliance with our debt instruments, purchase on the open market or call
our debt securities depending upon the availability and prices of such
securities. Financing Activities Cash used for financing activities, as reflected in the condensed
consolidated statements of cash flows, amounted to $2.5 million for the three
month period ended March 31, 2004 compared to cash provided by financing
activities of $1.5 million for the three month period ended March 31, 2003. As
of March 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 for
each period indicated are summarized as follows: 25




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##### Table of Contents



Payments Due by Period(in millions)Less Than
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    One Year
    
    1 - 3 Years
    
    4 - 5 Years
    
    5 YearsLong-term debt
    
    $
    656.2
    
    
    $
    6.6
    
    
    $
    10.5
    
    
    $
    265.3
    
    
    $
    373.8Operating lease obligations
    
    
    1,467.7
    
    
    
    106.8
    
    
    
    219.4
    
    
    
    214.3
    
    
    
    927.2Letters of credit
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    Employment agreements
    
    
    8.4
    
    
    
    2.8
    
    
    
    5.6
    
    
    
    
    
    
    
    Purchase
commitments 1
    
    
    101.3
    
    
    
    51.1
    
    
    
    49.9
    
    
    
    0.3
    
    
    
    Total obligations
    
    $
    2,233.7
    
    
    $
    167.4
    
    
    $
    285.4
    
    
    $
    479.9
    
    
    $
    1,301.0
 1Includes estimated capital expenditures associated with the construction
of new theatres to which we were committed as of March 31, 2004. As of March 31, 2004, we were in full compliance with all agreements
governing our outstanding debt. Recapitalization of Cinemark, Inc. On March 12, 2004, our parent company, Cinemark, Inc., entered into an
agreement and plan of merger with a Delaware corporation and newly formed
subsidiary of Madison Dearborn Partners, LLC (Madison). The transaction was
completed on April 2, 2004, at which time the newly formed subsidiary of
Madison was merged with and into Cinemark, Inc., with Cinemark, Inc. continuing
as the surviving corporation. Simultaneously, an affiliate of Madison
purchased shares of common stock of Cinemark, Inc. for approximately $518.3
million in cash and became the controlling stockholder of Cinemark, Inc.,
owning approximately 83% of Cinemark, Inc.s capital stock. Lee
Roy Mitchell, our Chief Executive Officer, and the Mitchell Special Trust
collectively retained approximately 16% ownership of Cinemark, Inc.s capital
stock and certain members of management own the remaining 1%. As part of the
transaction, Cinemark, Inc. paid change of control fees and other management
compensation expenses of approximately $15 million, which will be recorded by
us in April 2004. Based on the terms of the transaction, including Mr.
Mitchells ownership retention, the transaction will be accounted for as a
recapitalization, which results in Cinemark, Inc. and its subsidiaries
retaining their historical book values. On
March 31, 2004, Cinemark, Inc. issued $577,173,000 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 beginning
on September 15, 2009. Due to the holding company status of Cinemark, Inc.,
payments of principal and interest under these notes will be dependent on
loans, dividends and other payments from us to Cinemark, Inc. We 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 that are
effectively subordinated to our indebtedness and other liabilities. Senior Subordinated Notes As of March 31, 2004, we had two issues of senior subordinated notes
outstanding: (1) $105 million principal amount of 8 1/2% senior subordinated
notes due 2008; and (2) $360 million principal amount of 9% senior subordinated
notes due 2013. Interest on each issue is payable on February 1 and August 1
of each year. The senior subordinated notes are general, unsecured obligations and are
subordinated in right of payment to the senior secured credit facility or other
senior indebtedness. The notes are guaranteed by certain of our domestic
subsidiaries. The guarantees are subordinated to the senior debt of the
subsidiary guarantors and rank pari passu with the senior subordinated debt of
our guarantor subsidiaries. The notes are effectively subordinated to the
indebtedness and other liabilities of our non-guarantor subsidiaries. The indentures governing the senior subordinated notes contain covenants
that limit, among other things, dividends, transactions with affiliates,
investments, sale of assets, mergers, repurchases of our capital stock, liens
and additional 26




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##### Table of Contents



indebtedness. Upon a change of control, we would be required to make an
offer to repurchase the senior subordinated notes at a price equal to 101% of
the principal amount outstanding plus accrued and unpaid interest through the
date of repurchase. The indentures governing the senior subordinated notes
allow us to incur additional indebtedness if we satisfy the coverage ratio
specified in each indenture, after giving effect to the incurrence of the
additional indebtedness, and in certain other circumstances. On March 16, 2004, we initiated a tender offer for our outstanding $105
million 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, in conjunction with the
Recapitalization, we redeemed $94,115,000 principal amount of 8 1/2% senior subordinated notes that
were tendered, pursuant to the tender offer, utilizing a portion of the proceeds
from our amended senior secured credit facility. On
April 14, 2004, after the expiration of the tender offer, we redeemed an
additional $50,000 principal amount of 8 1/2% senior
subordinated notes that were tendered. After the expiration of the
tender offer, we had outstanding $10,835,000 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 our 9% senior
subordinated notes due 2013, we made a change of control offer to purchase the
9% senior subordinated notes at a purchase price of 101% of the aggregate
principal amount, plus accrued and unpaid interest, if any, at the date of
purchase. We expect that the purchase of any amounts tendered by the holders
of the 9% senior subordinated notes will be financed through additional
borrowings. Senior Secured Credit Facility On February 14, 2003, we entered into a new senior secured credit facility
consisting of a $75 million five year revolving credit line and a $125 million
term loan with Lehman Commercial Paper, Inc. for itself and as administrative
agent for a syndicate of lenders. The net proceeds from the senior secured
credit facility were used to repay, in full, certain debt agreements, including
our then existing Credit Facility. On August 18, 2003, we amended the senior secured credit facility with
Lehman Commercial Paper, Inc. for itself and as administrative agent for a
syndicate of lenders, 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 our senior secured credit
facility entered into February 14, 2003 and (ii) redeem the remaining $42
million principal amount of our then outstanding 9 5/8% senior subordinated
notes on September 18, 2003. Under the term loan, principal payments of $412,500 are due each calendar
quarter through March 31, 2007 and increase to $39,703,125 each calendar
quarter from June 30, 2007 to maturity at March 31, 2008. At March 31, 2004, there was approximately $163.8 million outstanding
under the term loan and no outstanding revolver borrowings. Approximately
$74.9 million was available for borrowing under the revolving credit line,
giving effect to a $0.1 million letter of credit outstanding. The effective
interest rate on outstanding borrowings under the senior secured credit
facility at March 31, 2004 was 5.5% per annum. On
April 2, 2004, we amended our senior secured credit facility in
connection with the Recapitalization. The amended senior secured credit
facility provides for a seven year term loan of $260 million 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
principal amount of our outstanding $105 million principal amount 8 1/2%
senior subordinated notes due 2008 that were tendered pursuant to the tender
offer. 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 our
option, at: (A) the base rate
equal to the higher of (i) the prime lending rate as set forth
on the British
Banking Association Telerate page 5 or (ii) the federal funds
effective rate
from time to time 27




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##### Table of Contents



plus 0.50%, plus a margin of 1.25% per annum, or (B) a eurodollar rate
plus a margin of 2.25% per annum. After the completion of two fiscal
quarters after the closing date, the margin under
the term loan applicable to base rate loans ranges from 1.00% per annum to
1.25% per annum and the margin applicable to eurodollar rate loans ranges from
2.00% per annum to 2.25% per annum, and will be adjusted based upon our
achieving certain performance targets. Borrowings under the amended revolving credit line bear interest, at our
option, at: (A) a base rate equal to the higher of (i) the prime lending rate
as set forth on the British Banking Association Telerate page 5 or (ii) the
federal funds effective rate from time to time plus 0.50%, plus a margin of
1.50% per annum, or (B) a eurodollar rate plus a margin of 2.50% per annum.
After the completion of two fiscal
quarters after the closing date, the margin under the revolving credit line
applicable to base rate loans ranges from 1.00% per annum to 1.50% per annum
and the margin applicable to eurodollar rate loans ranges from 2.00% per annum
to 2.50% per annum, and will be adjusted based upon our achieving certain
performance targets. We will also be required to pay a commitment fee
calculated at the rate of 0.50% per annum on the average daily unused portion
of the amended revolving credit line, payable quarterly in arrears. Our
obligations under the amended senior secured credit facility are
guaranteed by Cinemark, Inc., CNMK Holding, Inc. and certain of our
subsidiaries and are secured by mortgages on certain fee and leasehold
properties and security interests in substantially all of our personal and
intangible property, including without limitation, pledges of all of
our capital stock, all of the
capital stock of CNMK Holding, Inc., and certain of our domestic
subsidiaries and 65% of the voting stock of certain of our
foreign subsidiaries. Cinemark Brasil Notes Payable Cinemark Brasil S.A. currently has four main types of funding sources
executed with local and international banks. These include: (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 executed in October 1999 with a maturity
date of September 2004. 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 14.5%. At March 31, 2004, there was approximately US$1.0
million outstanding under this credit line. (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 13.8%. At
March 31, 2004, there was approximately US$1.3 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
March 31, 2004, there was approximately US$0.6 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 March 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. The effective
interest rate on such borrowings at March 31, 2004 was 12.7% per annum. 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. is required to make 24 equal quarterly installments of principal
plus accrued and unpaid interest, commencing March 27, 2002. The indebtedness
is secured by a first priority commercial 28




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##### Table of Contents



pledge of the shares of Cinemark Chile S.A., a chattel mortgage over
Cinemark Chiles personal property and by guarantees issued by Cinemark
International, L.L.C. and Chile Films S.A., whose owners are shareholders of
Cinemark Chile S.A. 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 (360 day TAB
Banking rate with respect to one of the four banks) as published by the
Association of Banks and Financial Institutions Act plus 2%. At March 31,
2004, $7.2 million was outstanding under this agreement and the effective
interest rate on such borrowing was 6.4% per annum. Seasonality Our revenues have historically been seasonal, coinciding with the timing
of releases of motion pictures by the major distributors. Generally, the most
successful motion pictures have been released during the summer, extending from
Memorial Day to Labor Day, and during the holiday season, extending from
Thanksgiving through year-end. The unexpected emergence of a hit film during
other periods can alter this seasonality trend. The timing of such film
releases can have a significant effect on our results of operations, and the
results of one quarter are not necessarily indicative of results for the next
quarter or for the same period in the following year. Cautionary Statement Regarding Forward-Looking Statements This quarterly report on Form 10-Q includes forward-looking statements
based on our current expectations, assumptions, estimates, and projections
about our and our subsidiaries business and industry. We intend that this
quarterly report be governed by the safe harbor provision of the Private
Securities Litigation Reform Act of 1995 (the PSLR Act) with respect to
statements that may be deemed to be forward-looking statements under the PSLR
Act. They include statements relating to:  
    
    future revenues, expenses and profitability;  
    
    the future development and expected growth of our business;  
    
    projected capital expenditures;  
    
    attendance at movies generally, or in any of the markets in which we operate;  
    
    the number or diversity of popular movies released;  
    
    our ability to successfully license and exhibit popular films;  
    
    competition from other exhibitors; and  
    
    determinations in lawsuits in which we are a defendant. You can identify forward-looking statements by the use of words such as
may, should, could, estimates, predicts, potential, continue,
anticipates, believes, plans, expects, future and intends and
similar expressions which are intended to identify forward-looking statements.
These statements are not guarantees of future performance and are subject to
risks, uncertainties and other factors, some of which are beyond our control
and difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. In
evaluating these forward-looking statements, you should carefully consider the
risks and uncertainties described in this report. These forward-looking
statements reflect our view only as of the date of this report. Actual 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. 29




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk We have exposure to financial market risks, including changes in interest
rates, foreign currency exchange rates and other relevant market prices. Interest Rate Risk An increase or decrease in interest rates would affect interest costs
relating to our variable rate debt facilities. We and our subsidiaries are
currently parties to variable rate debt facilities. At March 31, 2004, we had
an aggregate of $177.6 million of variable rate debt outstanding under these
facilities. Borrowings under these facilities represent approximately 27% of
our total outstanding long-term debt at March 31, 2004. Based on the interest
rate levels in effect on the variable rate debt outstanding at March 31, 2004,
a 100 basis point increase in market interest rates would not increase our
annual interest expense by a material amount. Changes in interest rates do not
have a direct impact on interest expense relating to the remaining fixed rate
debt facilities. The tables below provide information about our fixed rate and variable
rate long-term debt agreements as of March 31, 2004 and December 31, 2003: Expected Maturity As of March 31, 2004(in millions)March 31,
    
    
    
    
    
    AverageFair
    
    Interest2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    Value
    
    RateFixed rate
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    
    
    
    $
    104.6
    
    
    $
    373.8
    
    
    $
    478.6
    
    
    $
    476.8
    
    
    
    8.9
    %Variable rate
    
    
    6.5
    
    
    
    6.0
    
    
    
    4.4
    
    
    
    160.6
    
    
    
    0.1
    
    
    
    
    
    
    
    177.6
    
    
    
    177.4
    
    
    
    4.5
    %Total debt
    
    $
    6.6
    
    
    $
    6.1
    
    
    $
    4.4
    
    
    $
    160.6
    
    
    $
    104.7
    
    
    $
    373.8
    
    
    $
    656.2
    
    
    $
    654.2
 Expected Maturity As of December 31, 2003(in millions)December 31,
    
    
    
    
    
    AverageFair
    
    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 because of our international operations. 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 March 31, 2004,
holding everything else constant, a 10% immediate unfavorable change in each of
the foreign currency exchange rates to which we are exposed would decrease the
net fair value of our investments in our international subsidiaries by
approximately $6 million. 30




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##### Table of Contents



Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We have established a system of controls and other procedures designed to
ensure that information required to be disclosed in our periodic reports filed
under the Securities Exchange Act of 1934 (the Exchange Act), as amended, is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commissions rules and forms. These disclosure
controls and procedures have been evaluated under the direction of our Chief
Executive Officer and Chief Financial Officer for the period covered by this
report. Based on such evaluations, the Chief Executive Officer and Chief
Financial Officer have concluded that the disclosure controls and procedures
are effective in alerting them in a timely basis to material information
relating to the Company and its consolidated subsidiaries required to be
included in our reports filed or submitted under the Exchange Act. Changes in Internal Controls There have been no significant changes in our system of internal controls
or in other factors that could significantly affect internal controls within
the period covered by this report or subsequent to the evaluation by the Chief
Executive Officer and Chief Financial Officer. 31




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##### Table of Contents



PART II - OTHER INFORMATION 
 Item 1. Legal Proceedings Reference is made to Item 3 of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2003. 
 Item 5. Other Information PageSupplemental Schedules specified by the senior subordinated notes Indenture:Condensed Consolidating Balance Sheets (unaudited) as of March 31, 2004
    
    
    33Condensed Consolidating Statements of Operations (unaudited) for the
three month period ended March 31, 2004
    
    
    34Condensed Consolidating Statements of Cash Flows (unaudited) for the
three month period ended March 31, 2004
    
    
    35
 32




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##### Table of Contents



CINEMARK USA, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATING BALANCE SHEETS
 AS OF MARCH 31, 2004


(Unaudited)
 Restricted
    
    UnrestrictedGroup
    
    Group
    
    Eliminations
    
    ConsolidatedASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    53,016,830
    
    
    $
    30,827,183
    
    
    $
    
    
    
    $
    83,844,013Inventories
    
    
    3,427,110
    
    
    
    677,961
    
    
    
    
    
    
    
    4,105,071Accounts receivable
    
    
    12,655,577
    
    
    
    1,519,545
    
    
    
    (506,780
    )
    
    
    13,668,342Income tax receivable
    
    
    (769,478
    )
    
    
    769,478
    
    
    
    
    
    
    
    Prepaid expenses and other
    
    
    4,054,596
    
    
    
    2,201,212
    
    
    
    
    
    
    
    6,255,808Total current assets
    
    
    72,384,635
    
    
    
    35,995,379
    
    
    
    (506,780
    )
    
    
    107,873,234THEATRE PROPERTIES AND EQUIPMENT - net
    
    
    696,991,773
    
    
    
    76,293,278
    
    
    
    
    
    
    
    773,285,051OTHER ASSETSGoodwill
    
    
    8,066,496
    
    
    
    3,910,042
    
    
    
    
    
    
    
    11,976,538Investments in and advances to affiliates
    
    
    146,914,251
    
    
    
    1,188,858
    
    
    
    (142,029,398
    )
    
    
    6,073,711Intangible assets, deferred charges and other - net
    
    
    32,666,903
    
    
    
    7,626,888
    
    
    
    
    
    
    
    40,293,791Total other assets
    
    
    187,647,650
    
    
    
    12,725,788
    
    
    
    (142,029,398
    )
    
    
    58,344,040TOTAL ASSETS
    
    $
    957,024,058
    
    
    $
    125,014,445
    
    
    $
    (142,536,178
    )
    
    $
    939,502,325LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESCurrent portion of long-term debt
    
    $
    1,890,871
    
    
    $
    4,681,818
    
    
    $
    
    
    
    $
    6,572,689Accounts payable and accrued expenses
    
    
    92,187,098
    
    
    
    17,804,848
    
    
    
    (486,481
    )
    
    
    109,505,465Total current liabilities
    
    
    94,077,969
    
    
    
    22,486,666
    
    
    
    (486,481
    )
    
    
    116,078,154LONG-TERM LIABILITIESSenior credit agreements
    
    
    163,402,170
    
    
    
    7,842,182
    
    
    
    
    
    
    
    171,244,352Senior subordinated notes
    
    
    478,383,876
    
    
    
    
    
    
    
    
    
    
    
    478,383,876Deferred lease expenses
    
    
    25,612,434
    
    
    
    2,103,518
    
    
    
    
    
    
    
    27,715,952Deferred gain on sale leasebacks
    
    
    3,915,220
    
    
    
    
    
    
    
    
    
    
    
    3,915,220Deferred income taxes
    
    
    15,137,198
    
    
    
    (45,613
    )
    
    
    
    
    
    
    15,091,585Deferred revenues and other long-term liabilities
    
    
    744,494
    
    
    
    4,966,806
    
    
    
    
    
    
    
    5,711,300Total long-term liabilities
    
    
    687,195,392
    
    
    
    14,866,893
    
    
    
    
    
    
    
    702,062,285COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MINORITY INTERESTS IN SUBSIDIARIES
    
    
    10,729,990
    
    
    
    23,703,731
    
    
    
    
    
    
    
    34,433,721SHAREHOLDERS EQUITYClass A common stock, $.01 par value: 10,000,000 shares
authorized, 1,500 shares issued and outstanding
    
    
    15
    
    
    
    2,000
    
    
    
    (2,000
    )
    
    
    15Class B common stock, no par value: 1,000,000 shares
authorized, 239,893 shares issued and outstanding
    
    
    49,543,427
    
    
    
    
    
    
    
    
    
    
    
    49,543,427Additional paid-in-capital
    
    
    13,199,707
    
    
    
    142,047,697
    
    
    
    (142,047,697
    )
    
    
    13,199,707Retained earnings
    
    
    178,697,299
    
    
    
    (43,740,570
    )
    
    
    
    
    
    
    134,956,729Treasury stock, 57,245 Class B shares at cost
    
    
    (24,232,890
    )
    
    
    
    
    
    
    
    
    
    
    (24,232,890
    )Accumulated other comprehensive loss
    
    
    (52,186,851
    )
    
    
    (34,351,972
    )
    
    
    
    
    
    
    (86,538,823
    )Total shareholders equity
    
    
    165,020,707
    
    
    
    63,957,155
    
    
    
    (142,049,697
    )
    
    
    86,928,165TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    957,024,058
    
    
    $
    125,014,445
    
    
    $
    (142,536,178
    )
    
    $
    939,502,325
 Note: Restricted Group and Unrestricted Group are defined in the Indentures for the Senior Subordinated Notes. 33




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CINEMARK USA, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 (Unaudited)
 Restricted
    
    UnrestrictedGroup
    
    Group
    
    Eliminations
    
    ConsolidatedREVENUES
    
    $
    198,882,858
    
    
    $
    36,523,805
    
    
    $
    (294,574
    )
    
    $
    235,112,089COSTS AND EXPENSESCost of operations
    
    
    145,905,133
    
    
    
    27,459,755
    
    
    
    (294,574
    )
    
    
    173,070,314General and administrative expenses
    
    
    9,187,811
    
    
    
    2,611,809
    
    
    
    
    
    
    
    11,799,620Depreciation and amortization
    
    
    13,602,494
    
    
    
    3,286,413
    
    
    
    
    
    
    
    16,888,907Asset impairment loss
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Gain on sale of assets and other
    
    
    (473,971
    )
    
    
    (39,163
    )
    
    
    
    
    
    
    (513,134
    )Total costs and expenses
    
    
    169,221,467
    
    
    
    33,318,814
    
    
    
    (294,574
    )
    
    
    202,245,707OPERATING INCOME
    
    
    29,661,391
    
    
    
    3,204,991
    
    
    
    
    
    
    
    32,866,382OTHER INCOME (EXPENSE)Interest expense
    
    
    (11,583,281
    )
    
    
    (293,037
    )
    
    
    
    
    
    
    (11,876,318
    )Amortization of debt issue cost
    
    
    (569,677
    )
    
    
    (20,309
    )
    
    
    
    
    
    
    (589,986
    )Interest income
    
    
    194,436
    
    
    
    296,797
    
    
    
    
    
    
    
    491,233Foreign currency exchange gain
    
    
    92,378
    
    
    
    77,448
    
    
    
    
    
    
    
    169,826Equity in income of affiliates
    
    
    11,265
    
    
    
    25,793
    
    
    
    
    
    
    
    37,058Minority interests in income of subsidiaries
    
    
    (433,613
    )
    
    
    (1,018,715
    )
    
    
    
    
    
    
    (1,452,328
    )Total other expenses
    
    
    (12,288,492
    )
    
    
    (932,023
    )
    
    
    
    
    
    
    (13,220,515
    )INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    17,372,899
    
    
    
    2,272,968
    
    
    
    
    
    
    
    19,645,867Income taxes
    
    
    7,229,404
    
    
    
    719,120
    
    
    
    
    
    
    
    7,948,524INCOME FROM CONTINUING OPERATIONS
    
    
    10,143,495
    
    
    
    1,553,848
    
    
    
    
    
    
    
    11,697,343Loss from discontinued operations, net of income tax
benefit of $191,250
    
    
    (1,763,225
    )
    
    
    
    
    
    
    
    
    
    
    (1,763,225
    )NET INCOME
    
    $
    8,380,270
    
    
    $
    1,553,848
    
    
    $
    
    
    
    $
    9,934,118
 Note: Restricted Group and Unrestricted Group are defined in the Indentures for the Senior Subordinated Notes. 34




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##### Table of Contents



CINEMARK USA, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 (Unaudited)
 Restricted
    
    UnrestrictedGroup
    
    Group
    
    Eliminations
    
    ConsolidatedOPERATING ACTIVITIESNet income
    
    $
    8,380,270
    
    
    $
    1,553,848
    
    
    $
    
    
    
    $
    9,934,118Noncash items in net income:Depreciation
    
    
    13,464,769
    
    
    
    3,264,235
    
    
    
    
    
    
    
    16,729,004Depreciation - assets held for sale
    
    
    58,878

    
    
    
    
    
    
    
    
    
    
    
    58,878Amortization of intangible and other assets
    
    
    137,725
    
    
    
    22,178
    
    
    
    
    
    
    
    159,903Amortization of foreign advanced rents
    
    
    278,123
    
    
    
    218,933
    
    
    
    
    
    
    
    497,056Amortized compensation - stock options
    
    
    145,021
    
    
    
    
    
    
    
    
    
    
    
    145,021Amortization of debt issue costs
    
    
    569,677
    
    
    
    20,309
    
    
    
    
    
    
    
    589,986Amortization of gain on sale leasebacks
    
    
    (91,480
    )
    
    
    
    
    
    
    
    
    
    
    (91,480
    )Amortization of debt discount and premium
    
    
    (366,053
    )
    
    
    
    
    
    
    
    
    
    
    (366,053
    )Amortization of deferred revenues
    
    
    (55,000
    )
    
    
    
    
    
    
    
    
    
    
    (55,000
    )Loss on impairment of assets
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Loss on assets held for sale
    
    
    1,800,000
    
    
    
    
    
    
    
    
    
    
    
    1,800,000Gain on sale of assets and other
    
    
    (473,971
    )
    
    
    (39,163
    )
    
    
    
    
    
    
    (513,134
    )Deferred lease expenses
    
    
    345,188
    
    
    
    (281,938
    )
    
    
    
    
    
    
    63,250Deferred income tax expenses
    
    
    1,871,497
    
    
    
    187,075
    
    
    
    
    
    
    
    2,058,572Equity in income of affiliates
    
    
    (11,265
    )
    
    
    (25,793
    )
    
    
    
    
    
    
    (37,058
    )Minority interests in income of subsidiaries
    
    
    433,613
    
    
    
    1,018,715
    
    
    
    
    
    
    
    1,452,328Cash used for operating working capital
    
    
    (37,637,191
    )
    
    
    (472,636
    )
    
    
    
    
    
    
    (38,109,827
    )Net cash provided by (used for) operating activities
    
    
    (10,150,199
    )
    
    
    5,465,763
    
    
    
    
    
    
    
    (4,684,436
    )INVESTING ACTIVITIESAdditions to theatre properties and equipment
    
    
    (14,585,136
    )
    
    
    (3,265,316
    )
    
    
    
    
    
    
    (17,850,452
    )Proceeds from sale of theatre properties and equipment
    
    
    214,411
    
    
    
    48,098
    
    
    
    
    
    
    
    262,509Proceeds from sale of equity investment
    
    
    1,250,000
    
    
    
    
    
    
    
    
    
    
    
    1,250,000Dividends/capital returned from affiliates
    
    
    127,500
    
    
    
    
    
    
    
    
    
    
    
    127,500Net cash used for investing activities
    
    
    (12,993,225
    )
    
    
    (3,217,218
    )
    
    
    
    
    
    
    (16,210,443
    )FINANCING ACTIVITIESIncrease in long-term debt
    
    
    3,821
    
    
    
    687,920
    
    
    
    
    
    
    
    691,741Decrease in long-term debt
    
    
    (1,035,593
    )
    
    
    (1,231,134
    )
    
    
    
    
    
    
    (2,266,727
    )Increase in debt issue cost
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Increase in minority investment in subsidiaries
    
    
    97,309
    
    
    
    73,820
    
    
    
    
    
    
    
    171,129Decrease in minority investment in subsidiaries
    
    
    (55,404
    )
    
    
    (1,066,515
    )
    
    
    
    
    
    
    (1,121,919
    )Net cash used for financing activities
    
    
    (999,867
    )
    
    
    (1,535,909
    )
    
    
    
    
    
    
    (2,535,776
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
    
    
    41,759
    
    
    
    (86,376
    )
    
    
    
    
    
    
    (44,617
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (24,101,532
    )
    
    
    626,260
    
    
    
    
    
    
    
    (23,475,272
    )CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    77,118,362
    
    
    
    30,200,923
    
    
    
    
    
    
    
    107,319,285End of period
    
    $
    53,016,830
    
    
    $
    30,827,183
    
    
    $
    
    
    
    $
    83,844,013
 Note: Restricted Group and Unrestricted Group are defined in the Indentures for the Senior Subordinated Notes. 35




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##### Table of Contents



Item 6. Exhibits and Reports on Form 8-K  a)
    
    Exhibits 2
    
    Share Exchange Agreement dated as of May 17, 2002 by and among Cinemark, Inc., Cinemark USA,
Inc. and the shareholders signature thereto incorporated by reference from Amendment 2 to
Cinemark Inc.s Registration Statement on Forms S-1 (File No. 333-88618) filed June 28, 2002.3.1
    
    Amended and Restated Articles of Incorporation of the Company filed with the Texas Secretary
of State on June 3, 1992 (incorporated by reference to Exhibit 3.1(a) to the Companys Annual
Report on Form 10-K (File No. 033-47040) filed March 31, 1993).3.2(a)
    
    Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 to the Companys
Registration Statement on Form S-1 (File No. 033-47040) filed April 9, 1992).3.2(b)
    
    Amendment to Bylaws of the Company dated March 12, 1996 (incorporated by reference to Exhibit
3.2(b) to the Companys Annual Report on Form 10-K (File No. 033-47040) filed March 6, 1997).4.2(a)
    
    Indenture dated January 14, 1998 between the Company and U.S. Trust Company of Texas, N.A.
governing the 8 1/2% Senior Subordinated Notes issued thereunder (incorporated by reference
to Exhibit 4.1 to the Companys Registration Statement on Form S-4 (File No. 333-45417) filed
February 2, 1998).4.2(b)
    
    First Supplemental Indenture dated as of February 11, 2003 between the Company, the
subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A.,
as successor trustee to U.S. Trust Company of Texas, N.A. (incorporated by reference to
Exhibit 4.2 (g) to the Companys Registration Statement on Form S-4 (File No. 333-104940)
filed May 2, 2003).*4.2(c)
    
    Second Supplemental Indenture dated as of March, 25, 2004 between the Company, the subsidiary
guarantors party thereto and The Bank of New York Trust Company, N.A.4.2(d)
    
    Indenture dated February 11, 2003 between the Company and The Bank of New York Trust Company
of Florida, N.A. governing the 9% Senior Subordinated Notes issued thereunder (incorporated
by reference to Exhibit 10.2(b) to the Companys Annual Report on Form 10-K (File No.
033-47040) filed March 19, 2003).4.2(e)
    
    First Supplemental Indenture dated as of May 7, 2003 between the Company, the subsidiary
guarantors party thereto and The Bank of New York Trust Company of Florida, N.A.
(incorporated by reference to Exhibit 4.2(i) to the Companys Registration Statement on Form
S-4 (File No. 333-104940) filed May 28, 2003).4.2(f)
    
    Form of 8 1/2% Note (contained in the Indenture listed as Exhibit 4.2(f) above) (incorporated
by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-4 (File No.
333-45417) filed February 2, 1998).4.2(g)
    
    Form of 9% Note (contained in the Indenture listed as Exhibit 4.2(h) above) (incorporated by
reference to Exhibit 10.2(b) to the Companys Annual Report on Form 10-K (File 033-47040)
filed March 19, 2003).10.1(a)
    
    Management Agreement, dated as of July 28, 1993, between the Company and Cinemark Mexico
(USA) (incorporated by reference to Exhibit 10.1(a) to Cinemark, Inc.s Registration
Statement on Form S-1 (File No. 333-88618) filed May 17, 2002).10.1(b)
    
    Management Agreement, dated December 10, 1993, between Laredo Theatre, Ltd. and the Company
(incorporated by reference to Exhibit 10.14(b) to the Companys Annual Report on Form 10-K
(File No. 033-47040) filed March 31, 1994).10.1(c)
    
    Management Agreement, dated September 1, 1994, between Cinemark Partners II, Ltd. and the
Company (incorporated by reference to Exhibit 10.4(i) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 29, 1995).10.1(d)
    
    Management Services Agreement, effective as of March 28, 2001, between Mitchell Theatres and
Cinemark USA, Inc. (incorporated by reference from Exhibit 10.1(g) to Cinemark, Inc.s
Registration Statement on Form S-1 (File No. 333-88618) filed June 28, 2002).*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.10.3(a)
    
    License Agreement, dated December 10, 1993, between Laredo Joint Venture and the Company
(incorporated by reference to Exhibit 10.14(c) to the Companys Annual Report on Form 10-K
(File No. 033-47040) filed March 31, 1994).10.3(b)
    
    License Agreement, dated September 1, 1994, between Cinemark Partners II, Ltd. and the
Company (incorporated by reference to Exhibit 10.10(c) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 29, 1995).10.4(a)
    
    Tax Sharing Agreement, between the Company and Cinemark International, L.L.C. (f/k/a Cinemark
II, Inc. ), dated as of June 10, 1992 (incorporated by reference to Exhibit 10.22 to the
Companys Annual Report on Form 10-K (File No. 033-47040) filed March 31, 1993).10.4(b)
    
    Tax Sharing Agreement, dated as of July 28, 1993, between the Company and Cinemark Mexico
(USA) (incorporated by reference to Exhibit 10.10 to Cinemark Mexico (USA)s Registration
Statement on Form S-4 (File No. 033-72114) filed on November 24, 1993).
 36




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##### Table of Contents



10.5(a)
    
    Indemnification Agreement, between the Company and Lee Roy Mitchell, dated as of July 13,
1992 (incorporated by reference to Exhibit 10.23(a) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 31, 1993).10.5(b)
    
    Indemnification Agreement, between the Company and Tandy Mitchell, dated as of July 13, 1992
(incorporated by reference to Exhibit 10.23(b) to the Companys Annual Report on Form 10-K
(File No. 033-47040) filed March 31, 1993).10.5(c)
    
    Indemnification Agreement, between the Company and Alan Stock, dated as of July 13, 1992
(incorporated by reference to Exhibit 10.23(d) to the Companys Annual Report on Form 10-K
(File No. 033-47040) filed March 31, 1993).10.5(d)
    
    Indemnification Agreement, between the Company and W. Bryce Anderson, dated as of July 13,
1992 (incorporated by reference to Exhibit 10.23(f) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 31, 1993).10.5(e)
    
    Indemnification Agreement, between the Company and Sheldon I. Stein, dated as of July 13,
1992 (incorporated by reference to Exhibit 10.23(g) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 31, 1993).10.5(f)
    
    Indemnification Agreement, between the Company and Heriberto Guerra, dated as of December 3,
1993 (incorporated by reference to Exhibit 10.23(f) to the Companys Annual Report on Form
10-K (File No. 033-11895) filed September 13, 1996).10.6(a)
    
    Letter Agreements with directors of the Company regarding stock options (incorporated by
reference to Exhibit 10.15 to the Companys Annual Report on Form 10-K (File No. 033-47040)
filed March 31, 1993).10.6(b)
    
    Letter Agreements with directors of the Company amending stock options (incorporated by
reference to Exhibit 10.15(c) to the Companys Registration Statement on Form S-4 (File No.
033-11895) filed September 13, 1996).10.6(c)
    
    Letter Agreements with directors of the Company regarding stock options (incorporated by
reference to Exhibit 10.10(c) to the Companys Annual Report on Form 10-K (File No.
033-47040) filed March 31, 1999)10.7(a)
    
    Senior Secured Credit Agreement dated December 4, 1995 among Cinemark International, L.L.C.
(f/k/a Cinemark II, Inc., Cinemark Mexico (USA) and Cinemark de Mexico (incorporated by
reference to Exhibit 10.18 to the Companys Annual Report on Form 10-K (File No. 033-47040)
filed April 1, 1996).10.7(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).10.7(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).*10.14(a)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Lee Roy Mitchell.*10.14(b)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Alan Stock.*10.14(c)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Tim Warner.*10.14(d)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Robert Copple.*10.14(e)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Rob Carmony.*10.14(f)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Tandy Mitchell.*10.15
    
    Amended and Restated Credit Agreement, dated April 2, 2004, among Cinemark, Inc., CNMK
Holdings, Inc., the Company, the several lenders from time to time parties thereto, Lehman
Brothers Inc. and Goldman Sachs Credit Partners LP, as Joint Legal Arrangers, Goldman Sachs
Credit Partners LP, as Syndication Agent, Deutsche Bank Securities, Inc., The Bank of New
York, General Electric Capital Corporation and CIBC Inc. as Documentation Agents and Lehman
Commercial Paper Inc. as Administrative Agent.*10.16
    
    Amended and Restated Guaranty and Collateral Agreement, dated April 2, 2004, among Cinemark,
Inc., CNMK Holdings Inc., the Company and certain of it subsidiaries in favor of Lehman
Commercial Paper, Inc., as administrative agent.*31.1
    
    Certification of Chief Executive Officer of Cinemark USA, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*31.2
    
    Certification of Chief Financial Officer of Cinemark USA, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*32.1
    
    Certification of the Chief Executive Officer of Cinemark USA, Inc. Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*32.2
    
    Certification of the Chief Financial Officer of Cinemark USA, Inc. Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
  *
    
    filed herewith. 37




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##### Table of Contents



b)
    
    Reports on Form 8-K On January 28, 2004, the Company filed on Form 8-K, reporting under
Item 9, a press release announcing Cinemark, Inc.s retention of Goldman,
Sachs & Co. and Lehman Brothers Inc., to explore strategic alternatives. On March 17, 2004, the Company filed on Form 8-K, reporting under
Item 9, a press release announcing the recapitalization of Cinemark, Inc.
and related long-term debt refinancing. On March 17, 2004, the Company filed on Form 8-K, reporting under
Item 12, a press release announcing our operating results for the three
months and year ended December 31, 2003. On March 17, 2004, the Company filed on Form 8-K, reporting under
Item 9, a press release announcing a cash tender offer and consent
solicitation for our $105 million outstanding 8 1⁄2% senior subordinated notes due
2008. On March 26, 2004, the Company filed on Form 8-K, reporting under
Item 9, a press release announcing the receipt of requisite consents in
our cash tender offer and consent solicitation for our $105 million
outstanding 8 1⁄2% senior subordinated notes due 2008. On April 15, 2004, the Company filed on Form 8-K, reporting under
Item 9, a press release announcing expiration and final settlement of our
cash tender offer for our $105 million outstanding 8 1⁄2% senior
subordinated notes due 2008. 38




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. CINEMARK USA, INC.RegistrantDATE:May 12, 2004/s/ Alan W. StockAlan W. StockPresident/s/ Robert CoppleRobert CoppleChief Financial Officer
 39




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##### Table of Contents



EXHIBIT INDEX 2
    
    Share Exchange Agreement dated as of May 17, 2002 by and among Cinemark, Inc., Cinemark USA,
Inc. and the shareholders signature thereto incorporated by reference from Amendment 2 to
Cinemark Inc.s Registration Statement on Forms S-1 (File No. 333-88618) filed June 28, 2002.3.1
    
    Amended and Restated Articles of Incorporation of the Company filed with the Texas Secretary
of State on June 3, 1992 (incorporated by reference to Exhibit 3.1(a) to the Companys Annual
Report on Form 10-K (File No. 033-47040) filed March 31, 1993).3.2(a)
    
    Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 to the Companys
Registration Statement on Form S-1 (File No. 033-47040) filed April 9, 1992).3.2(b)
    
    Amendment to Bylaws of the Company dated March 12, 1996 (incorporated by reference to Exhibit
3.2(b) to the Companys Annual Report on Form 10-K (File No. 033-47040) filed March 6, 1997).4.2(a)
    
    Indenture dated January 14, 1998 between the Company and U.S. Trust Company of Texas, N.A.
governing the 8 1/2% Senior Subordinated Notes issued thereunder (incorporated by reference
to Exhibit 4.1 to the Companys Registration Statement on Form S-4 (File No. 333-45417) filed
February 2, 1998).4.2(b)
    
    First Supplemental Indenture dated as of February 11, 2003 between the Company, the
subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A.,
as successor trustee to U.S. Trust Company of Texas, N.A. (incorporated by reference to
Exhibit 4.2 (g) to the Companys Registration Statement on Form S-4 (File No. 333-104940)
filed May 2, 2003).*4.2(c)
    
    Second Supplemental Indenture dated as of March, 25, 2004 between the Company, the subsidiary
guarantors party thereto and The Bank of New York Trust Company, N.A.4.2(d)
    
    Indenture dated February 11, 2003 between the Company and The Bank of New York Trust Company
of Florida, N.A. governing the 9% Senior Subordinated Notes issued thereunder (incorporated
by reference to Exhibit 10.2(b) to the Companys Annual Report on Form 10-K (File No.
033-47040) filed March 19, 2003).4.2(e)
    
    First Supplemental Indenture dated as of May 7, 2003 between the Company, the subsidiary
guarantors party thereto and The Bank of New York Trust Company of Florida, N.A.
(incorporated by reference to Exhibit 4.2(i) to the Companys Registration Statement on Form
S-4 (File No. 333-104940) filed May 28, 2003).4.2(f)
    
    Form of 8 1/2% Note (contained in the Indenture listed as Exhibit 4.2(f) above) (incorporated
by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-4 (File No.
333-45417) filed February 2, 1998).4.2(g)
    
    Form of 9% Note (contained in the Indenture listed as Exhibit 4.2(h) above) (incorporated by
reference to Exhibit 10.2(b) to the Companys Annual Report on Form 10-K (File 033-47040)
filed March 19, 2003).10.1(a)
    
    Management Agreement, dated as of July 28, 1993, between the Company and Cinemark Mexico
(USA) (incorporated by reference to Exhibit 10.1(a) to Cinemark, Inc.s Registration
Statement on Form S-1 (File No. 333-88618) filed May 17, 2002).10.1(b)
    
    Management Agreement, dated December 10, 1993, between Laredo Theatre, Ltd. and the Company
(incorporated by reference to Exhibit 10.14(b) to the Companys Annual Report on Form 10-K
(File No. 033-47040) filed March 31, 1994).10.1(c)
    
    Management Agreement, dated September 1, 1994, between Cinemark Partners II, Ltd. and the
Company (incorporated by reference to Exhibit 10.4(i) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 29, 1995).10.1(d)
    
    Management Services Agreement, effective as of March 28, 2001, between Mitchell Theatres and
Cinemark USA, Inc. (incorporated by reference from Exhibit 10.1(g) to Cinemark, Inc.s
Registration Statement on Form S-1 (File No. 333-88618) filed June 28, 2002).*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.10.3(a)
    
    License Agreement, dated December 10, 1993, between Laredo Joint Venture and the Company
(incorporated by reference to Exhibit 10.14(c) to the Companys Annual Report on Form 10-K
(File No. 033-47040) filed March 31, 1994).10.3(b)
    
    License Agreement, dated September 1, 1994, between Cinemark Partners II, Ltd. and the
Company (incorporated by reference to Exhibit 10.10(c) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 29, 1995).10.4(a)
    
    Tax Sharing Agreement, between the Company and Cinemark International, L.L.C. (f/k/a Cinemark
II, Inc. ), dated as of June 10, 1992 (incorporated by reference to Exhibit 10.22 to the
Companys Annual Report on Form 10-K (File No. 033-47040) filed March 31, 1993).10.4(b)
    
    Tax Sharing Agreement, dated as of July 28, 1993, between the Company and Cinemark Mexico
(USA) (incorporated by reference to Exhibit 10.10 to Cinemark Mexico (USA)s Registration
Statement on Form S-4 (File No. 033-72114) filed on November 24, 1993).10.5(a)
    
    Indemnification Agreement, between the Company and Lee Roy Mitchell, dated as of July 13,
1992 (incorporated by reference to Exhibit 10.23(a) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 31, 1993).




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##### Table of Contents



10.5(b)
    
    Indemnification Agreement, between the Company and Tandy Mitchell, dated as of July 13, 1992
(incorporated by reference to Exhibit 10.23(b) to the Companys Annual Report on Form 10-K
(File No. 033-47040) filed March 31, 1993).10.5(c)
    
    Indemnification Agreement, between the Company and Alan Stock, dated as of July 13, 1992
(incorporated by reference to Exhibit 10.23(d) to the Companys Annual Report on Form 10-K
(File No. 033-47040) filed March 31, 1993).10.5(d)
    
    Indemnification Agreement, between the Company and W. Bryce Anderson, dated as of July 13,
1992 (incorporated by reference to Exhibit 10.23(f) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 31, 1993).10.5(e)
    
    Indemnification Agreement, between the Company and Sheldon I. Stein, dated as of July 13,
1992 (incorporated by reference to Exhibit 10.23(g) to the Companys Annual Report on Form
10-K (File No. 033-47040) filed March 31, 1993).10.5(f)
    
    Indemnification Agreement, between the Company and Heriberto Guerra, dated as of December 3,
1993 (incorporated by reference to Exhibit 10.23(f) to the Companys Annual Report on Form
10-K (File No. 033-11895) filed September 13, 1996).10.6(a)
    
    Letter Agreements with directors of the Company regarding stock options (incorporated by
reference to Exhibit 10.15 to the Companys Annual Report on Form 10-K (File No. 033-47040)
filed March 31, 1993).10.6(b)
    
    Letter Agreements with directors of the Company amending stock options (incorporated by
reference to Exhibit 10.15(c) to the Companys Registration Statement on Form S-4 (File No.
033-11895) filed September 13, 1996).10.6(c)
    
    Letter Agreements with directors of the Company regarding stock options (incorporated by
reference to Exhibit 10.10(c) to the Companys Annual Report on Form 10-K (File No.
033-47040) filed March 31, 1999)10.7(a)
    
    Senior Secured Credit Agreement dated December 4, 1995 among Cinemark International, L.L.C.
(f/k/a Cinemark II, Inc., Cinemark Mexico (USA) and Cinemark de Mexico (incorporated by
reference to Exhibit 10.18 to the Companys Annual Report on Form 10-K (File No. 033-47040)
filed April 1, 1996).10.7(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).10.7(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).*10.14(a)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Lee Roy Mitchell.*10.14(b)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Alan Stock.*10.14(c)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Tim Warner.*10.14(d)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Robert Copple.*10.14(e)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Rob Carmony.*10.14(f)
    
    Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Tandy Mitchell.*10.15
    
    Amended and Restated Credit Agreement, dated April 2, 2004, among Cinemark, Inc., CNMK
Holdings, Inc., the Company, the several lenders from time to time parties thereto, Lehman
Brothers Inc. and Goldman Sachs Credit Partners LP, as Joint Legal Arrangers, Goldman Sachs
Credit Partners LP, as Syndication Agent, Deutsche Bank Securities, Inc., The Bank of New
York, General Electric Capital Corporation and CIBC Inc. as Documentation Agents and Lehman
Commercial Paper Inc. as Administrative Agent.*10.16
    
    Amended and Restated Guaranty and Collateral Agreement, dated April 2, 2004, among Cinemark,
Inc., CNMK Holdings Inc., the Company and certain of it subsidiaries in favor of Lehman
Commercial Paper, Inc., as administrative agent.*31.1
    
    Certification of Chief Executive Officer of Cinemark USA, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*31.2
    
    Certification of Chief Financial Officer of Cinemark USA, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*32.1
    
    Certification of the Chief Executive Officer of Cinemark USA, Inc. Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*32.2
    
    Certification of the Chief Financial Officer of Cinemark USA, Inc. Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
  *
    
    filed herewith