Edgar Filing: Cinemark Holdings, Inc.

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As filed with the Securities and Exchange Commission on March 16, 2007

Registration No. 333-140390

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Cinemark Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware	7832	20-5490327
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

3900 Dallas Parkway, Suite 500

Plano, Texas 75093

(972) 665-1000

(Address, Including Zip Code, and Telephone Number,

Including Area Code, of Registrant’s Principal Executive Offices)

Michael Cavalier

Senior Vice President-General Counsel

3900 Dallas Parkway, Suite 500

Plano, Texas 75093

(972) 665-1000

(Name, Address, Including Zip Code, and Telephone Number,

Including Area Code, of Agent for Service)

With a copy to:


Terry M. Schpok, P.C. Akin Gump Strauss Hauer & Feld LLP 1700 Pacific Avenue, Suite 4100 Dallas, Texas 75201 Telephone: (214) 969-2800		D. Rhett Brandon, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 Telephone: (212) 455-3615

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _ _

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _ _

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _ _

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated March 16, 2007

PROSPECTUS

Cinemark Holdings, Inc.

Common Stock

We are offering shares of our common stock in this initial public offering. The selling stockholders named in this prospectus are offering an additional shares of our common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.

No public market currently exists for our common stock. We intend to apply to list our common stock on the New York Stock Exchange under the symbol “CNK.” We currently expect that the initial public offering price will be between $ and $ per share.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 12.


	Per Share	Total

Public offering price	$	$
Underwriting discount	$	$
Proceeds to Cinemark Holdings, Inc. (before expenses)	$	$
Proceeds to the Selling Stockholders (before expenses)	$	$

The selling stockholders have granted the underwriter a 30-day option to purchase up to an additional shares of our common stock on the same terms and conditions as set forth above if the underwriter sells more than shares of our common stock in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers expects to deliver the shares on or about , 2007.

Lehman Brothers

, 2007

TABLE OF CONTENTS


	Page

Prospectus Summary		1
Risk Factors		12
Cautionary Statement Regarding Forward-Looking Statements		20
Use of Proceeds		21
Dividend Policy		21
Capitalization		22
Dilution		23
Selected Historical Consolidated Financial and Operating Information		24
Unaudited Pro Forma Condensed Consolidated Financial Information		28
Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Business		57
Management		72
Principal and Selling Stockholders		87
Certain Relationships and Related Party Transactions		89
Description of Capital Stock		93
Shares Eligible for Future Sale		96
Material U.S. Federal Income and Estate Tax Considerations To Non-U.S. Holders		98
Underwriting		100
Legal Matters		105
Experts		105
Where You Can Find More Information		105
Index to Consolidated Financial Statements		F-1
Amendment to Credit Agreement
Exhibitor Services Agreement
Third Amended and Restated Limited Liability Company Operating Agreement
Consent of Deloitte & Touche LLP
Consent of Grant Thornton LLP

You should rely only on the information contained in this prospectus. We have not, and the underwriter has not, authorized anyone to provide you with information that is different. This prospectus may only be used where it is legal to sell these securities. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Dealer Prospectus Delivery Obligation

Until , 2007 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Market Information

Information regarding market share, market position and industry data pertaining to our business contained in this prospectus consists of estimates based on data and reports compiled by industry professional organizations (including the Motion Picture Association of America, or MPAA, PricewaterhouseCoopers LLP, or PwC, MPA Worldwide Market Research, the National Association of Theatre Owners, or NATO, BIA Financial Network, Inc., or BIAfn, and Veronis Suhler Stevenson), industry analysts and our knowledge of our business and markets.

About Us

Financial Presentation

On April 2, 2004, an affiliate of Madison Dearborn Partners, LLC, or MDP, acquired approximately 83% of the capital stock of Cinemark, Inc., pursuant to which a newly formed subsidiary owned by an affiliate of MDP was merged with and into Cinemark, Inc. with Cinemark, Inc. continuing as the surviving corporation, hereinafter referred to as the MDP Merger. Management, including Lee Roy Mitchell, Chairman and then Chief Executive Officer, retained at such time an approximately 17% ownership interest in Cinemark, Inc.

Cinemark Holdings, Inc. was formed on August 2, 2006. On August 7, 2006, the Cinemark, Inc. stockholders entered into a share exchange agreement pursuant to which they agreed to exchange their shares of Class A common stock for an equal number of shares of common stock of Cinemark Holdings, Inc., hereinafter referred to as the Cinemark Share Exchange. The Cinemark Share Exchange and the acquisition of Century Theatres, Inc., or Century, were completed on October 5, 2006. Prior to October 5, 2006, Cinemark Holdings, Inc. had no assets, liabilities or operations. On October 5, 2006, Cinemark, Inc. became a wholly owned subsidiary of Cinemark Holdings, Inc.

As of December 31, 2006, MDP owned approximately 66% of our capital stock, Lee Roy Mitchell and the Mitchell Special Trust collectively owned approximately 14%, Syufy Enterprises, LP owned approximately 11%, outside investors owned approximately 8%, and certain members of management owned the remaining 1%.

The Century acquisition is reflected in the historical financial information of Cinemark Holdings, Inc. from October 5, 2006. Because of the significance of the Century acquisition, we have included in this prospectus historical financial statements for Century as well as pro forma financial information giving effect to the Century acquisition as more fully described in “Unaudited Pro Forma Condensed Consolidated Financial Information.”

Certain Definitions

Unless the context otherwise requires, all references to “we,” “our,” “us,” the “issuer” or “Cinemark” relate to Cinemark Holdings, Inc. or Cinemark, Inc., its predecessor, and its consolidated subsidiaries, including Cinemark USA, Inc. and Century. We use the term “pro forma” in this prospectus to refer to information presented after giving effect to the Century acquisition. Unless otherwise specified, all operating and other statistical data for the U.S. include one theatre in Canada. All references to Latin America are to Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Nicaragua, Panama and Peru. Unless otherwise specified, all operating and other statistical data are as of and for the year ended December 31, 2006.

Non-GAAP Financial Measures

Accounting principles generally accepted in the United States are commonly referred to as “GAAP.” A non-GAAP financial measure is generally defined by the Securities and Exchange Commission, or SEC, as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. In this prospectus, we present Adjusted EBITDA and Adjusted EBITDA margin, both non-GAAP financial measures, because we use these financial measures to monitor compliance with financial covenants in the indenture governing our 93/4% senior discount notes and because these measures provide our Board of Directors, management and investors with additional information to measure our performance, estimate our value and evaluate our ability to service debt. Management uses Adjusted EBITDA and Adjusted EBITDA margin as a performance measure for internal monitoring and planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability and performance comparisons between us and our competitors. We also use these measures to calculate amounts of performance based compensation under employment contracts and incentive bonus programs. Adjusted EBITDA and Adjusted EBITDA margin should not be construed as alternatives to net income (loss) or operating income as indicators of operating performance or as alternatives to cash flow from operations as measures of liquidity (as determined in accordance with GAAP). Our definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found at “Prospectus Summary — Non-GAAP Financial Measures and Reconciliations.”

iii

PROSPECTUS SUMMARY

The following summary highlights information contained elsewhere in this prospectus. It is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under “Risk Factors” and the financial statements and accompanying notes.

Cinemark Holdings, Inc.

Our Company

We are a leader in the motion picture exhibition industry with 396 theatres and 4,488 screens in the U.S. and Latin America. Our circuit is the third largest in the U.S. with 281 theatres and 3,523 screens in 37 states. We are the most geographically diverse circuit in Latin America with 115 theatres and 965 screens in 12 countries. During the year ended December 31, 2006, over 215 million patrons attended our theatres, when giving effect to the Century acquisition as of the beginning of the year. Our modern theatre circuit features stadium seating for approximately 73% of our screens.

We selectively build or acquire new theatres in markets where we can establish and maintain a strong market position. We believe our portfolio of modern theatres provides a preferred destination for moviegoers and contributes to our significant cash flows from operating activities. Our significant presence in the U.S. and Latin America has made us an important distribution channel for movie studios, particularly as they look to increase revenues generated in Latin America. Our market leadership is attributable in large part to our senior executives, who average approximately 32 years of industry experience and have successfully navigated us through multiple business cycles.

We grew our total revenue per patron at the highest compound annual growth rate, or CAGR, during the last three fiscal years among the three largest motion picture exhibitors in the U.S. Revenues, operating income, net income and Adjusted EBITDA for the year ended December 31, 2006 were $1,220.6 million, $127.4 million, $0.8 million, and $271.6 million, respectively, with operating income and Adjusted EBITDA margins of 10.4% and 22.3%, respectively. On a pro forma basis for the Century acquisition, revenues, operating income, net loss and Adjusted EBITDA for the year ended December 31, 2006 were $1,612.1 million, $175.6 million, $(3.5) million and $360.4 million, respectively, with pro forma operating income and Adjusted EBITDA margins of 10.9% and 22.4%, respectively. At December 31, 2006, we had cash and cash equivalents of $147.1 million and long-term debt, excluding capital leases, of $1,911.7 million. Approximately $1,126.7 million, or 59%, of our total long-term debt accrues interest at variable rates.

Acquisition of Century Theatres, Inc.

On October 5, 2006, we completed the acquisition of Century, a national theatre chain headquartered in San Rafael, California with 77 theatres and 1,017 screens in 12 states, for a purchase price of approximately $681 million and the assumption of approximately $360 million of Century debt. The acquisition of Century combines two family founded companies with common operating philosophies and cultures, strong operating performances and complementary geographic footprints. The key strategic benefits of the acquisition include:

High Quality Theatres with Strong Operating Performance. Century’s theatre circuit is among the most modern in the U.S. based on 77% of their screens featuring stadium seating. Prior to the Century acquisition, Century achieved strong performance with revenues of $516.0 million, operating income of $59.9 million, net income of $18.1 million and Adjusted EBITDA of $120.8 million and Adjusted EBITDA margin of 23.4% for its fiscal year ended September 28, 2006. These results are due in part to Century’s operating philosophy which is similar to Cinemark’s.

Strengthens Our Geographic Footprint. The Century acquisition enhances our geographic diversity, strengthens our presence in key large- and medium-sized metropolitan and suburban markets such as Las Vegas, the San Francisco Bay Area and Tucson, and complements our existing footprint. The increased number of theatres and markets diversifies our revenues and broadens the composition of our overall portfolio.

Leading Share in Attractive Markets. With the Century acquisition, we have a leading market share in a large number of attractive metropolitan and suburban markets. For the year ended December 31, 2006, on a pro forma basis, we ranked either first or second by box office revenues in 28 out of our top 30 U.S. markets, including Chicago, Dallas, Houston, Las Vegas, Salt Lake City and the San Francisco Bay Area.

Participation in National CineMedia

In March 2005, Regal Entertainment, Inc., or Regal, and AMC Entertainment, Inc., or AMC, formed National CineMedia, LLC, or NCM, and on July 15, 2005, we joined NCM, as one of the founding members. NCM operates the largest in-theatre network in the U.S. which delivers digital advertising content and digital non-film event content to the screens and lobbies of the three largest motion picture companies in the country. The digital projectors currently used to display advertising will not be used to exhibit digital film content or digital cinema. NCM’s primary activities that impact us include the following activities:


	•	*Advertising:* NCM develops, produces, sells and distributes a branded, pre-feature entertainment and advertising program called “FirstLook,” along with an advertising program for its lobby entertainment network, or LEN, and various marketing and promotional products in theatre lobbies;

	•	*CineMeetings:* NCM provides live and pre-recorded networked and single-site meetings and events in the theatres throughout its network; and


	•	*Digital Programming Events:* NCM distributes live and pre-recorded concerts, sporting events and other non-film entertainment programming to theatres across its digital network.

We believe that the reach, scope and digital delivery capability of NCM’s network provides an effective platform for national, regional and local advertisers to reach a young, affluent and engaged audience on a highly targeted and measurable basis.

On February 13, 2007, we received $389.0 million in connection with National CineMedia, Inc.’s, or NCM, Inc.’s, initial public offering and related transactions, or the NCM transactions. As a result of these transactions, we will no longer receive a percentage of NCM’s revenue but rather a monthly theatre access fee which we expect will reduce the contractual amounts required to be paid to us by NCM. In addition, we expect to receive mandatory quarterly distributions of excess cash from NCM. Prior to the initial public offering of NCM, Inc. common stock, our ownership interest in NCM was approximately 25% and subsequent to the completion of the offering we owned a 14% interest in NCM.

Competitive Strengths

We believe the following strengths allow us to compete effectively.

Strong Operating Performance and Discipline. We generated operating income, net income and Adjusted EBITDA margin of $127.4 million, $0.8 million and 22.3%, respectively, for the year ended December 31, 2006. Our strong operating performance is a result of our financial discipline, such as negotiating favorable theatre level economics and controlling theatre operating costs. We believe the Century acquisition will result in additional revenues and cost efficiencies to further improve our margins.

Leading Position in Our U.S. Markets. We have a leading share in the U.S. metropolitan and suburban markets we serve. For the year ended December 31, 2006, on a pro forma basis we ranked either first or second based on box office revenues in 28 out of our top 30 U.S. markets, including Chicago, Dallas, Houston, Las Vegas, Salt Lake City and the San Francisco Bay Area. On average, the population in over 80% of our domestic markets, including Dallas, Las Vegas and Phoenix, is expected to grow 61% faster than the average growth rate of the U.S. population over the next five years, as reported by BIAfn and U.S. census data.

Strategically Located in Heavily Populated Latin American Markets. Since 1993, we have invested throughout Latin America due to the growth potential of the region. We operate 115 theatres and 965 screens in 12 countries, generating revenues of $285.9 million for the year ended December 31, 2006. We have successfully established a significant presence in major cities in the region, with theatres in twelve of the

fifteen largest metropolitan areas. With the most geographically diverse circuit in Latin America, we are an important distribution channel to the movie studios. The region’s improved economic climate and rising disposable income are also a source for growth. Over the last three years, the CAGR of our international revenue has been greater than that of our U.S. operations. We are well-positioned with our modern, large-format theatres and new screens to take advantage of this favorable economic environment for further growth and diversification of our revenues.

Modern Theatre Circuit. We have one of the most modern theatre circuits in the industry which we believe makes our theatres a preferred destination for moviegoers in our markets. We feature stadium seating in 79% of our first run auditoriums, the highest percentage among the three largest U.S. exhibitors, and 81% of our international screens also feature stadium seating. During 2006, we continued our organic expansion by building 210 screens. We currently have commitments to build 382 additional screens over the next four years.

Strong Balance Sheet with Significant Cash Flow from Operating Activities. We generate significant cash flow from operating activities as a result of several factors, including management’s ability to contain costs, predictable revenues and a geographically diverse, modern theatre circuit requiring limited maintenance capital expenditures. Additionally, a strategic advantage, which enhances our cash flows, is our ownership of land and buildings. We own 45 properties with an aggregate value in excess of $350 million. For the year ended December 31, 2006, on a pro forma basis adjusted to give effect to this offering at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), we expect our leverage to be net debt to Adjusted EBITDA. We believe our expected level of cash flow generation will provide us with the strategic and financial flexibility to pursue growth opportunities, support our debt payments and make dividend payments to our stockholders.

Strong Management with Focused Operating Philosophy. Led by Chairman and founder Lee Roy Mitchell, Chief Executive Officer Alan Stock, President and Chief Operating Officer Timothy Warner and Chief Financial Officer Robert Copple, our management team has an average of approximately 32 years of theatre operating experience executing a focused strategy which has led to strong operating results. Our operating philosophy has centered on providing a superior viewing experience and selecting less competitive markets or clustering in strategic metropolitan and suburban markets in order to generate a high return on invested capital. This focused strategy includes strategic site selection, building appropriately-sized theatres for each of our markets, and managing our properties to maximize profitability. As a result, we grew our admissions and concessions revenues per patron at the highest CAGR during the last three fiscal years among the three largest motion picture exhibitors in the U.S.

Our Strategy

We believe our operating philosophy and management team will enable us to continue to enhance our leading position in the motion picture exhibition industry. Key components of our strategy include:

Establish and Maintain Leading Market Positions. We will continue to seek growth opportunities by building or acquiring modern theatres that meet our strategic, financial and demographic criteria. We will continue to focus on establishing and maintaining a leading position in the markets we serve.

Continue to Focus on Operational Excellence. We will continue to focus on achieving operational excellence by controlling theatre operating costs. Our margins reflect our track record of operating efficiency.

Selectively Build in Profitable, Strategic Latin American Markets. Our international expansion will continue to focus primarily on Latin America through construction of American-style, state-of-the-art theatres in major urban markets.

Our Industry

improvement over 2005, with box office revenue increasing 5.5%, after a decrease of 5.7% in 2005 over the prior year. Strong revenue and attendance growth has been driven by a steadily growing number of movie releases, which, according to MPAA, reached an all-time high of 607 in 2006, up 11%. We believe this trend will continue into 2007 with a strong slate of franchise films, such as Spider-Man 3, Shrek the Third, Pirates of the Caribbean: At World’s End and Harry Potter and the Order of the Phoenix.

International growth has also been strong. According to MPAA, global box office revenues grew steadily at a CAGR of 8.2% from 2003 to 2006 as a result of the increasing acceptance of moviegoing as a popular form of entertainment throughout the world, ticket price increases and new theatre construction. According to PwC, Latin America’s estimated box office revenue CAGR was 8.4% over the same period.

Drivers of Continued Industry Success

We believe the following market trends will drive the continued growth and strength of our industry:

Importance of Theatrical Success in Establishing Movie Brands and Subsequent Markets. Theatrical exhibition is the primary distribution channel for new motion picture releases. A successful theatrical release which “brands” a film is one of the major factors in determining its success in “downstream” markets, such as home video, DVD, and network, syndicated and pay-per-view television.

Increased Importance of International Markets for Box Office Success. International markets are becoming an increasingly important component of the overall box office revenues generated by Hollywood films, accounting for $16 billion, or 63% of 2006 total worldwide box office revenues according to MPAA, with many international blockbusters such as Pirates of the Caribbean: Dead Man’s Chest, The Da Vinci Code, Ice Age: The Meltdown, and Mission Impossible III. With continued growth of the international motion picture exhibition industry, we believe the relative contribution of markets outside North America will become even more significant.

Increased Investment in Production and Marketing of Films by Distributors. As a result of the additional revenues generated by domestic, international and “downstream” markets, studios have increased production and marketing expenditures at a CAGR of 5.5% and 6.3%, respectively, since 1995. Over the last three years, third party funding sources such as hedge funds have also provided over $5 billion of incremental capital to fund new film content production. This has led to an increase in “blockbuster” features, which attract larger audiences to theatres.

Stable Long-term Attendance Trends. We believe that long-term trends in motion picture attendance in the U.S. will continue to benefit the industry. Despite historical economic and industry cycles, attendance has grown at a 1.6% CAGR over the last 35 years to 1.45 billion patrons in 2006. According to Nielsen Entertainment/NRG, 80% of moviegoers stated their overall theatre experience in 2006 was time and money well spent. Additionally, younger moviegoers in the U.S. continue to be the most frequent patrons.

Reduced Seasonality of Revenues. Box office revenues have historically been highly seasonal, with a majority of blockbusters being released during the summer and year-end holiday season. In recent years, the seasonality of motion picture exhibition has become less pronounced as studios have begun to release films more evenly throughout the year. This benefits exhibitors by allowing more effective allocation of the fixed cost base throughout the year.

Convenient and Affordable Form of Out-Of-Home Entertainment. Moviegoing continues to be one of the most convenient and affordable forms of out-of-home entertainment, with an estimated average ticket price in the U.S. of $6.55 in 2006. Average prices in 2006 for other forms of out-of-home entertainment in the U.S., including sporting events and theme parks, range from approximately $22.40 to $61.60 per ticket according to MPAA. Movie ticket prices have risen at approximately the rate of inflation, while ticket prices for other forms of out-of-home entertainment have increased at higher rates.

Recent Developments

Repurchase of 9% Senior Subordinated Notes

On March 6, 2007, we commenced an offer to purchase for cash, on the terms and subject to the conditions set forth in an Offer to Purchase and Consent Solicitation Statement, any and all of our 9% senior subordinated notes. As of the date of this prospectus, the outstanding principal amount of the 9% senior subordinated notes is approximately $332.2 million. In connection with the tender offer, we are soliciting consents for certain proposed amendments to the indenture pursuant to which the 9% senior subordinated notes were issued. We expect to fund the repurchase with the net proceeds received from NCM in connection with the consummation of the NCM transactions.

Amendments to the New Senior Secured Credit Facility

On March 14, 2007, Cinemark USA, Inc. amended its new senior secured credit facility to, among other things, modify the interest rate on the term loans under the new senior secured credit facility, modify certain prepayment terms and covenants, and facilitate the tender offer for the 9% senior subordinated notes. The term loans now accrue interest, at Cinemark USA, Inc.’s option, at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 0.50% to 0.75% per annum, or (B) a “Eurodollar rate” plus a margin that ranges from 1.50% to 1.75%, per annum. In each case, the margin is a function of the corporate credit rating applicable to the borrower. The interest rate on the revolving credit line was not amended. Additionally, the amendment removed any obligation to prepay amounts outstanding under the new senior secured credit facility in an amount equal to the amount of the net cash proceeds received from the NCM transactions or from excess cash flows, and imposed a 1% prepayment premium for one year on certain prepayments of the term loans. The amendment was a condition precedent to the consummation of the tender offer for the 9% senior subordinated notes.

Digital Cinema Implementation Partners LLC

On February 12, 2007, we, along with AMC and Regal, entered into a joint venture known as Digital Cinema Implementation Partners LLC, or DCIP, to explore the possibility of implementing digital cinema in our theatres and to establish agreements with major motion picture studios for the implementation and financing of digital cinema. In addition, DCIP has entered into a digital cinema services agreement with NCM for purposes of assisting DCIP in the development of digital cinema systems. Future digital cinema developments will be managed by DCIP, subject to certain approvals by us, AMC and Regal.

Risk Factors

Investing in our common stock involves risk. Our business is subject to a number of risks including the following:


	•	our dependency on motion picture production and performance could have a material adverse effect on our business;

	•	a deterioration in relationships with film distributors could adversely affect our ability to license commercially successful films at reasonable rental rates;


	•	we may not be able to successfully execute our business strategy because of the competitive nature of our industry as well as increasing competition from alternative forms of entertainment;


	•	alternative or “downstream” film distribution channels that may drive down movie theatre attendance, limit ticket price growth and shrink video release windows;


	•	our substantial lease and debt obligations could impair our liquidity and financial condition; and

	•	we may not be able to identify suitable locations for expansion or generate additional revenue opportunities.

You should refer to the section entitled “Risk Factors,” for a discussion of these and other risks, before investing in our common stock.

Madison Dearborn Partners

On April 2, 2004, an affiliate of MDP acquired approximately 83% of the capital stock of Cinemark, Inc. for approximately $518.2 million in cash. Prior to this offering, MDP beneficially owned approximately 66% of our outstanding common stock. MDP will receive net proceeds from this offering of approximately $ million based upon an assumed initial public offering price of $ (the midpoint of the range set forth on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions. We will not receive any of the net proceeds from the sale of shares by the selling stockholders. Upon completion of the offering, MDP will beneficially own approximately % of our common stock (approximately % of our common stock if the underwriter’s option to purchase additional shares is exercised in full). After the offering, pursuant to a stockholders agreement, MDP will continue to have the right to designate a majority of our Board of Directors.

Corporate Information

We are incorporated under the laws of the state of Delaware. Our principal executive offices are located at 3900 Dallas Parkway, Suite 500, Plano, Texas 75093. The telephone number of our principal executive offices is (972) 665-1000. We maintain a website at www.cinemark.com, on which we will, after completion of this offering, post our key corporate governance documents, including our board committee charters and our code of ethics. We do not incorporate the information on our website into this prospectus and you should not consider any information on, or that can be accessed through, our website as part of this prospectus.

The Offering


Common stock offered by us		shares

Common stock offered by the selling stockholders		shares

Common stock to be outstanding after the offering		shares


Underwriter’s option		The selling stockholders have granted the underwriter a 30-day option to purchase up to an aggregate of additional shares of our common stock if the underwriter sells more than shares in this offering.

Dividend policy		Following this offering, we intend to pay a quarterly cash dividend at an annual rate initially equal to $ per share (or a quarterly rate initially equal to $ per share) of common stock, commencing in the quarter of 2007, which will be a partial dividend paid on a pro rata basis depending on the closing date for this offering. The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, limitations in our debt agreements and legal requirements. See “Dividend Policy.”

Use of proceeds		We expect to use the net proceeds that we receive from this offering to repay outstanding debt and for working capital and other general corporate purposes. See “Use of Proceeds.” We will not receive any proceeds from the sale of shares by the selling stockholders.


		Lehman Brothers Inc. acted as initial purchaser in connection with the offerings of our 93/4% senior discount notes and our 9% senior subordinated notes. An affiliate of Lehman Brothers Inc. was the arranger and is a lender and the administrative agent under our new senior secured credit facility.


Proposed New York Stock Exchange symbol		“CNK”

The outstanding share information is based on shares of our common stock that will be outstanding immediately prior to the consummation of this offering. Unless otherwise indicated, information contained in this prospectus regarding the number of outstanding shares of our common stock does not include the following:


	•	shares of our common stock issuable upon the exercise of outstanding stock options, which have a weighted average exercise price of $ per share; and

	•	an aggregate of shares of our common stock reserved for future issuance under our 2006 Long Term Incentive Plan.

Unless otherwise indicated, all information contained in this prospectus:


	•	assumes no exercise of the underwriter’s option to purchase up to an aggregate of additional shares of our common stock; and

	•	assumes an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus.

Summary Consolidated Financial and Operating Information

The following table provides our summary historical consolidated financial and operating information and unaudited pro forma condensed consolidated financial information. The summary information for periods through April 1, 2004 are of Cinemark, Inc., the predecessor, and the summary information for all subsequent periods are of Cinemark Holdings, Inc., the successor. Our summary historical financial information for the period January 1, 2004 to April 1, 2004, the period April 2, 2004 to December 31, 2004 and the years ended December 31, 2005 and 2006 is derived from our audited consolidated financial statements appearing elsewhere in this prospectus.

Our unaudited pro forma statement of operations information and other financial information for the year ended December 31, 2006 gives effect to the Century acquisition as if it had been consummated on January 1, 2006.

The unaudited pro forma condensed consolidated financial information does not purport to represent what our results of operations would have been had the transaction noted above actually occurred on the date specified, nor does it purport to project our results of operations for any future period or as of any future date. The unaudited pro forma condensed consolidated financial information is not comparable to our historical financial information due to the inclusion of the effects of the Century acquisition.

You should read the information set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ “Unaudited Pro Forma Condensed Consolidated Financial Information” and our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus.


	Cinemark, Inc.			Cinemark Holdings, Inc.
	Predecessor			Successor
	Period from			Period from
	January 1,			April 2,
	2004			2004									Pro Forma
	to			to			Year Ended			Year Ended			Year Ended
	April 1,			December 31,			December 31,			December 31,			December 31,
	2004			2004			2005			2006			2006
				(Dollars in thousand, except per share data)
Statement of Operations Data(1):
Revenues:
Admissions	$	149,134		$	497,865		$	641,240		$	760,275		$	1,029,881
Concession		72,480			249,141			320,072			375,798			487,416
Other		12,011			43,611			59,285			84,521			94,807

Total Revenue	$	233,625		$	790,617		$	1,020,597		$	1,220,594		$	1,612,104
Operating Income		556			73,620			63,501			127,369			175,579
Income (loss) from continuing operations		(9,068	)		(7,842	)		(25,408	)		841			(3,548	)
Net income (loss)	$	(10,633	)	$	(3,687	)	$	(25,408	)	$	841		$	(3,548	)
Net income (loss) per share:
Basic	$	(0.26	)	$	(0.13	)	$	(0.91	)	$	0.03		$	(0.11	)
Diluted	$	(0.26	)	$	(0.13	)	$	(0.91	)	$	0.03		$	(0.11	)
Weighted average shares outstanding:
Basic		40,614			27,675			27,784			28,713			31,284
Diluted		40,614			27,675			27,784			29,278			31,284
Other Financial Data:
Cash flow provided by (used for):
Operating activities	$	10,100		$	112,986		$	165,270		$	155,662
Investing activities		(16,210	)		(100,737	)		(81,617	)		(631,747	)(2)
Financing activities		346,983			(361,426	)		(3,750	)		439,977
Capital expenditures		(17,850	)		(63,158	)		(75,605	)		(107,081	)
Non-GAAP Data(1)(3):
Adjusted EBITDA	$	50,608		$	178,632		$	210,135		$	271,615		$	360,364
Adjusted EBITDA margin		21.7	%		22.6	%		20.6	%		22.3	%		22.4	%


	Cinemark Holdings, Inc.
	Successor
	As of
	December 31,
	2004		2005		2006
	(In thousands)

Balance Sheet Data:
Cash and cash equivalents	$	100,248	$	182,199	$	147,099
Theatre properties and equipment, net		794,723		803,269		1,324,572
Total assets		1,831,855		1,864,852		3,171,582
Total long-term debt and capital lease obligations, including current portion		1,026,055		1,055,095		2,027,480
Stockholders’ equity		533,200		519,349		689,297


	Cinemark Inc.		Cinemark Holdings, Inc.
	Predecessor		Successor						Cinemark
	Period from		Period from						and
	January 1,		April 2,						Century
	2004		2004						Combined
	to		to		Year Ended		Year Ended		Year Ended
	April 1,		December 31,		December 31,		December 31,		December 31,
	2004		2004		2005		2006		2006
	(Attendance in thousands)
Operating Data:
United States(4)
Theatres operated (at period end)		191		191		200		281		281
Screens operated (at period end)		2,262		2,303		2,417		3,523		3,523
Total attendance(1)		25,790		87,856		105,573		118,714		155,981
International(5)
Theatres operated (at period end)		95		101		108		115		115
Screens operated (at period end)		835		869		912		965		965
Total attendance(1)		15,791		49,904		60,104		59,550		59,550
Worldwide(4)(5)
Theatres operated (at period end)		286		292		308		396		396
Screens operated (at period end)		3,097		3,172		3,329		4,488		4,488
Total attendance(1)		41,581		137,760		165,677		178,264		215,531


(1)		Statement of Operations Data (other than net income (loss)), non-GAAP Data and attendance data exclude the results of the two United Kingdom theatres and the eleven Interstate theatres for all periods presented as these theatres were sold during the period from April 2, 2004 through December 31, 2004. The results of operations for these theatres in the 2004 periods are presented as discontinued operations. See note 7 to our annual consolidated financial statements.


(2)		Includes the cash portion of the Century acquisition purchase price of $531.2 million.


(3)		We set forth our definitions of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of net income (loss) to Adjusted EBITDA at “— Non-GAAP Financial Measures and Reconciliations.”


(4)		The data excludes certain theatres operated by us in the U.S. pursuant to management agreements that are not part of our consolidated operations.


(5)		The data excludes certain theatres operated internationally through our affiliates that are not part of our consolidated operations.

Non-GAAP Financial Measures and Reconciliations

Adjusted EBITDA as presented in the table above is equal to net income (loss), the most directly comparable GAAP financial measure, plus income taxes, interest expense, other (income) expense, (income) loss from discontinued operations, net of taxes, depreciation and amortization, amortization of net favorable leases, amortization of tenant allowances, impairment of long-lived assets, (gain) loss on sale of assets and other, changes in deferred lease expense, stock option compensation and change of control expenses related to the MDP Merger and amortized compensation related to stock options. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by revenues.

We have presented Adjusted EBITDA and Adjusted EBITDA margin because we use these financial measures to monitor compliance with financial covenants in the indenture governing our 93/4% senior discount notes and in measuring our operating performance. The indenture governing the 93/4% senior discount notes requires Cinemark, Inc. to have a fixed charge coverage ratio (as determined under the indenture) of at least 2.0 to 1.0 in order to incur certain additional indebtedness, issue preferred stock or make certain restricted payments, including dividends to us. Fixed charge coverage ratio is defined as the ratio of consolidated cash flow of Cinemark, Inc. and its subsidiaries to their fixed charges for the four most recent full fiscal quarters, giving pro forma effect to certain events as specified in the indenture. Fixed charges is defined as consolidated interest expense of Cinemark, Inc. and its subsidiaries, subject to certain adjustments as provided in the indenture. Consolidated cash flow as defined in the indenture is substantially consistent with our presentation of Adjusted EBITDA in this prospectus. Because Cinemark, Inc.’s failure to meet the fixed charge coverage ratio described above could restrict its ability to incur debt or make dividend payments, management believes that the indenture governing the 93/4% senior discount notes and these covenants and the Adjusted EBITDA and Adjusted EBITDA margins are material to us. As of December 31, 2006, Cinemark, Inc.’s fixed charge coverage ratio under the indenture was in excess of the 2.0 to 1.0 requirement described above. In addition, we have included Adjusted EBITDA and Adjusted EBITDA margin because these measures provide our Board of Directors, management and investors with additional information to measure our performance, estimate our value and evaluate our ability to service debt. Management uses Adjusted EBITDA and Adjusted EBITDA margin as a performance measure for internal monitoring and planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability and performance comparisons between us and our competitors. In addition, we use these measures to calculate the amount of performance based compensation under employment contracts and incentive bonus programs.

Adjusted EBITDA and Adjusted EBITDA margin should not be construed as alternatives to net income or operating income as indicators of operating performance or as alternatives to cash flow provided by operating activities as measures of liquidity (as determined in accordance with GAAP). Furthermore, Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Our unaudited pro forma reconciliation information for the year ended December 31, 2006 gives effect to the Century acquisition as if it had been consummated on January 1, 2006.

The unaudited pro forma reconciliation information does not purport to represent what our results of operations would have been had the transaction noted above actually occurred on the date specified, nor does it purport to project our results of operations for any future period or as of any future date. The unaudited pro forma reconciliation information is not comparable to our historical financial information due to the inclusion of the effects of the Century acquisition. See “Unaudited Pro Forma Condensed Consolidated Financial Information” and related notes thereto appearing elsewhere in this prospectus.

The following table sets forth the reconciliation of our net income (loss) to Adjusted EBITDA:


	Cinemark, Inc.			Cinemark Holdings, Inc.
	Predecessor			Successor
	Period from			Period from									Pro Forma
	January 1, 2004			April 2, 2004			Year Ended			Year Ended			Year Ended
	to April 1,			to December 31,			December 31,			December 31,			December 31,
	2004			2004			2005			2006			2006
							(Dollars in thousands)
Net Income (loss)	$	(10,633	)	$	(3,687	)	$	(25,408	)	$	841		$	(3,548	)
Add (deduct):
Income taxes		(3,703	)		18,293			9,408			12,685			6,520
Interest expense(1)		12,562			58,149			84,082			109,328			168,051
Other (income) expense		765			5,020			(4,581	)		4,515			4,556
(Income) loss from discontinued operations, net of taxes		1,565			(4,155	)		—			—			—
Depreciation and amortization		16,865			58,266			81,952			95,821			137,745
Amortization of net favorable leases		—			3,087			4,174			3,649			3,671
Amortization of tenant allowances		—			—			—			—			(1,303	)
Impairment of long-lived assets		1,000			36,721			51,677			28,537			28,943
(Gain) loss on sale of assets and other		(513	)		3,602			4,436			7,645			7,706
Deferred lease expenses		560			3,336			4,395			5,730			5,159
Stock option compensation and change of control expenses related to the MDP Merger		31,995			—			—			—			—
Amortized compensation — stock options		145			—			—			2,864			2,864

Adjusted EBITDA	$	50,608		$	178,632		$	210,135		$	271,615		$	360,364

Adjusted EBITDA margin		21.7	%		22.6	%		20.6	%		22.3	%		22.4	%


(1)	Includes amortization of debt issue costs.

The following table sets forth the reconciliation of Century’s net income to Adjusted EBITDA.


	Century Theatres, Inc.
	Year Ended			Year Ended			Year Ended
	September 30,			September 29,			September 28,
	2004			2005			2006
	(Dollars in thousands)

Net Income	$	33,242		$	27,256		$	18,124
Add (deduct):
Income taxes		21,216			17,310			12,674
Interest expense		11,713			13,081			29,367
Other (income) expense		(1,045	)		(1,403	)		(282	)
Income (loss) from discontinued operations, net of taxes		—			—			—
Depreciation and amortization		45,635			49,500			47,116
Amortization of net favorable leases		—			—			—
Amortization of tenant allowances		(1,734	)		(1,738	)		(1,738	)
Impairment of long-lived assets		295			—			406
Loss on sale of assets and other		110			4,967			61
Deferred lease expenses		1,803			744			(565	)
Change of control expenses related to acquisition (1)		—			—			15,672
Amortized compensation-stock options(2)		—			—			—

Adjusted EBITDA	$	111,235		$	109,717		$	120,835

Adjusted EBITDA margin		22.3	%		22.5	%		23.4	%


(1)		Reflects change of control payments of $15.7 million as a result of the Century acquisition.

(2)		Century had no stock option plan during the periods presented.

RISK FACTORS

Before you invest in our common stock, you should understand the high degree of risk involved. The following risks and uncertainties are not the only ones we face. If any of the following risks actually occur, our business, financial condition and operating results could be adversely affected.

Risks Related to Our Business and Industry

Our business depends on film production and performance.

Our business depends on both the availability of suitable films for exhibition in our theatres and the success of those pictures in our markets. Poor performance of films, the disruption in the production of films, or a reduction in the marketing efforts of the film distributors to promote their films could have an adverse effect on our business by resulting in fewer patrons and reduced revenues.

A deterioration in relationships with film distributors could adversely affect our ability to obtain commercially successful films.

We rely on the film distributors for the motion pictures shown in our theatres. The film distribution business is highly concentrated, with six major film distributors accounting for approximately 93% of U.S. box office revenues and 45 of the top 50 grossing films during 2006. Numerous antitrust cases and consent decrees resulting from these cases impact the distribution of motion pictures. The consent decrees bind certain major film distributors to license films to exhibitors on a theatre-by-theatre and film-by-film basis. Consequently, we cannot guarantee a supply of films by entering into long-term arrangements with major distributors. We are therefore required to negotiate licenses for each film and for each theatre. A deterioration in our relationship with any of the six major film distributors could adversely affect our ability to obtain commercially successful films and to negotiate favorable licensing terms for such films, both of which could adversely affect our business and operating results.

We face intense competition for patrons and film licensing which may adversely affect our business.

The motion picture industry is highly competitive. We compete against local, regional, national and international exhibitors. We compete for both patrons and licensing of motion pictures. The competition for patrons is dependent upon such factors as the availability of popular motion pictures, the location and number of theatres and screens in a market, the comfort and quality of the theatres and pricing. Some of our competitors have greater resources and may have lower costs. The principal competitive factors with respect to film licensing include licensing terms, number of seats and screens available for a particular picture, revenue potential and the location and condition of an exhibitor’s theatres. If we are unable to license successful films, our business may be adversely affected.

The oversupply of screens in the motion picture exhibition industry and other factors may adversely affect the performance of some of our theatres.

During the period between 1996 and 2000, theatre exhibitor companies emphasized the development of large multiplexes. The strategy of aggressively building multiplexes was adopted throughout the industry and resulted in an oversupply of screens in the North American exhibition industry and negatively impacted many older multiplex theatres more than expected. Many of these theatres have long lease commitments making them financially burdensome to close prior to the expiration of the lease term, even theatres that are unprofitable. Where theatres have been closed, landlords have often made rent concessions to small independent or regional operators to keep the theatres open since theatre buildings are typically limited in alternative uses. As a result, some analysts believe that there continues to be an oversupply of screens in the North American exhibition industry, as screen counts have increased each year since 2003. If competitors build theatres in the markets we serve, the performance of some of our theatres could be adversely affected due to increased competition.

An increase in the use of alternative or “downstream” film distribution channels and other competing forms of entertainment may drive down movie theatre attendance and limit ticket price growth.

We face competition for patrons from a number of alternative motion picture distribution channels, such as videocassettes, DVDs, network and syndicated television, video on-demand, satellite pay-per-view television and downloading utilizing the Internet. According to Veronis Suhler Stevenson, total home video spending, including videocassettes and DVDs, increased from $17.1 billion in 2000 to $25.6 billion in 2005. We also compete with other forms of entertainment competing for our patrons’ leisure time and disposable income such as concerts, amusement parks and sporting events. A significant increase in popularity of these alternative film distribution channels and competing forms of entertainment could have an adverse effect on our business and results of operations.

Our results of operations may be impacted by shrinking video release windows.

Over the last decade, the average video release window, which represents the time that elapses from the date of a film’s theatrical release to the date a film is available on DVD, an important “downstream” market, has decreased from approximately six months to approximately four months. We cannot assure you that this release window, which is determined by the film studios, will not shrink further or be eliminated altogether, which could have an adverse impact on our business and results of operations.

We have substantial long-term lease and debt obligations, which may restrict our ability to fund current and future operations.

We have significant long-term debt service obligations and long-term lease obligations. As of December 31, 2006, we had $1,911.7 million in long-term debt obligations, $115.8 million in capital lease obligations and $2,004.2 million in long-term operating lease obligations. On a pro forma basis, we incurred $168.0 million of interest expense for the year ended December 31, 2006. On a pro forma basis, we incurred $207.0 million of rent expense for the year ended December 31, 2006 under operating leases (with terms, excluding renewal options, ranging from one to 30 years). Our substantial lease and debt obligations pose risk to you by:


	•	making it more difficult for us to satisfy our obligations;

	•	requiring us to dedicate a substantial portion of our cash flow to payments on our lease and debt obligations, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other corporate requirements and to pay dividends;

	•	impeding our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes;

	•	subjecting us to the risk of increased sensitivity to interest rate increases on our variable rate debt, including our borrowings under our new senior secured credit facility; and

	•	making us more vulnerable to a downturn in our business and competitive pressures and limiting our flexibility to plan for, or react to, changes in our business.

Our ability to make scheduled payments of principal and interest with respect to our indebtedness and service our lease obligations will depend on our ability to generate cash flow from our operations. To a certain extent, our ability to generate cash flow is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control. We cannot assure you that we will continue to generate cash flow at current levels. If we fail to make any required payment under the agreements governing our indebtedness or fail to comply with the financial and operating covenants contained in them, we would be in default and our lenders would have the ability to require that we immediately repay our outstanding indebtedness. If we fail to make any required payment under our leases, we would be in default and our landlords would have the ability to terminate our leases and re-enter the premises. Subject to the restrictions contained in our indebtedness agreements, we expect to incur additional indebtedness from time to time to finance acquisitions, capital expenditures, working capital requirements and other general business purposes. In addition, we may need to refinance all or a portion of our indebtedness, including our new senior secured credit facility, our 9% senior

subordinated notes and our 93/4% senior discount notes, on or before maturity. However, we may not be able to refinance all or any of our indebtedness on commercially reasonable terms or at all.

We are subject to various covenants in our debt agreements that restrict our ability to enter into certain transactions.

The agreements governing our debt obligations contain various financial and operating covenants that limit our ability to engage in certain transactions, that require us not to allow specific events to occur or that require us to apply proceeds from certain transactions to reduce indebtedness. If we fail to make any required payment under the agreements governing our indebtedness or fail to comply with the financial and operating covenants contained in them, we would be in default, and our debt holders would have the ability to require that we immediately repay our outstanding indebtedness. Any such defaults could materially impair our financial condition and liquidity. We cannot assure you that we would be able to refinance our outstanding indebtedness if debt holders require repayments as a result of a default.

General political, social and economic conditions can adversely affect our attendance.

Our results of operations are dependent on general political, social and economic conditions, and the impact of such conditions on our theatre operating costs and on the willingness of consumers to spend money at movie theatres. If consumers’ discretionary income declines as a result of an economic downturn, our operations could be adversely affected. If theatre operating costs, such as utility costs, increase due to political or economic changes, our results of operations could be adversely affected. Political events, such as terrorist attacks, could cause people to avoid our theatres or other public places where large crowds are in attendance.

Our foreign operations are subject to adverse regulations and currency exchange risk.

We have 115 theatres with 965 screens in twelve countries in Latin America. Brazil and Mexico represented approximately 8.0% and 4.4% of our consolidated 2006 pro forma revenues, respectively. Governmental regulation of the motion picture industry in foreign markets differs from that in the United States. Regulations affecting prices, quota systems requiring the exhibition of locally-produced films and restrictions on ownership of land may adversely affect our international operations in foreign markets. Our international operations are subject to certain political, economic and other uncertainties not encountered by our domestic operations, including risks of severe economic downturns and high inflation. We also face the additional risks of currency fluctuations, hard currency shortages and controls of foreign currency exchange and transfers abroad, all of which could have an adverse effect on the results of our international operations.

We may not be able to generate additional revenues or realize expected value from our investment in NCM.

We, along with Regal and AMC, are founding members of NCM. After the completion of NCM, Inc.’s initial public offering, we continue to own a 14% interest in NCM. In connection with the NCM, Inc. initial public offering, we modified our Exhibitor Services Agreement to reflect a shift from circuit share expense under the prior exhibitor service agreement, which obligated NCM to pay us a percentage of revenue, to a monthly theatre access fee. The theatre access fee will significantly reduce the contractual amounts paid to us by NCM.

Cinema advertising is a small component of the U.S. advertising market. Accordingly, NCM competes with larger, established and well known media platforms such as broadcast radio and television, cable and satellite television, outdoor advertising and Internet portals. NCM also competes with other cinema advertising companies and with hotels, conference centers, arenas, restaurants and convention facilities for its non-film related events to be shown in our auditorium. In-theatre advertising may not continue to attract major advertisers or NCM’s in-theatre advertising format may not be received favorably by the theatre-going public. If NCM is unable to generate expected sales of advertising, it may not maintain the level of profitability we hope to achieve, its results of operations may be adversely affected and our investment in and revenues from NCM may be adversely impacted.

We are subject to uncertainties related to digital cinema, including potentially high costs of re-equipping theatres with projectors to show digital movies.

Digital cinema is still in an experimental stage in our industry. Some of our competitors have commenced a roll-out of digital equipment for exhibiting feature films. There are multiple parties vying for the position of being the primary generator of the digital projector roll-out for exhibiting feature films. However, significant obstacles exist that impact such a roll-out plan including the cost of digital projectors, the substantial investment in re-equipping theatres and determining who will be responsible for such costs. We cannot assure you that we will be able to obtain financing arrangements to fund our portion of the digital cinema roll-out nor that such financing will be available to us on acceptable terms, if at all.

On February 12, 2007, we, along with AMC and Regal entered into a joint venture known as Digital Cinema Implementation Partners LLC to explore the possibility of implementing digital cinema in our theatres and to establish agreements with major motion picture studios for the implementation and financing of digital cinema. In addition, DCIP has entered into a digital cinema services agreement with NCM for purposes of assisting DCIP in the development of digital cinema systems. Future digital cinema developments will be managed by DCIP, subject to certain approvals by us, AMC and Regal.

We are subject to uncertainties relating to future expansion plans, including our ability to identify suitable acquisition candidates or site locations.

We have greatly expanded our operations over the last decade through targeted worldwide theatre development and the Century acquisition. We will continue to pursue a strategy of expansion that will involve the development of new theatres and may involve acquisitions of existing theatres and theatre circuits both in the U.S. and internationally. There is significant competition for potential site locations and existing theatre and theatre circuit acquisition opportunities. As a result of such competition, we may not be able to acquire attractive site locations, existing theatres or theatre circuits on terms we consider acceptable. We cannot assure you that our expansion strategy will result in improvements to our business, financial condition or profitability. Further, our expansion programs may require financing above our existing borrowing capacity and internally generated funds. We cannot assure you that we will be able to obtain such financing nor that such financing will be available to us on acceptable terms.

If we do not comply with the Americans with Disabilities Act of 1990 and a consent order we entered into with the Department of Justice, we could be subject to further litigation.

Our theatres must comply with Title III of the Americans with Disabilities Act of 1990, or the ADA, and analogous state and local laws. Compliance with the ADA requires among other things that public facilities “reasonably accommodate” individuals with disabilities and that new construction or alterations made to “commercial facilities” conform to accessibility guidelines unless “structurally impracticable” for new construction or technically infeasible for alterations. In March 1999, the Department of Justice, or DOJ, filed suit against us in Ohio alleging certain violations of the ADA relating to wheelchair seating arrangements in certain of our stadium-style theatres and seeking remedial action. We and the DOJ have resolved this lawsuit and a consent order was entered by the U.S. District Court for the Northern District of Ohio, Eastern Division, on November 17, 2004. Under the consent order, we are required to make modifications to wheelchair seating locations in fourteen stadium-style movie theatres and spacing and companion seating modifications in 67 auditoriums at other stadium-styled movie theatres. These modifications must be completed by November 2009. If we fail to comply with the ADA, remedies could include imposition of injunctive relief, fines, awards for damages to private litigants and additional capital expenditures to remedy non-compliance. Imposition of significant fines, damage awards or capital expenditures to cure non-compliance could adversely affect our business and operating results.

We depend on key personnel for our current and future performance.

Our current and future performance depends to a significant degree upon the continued contributions of our senior management team and other key personnel. The loss or unavailability to us of any member of our senior

management team or a key employee could significantly harm us. We cannot assure you that we would be able to locate or employ qualified replacements for senior management or key employees on acceptable terms.

We are subject to impairment losses due to potential declines in the fair value of our assets.

We review long-lived assets for impairment on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable.

We assess many factors when determining whether to impair individual theatre assets, including actual theatre level cash flows, future years budgeted theatre level cash flows, theatre property and equipment carrying values, theatre goodwill carrying values, the age of a recently built theatre, competitive theatres in the marketplace, 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. 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, which includes the probability of renewal periods, for leased properties and a period of twenty years for fee owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, we then compare the carrying value of the asset with its estimated fair value. Fair value is determined based on a multiple of cash flows, which was eight times for the evaluation performed as of December 31, 2006. When estimated fair value is determined to be lower than the carrying value of the long-lived asset, the asset is written down to its estimated fair value. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates are based on historical and projected operating performance as well as recent market transactions.

We also test goodwill and other intangible assets for impairment at least annually in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at the reporting unit level at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Factors considered include significant underperformance relative to historical or projected business and significant negative industry or economic trends. Goodwill impairment is evaluated using a two-step approach requiring us to compute the fair value of a reporting unit (generally at the theatre level), and compare it with its carrying value. If the carrying value of the theatre exceeds its fair value, a second step would be performed to measure the potential goodwill impairment. Fair value is estimated based on a multiple of cash flows, which was eight times for the evaluation performed as of December 31, 2006. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates are based on historical and projected operating performance as well as recent market transactions.

We recorded asset impairment charges, including goodwill impairment charges, of $1.0 million, $36.7 million, $51.7 million and $28.5 million for the period January 1, 2004 to April 1, 2004, the period April 2, 2004 to December 31, 2004 and the year ended December 31, 2005 and 2006, respectively. During 2004, we recorded $620.5 million of goodwill as a result of the MDP Merger, and during 2006, we recorded $658.5 million of goodwill as a result of the Century acquisition. We record goodwill at the theatre level. This results in more volatile impairment charges on an annual basis due to changes in market conditions and box office performance and the resulting impact on individual theatres. We cannot assure you that additional impairment charges will not be required in the future, and such charges may have an adverse effect on our financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our results of operations vary from period to period based upon the quantity and quality of the motion pictures that we show in our theatres.

Our results of operations vary from period to period based upon the quantity and quality of the motion pictures that we show in our theatres. The major film distributors generally release the films they anticipate will be most successful during the summer and holiday seasons. Consequently, we typically generate higher revenues during these periods. Due to the dependency on the success of films released from one period to the

next, results of operations for one period may not be indicative of the results for the following period or the same period in the following year.

Risks Related to Our Corporate Structure

The interests of MDP may not be aligned with yours.

We are controlled by an affiliate of MDP. MDP will beneficially own approximately % of our common stock after the offering (approximately % of our common stock if the underwriter’s option to purchase additional shares is exercised in full). After the offering, MDP will continue to have the right to designate a majority of our Board of Directors. Accordingly, we expect that MDP will influence and effectively control our corporate and management policies and determine, without the consent of our other stockholders, the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions. MDP could take other actions that might be desirable to MDP but not to other stockholders.

Investors in this offering will experience immediate dilution.

Investors purchasing shares of our common stock in this offering will experience immediate dilution of $ per share, based upon an assumed initial offering price of $ per share. You will suffer additional dilution if stock, restricted stock, stock options or other equity awards, whether currently outstanding or subsequently granted, are exercised.

Our ability to pay dividends may be limited or otherwise restricted.

We have never declared or paid any dividends on our common stock. Our ability to pay dividends is limited by our status as a holding company and the terms of our indentures, our new senior secured credit facility and certain of our other debt instruments, which restrict our ability to pay dividends and the ability of certain of our subsidiaries to pay dividends, directly or indirectly, to us. Under our debt instruments, we may pay a cash dividend up to a specified amount, provided we have satisfied certain financial covenants in, and are not in default under, our debt instruments. Furthermore, certain of our foreign subsidiaries currently have a deficit in retained earnings which prevents them from declaring and paying dividends from those subsidiaries. The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, limitations in our debt agreements and legal requirements. We cannot assure you that any dividends will be paid in the anticipated amounts and frequency set forth in this prospectus, if at all.

Provisions in our corporate documents and certain agreements, as well as Delaware law, may hinder a change of control.

Provisions that will be in our amended and restated certificate of incorporation and bylaws, as well as provisions of the Delaware General Corporation Law, could discourage unsolicited proposals to acquire us, even though such proposals may be beneficial to you. These provisions include:


	•	authorization of our Board of Directors to issue shares of preferred stock without stockholder approval;

	•	a board of directors classified into three classes of directors with the directors of each class having staggered, three-year terms;

	•	provisions regulating the ability of our stockholders to nominate directors for election or to bring matters for action at annual meetings of our stockholders; and

	•	provisions of Delaware law that restrict many business combinations and provide that directors serving on classified boards of directors, such as ours, may be removed only for cause.

Certain provisions of the 93/4% senior discount notes indenture, 9% senior subordinated notes indenture and the new senior secured credit facility may have the effect of delaying or preventing future transactions involving a “change of control.” A “change of control” would require us to make an offer to the holders of our 9% senior subordinated notes and 93/4% senior discount notes to repurchase all of the outstanding notes at a

purchase price equal to 101% of the aggregate principal amount outstanding plus accrued unpaid interest to the date of the purchase. A “change of control” would also be an event of default under our new senior secured credit facility.

Since we are a “controlled company” for purposes of the New York Stock Exchange’s corporate governance requirements, our stockholders will not have, and may never have, the protections that these corporate governance requirements are intended to provide.

Since we are a “controlled company” for purposes of the New York Stock Exchange’s corporate governance requirements, we are not required to comply with the provisions requiring a majority of independent directors, nominating and corporate governance and compensation committees composed entirely of independent directors as defined under the listing standards and written charters for these committees addressing specified matters. As a result, our stockholders will not have, and may never have, the protections that these rules are intended to provide.

We will be subject to the requirements of Section 404 of the Sarbanes-Oxley Act and if we are unable to timely comply with Section 404, our profitability, stock price and results of operations and financial condition could be materially adversely affected.

We will be required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 as of December 31, 2007. Section 404 requires that we document and test our internal control over financial reporting and issue management’s assessment of our internal control over financial reporting. This section also requires that our independent registered public accounting firm opine on those internal controls and management’s assessment of those controls as of December 31, 2008. We are currently evaluating our existing controls against the standards adopted by the Committee of Sponsoring Organizations of the Treadway Commission. During the course of our ongoing evaluation and integration of the internal control over financial reporting, we may identify areas requiring improvement, and we may have to design enhanced processes and controls to address issues identified through this review. We cannot be certain at this time that we will be able to successfully complete the procedures, certification and attestation requirements of Section 404. If we fail to comply with the requirements of Section 404 or if we or our auditors identify and report material weakness, the accuracy and timeliness of the filing of our annual and quarterly reports may be negatively affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

Risks Related to This Offering

The market price of our common stock may be volatile.

Prior to this offering, there has been no public market for our common stock, and there can be no assurance that an active trading market for our common stock will develop or continue upon completion of the offering. The securities markets have recently experienced extreme price and volume fluctuations and the market prices of the securities of companies have been particularly volatile. The initial price to the public of our common stock will be determined through our negotiations with the underwriter. This market volatility, as well as general economic or political conditions, could reduce the market price of our common stock regardless of our operating performance. In addition, our operating results could be below the expectations of investment analysts and investors and, in response, the market price of our common stock may decrease significantly and prevent investors from reselling their shares of our common stock at or above the offering price. In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we were the subject of securities class action litigation, it could result in substantial costs, liabilities and a diversion of management’s attention and resources.

Future sales of our common stock may adversely affect the prevailing market price.

If a large number of shares of our common stock is sold in the open market after this offering, or the perception that such sales will occur, the trading price of our common stock could decrease. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional common stock. After this offering, we will have an aggregate of shares of our common stock authorized but unissued and

not reserved for specific purposes. In general, we may issue all of these shares without any action or approval by our stockholders. We may issue shares of our common stock in connection with acquisitions.

Upon consummation of the offering, we will have shares of our common stock outstanding. Of these shares, all shares sold in the offering, other than shares, if any, purchased by our affiliates, will be freely tradable. The remaining shares of our common stock will be “restricted securities” as that term is defined in Rule 144 under the Securities Act. Restricted securities may not be resold in a public distribution except in compliance with the registration requirements of the Securities Act or pursuant to an exemption therefrom, including the exemptions provided by Regulation S and Rule 144 promulgated under the Securities Act.

We, all of our directors and executive officers, holders of more than 5% of our outstanding stock and the selling stockholders have entered into lock-up agreements and, with limited exceptions, have agreed not to, among other things, sell or otherwise dispose of our common stock for a period of days after the date of this prospectus. After this lock-up period, certain of our existing stockholders will be able to sell their shares pursuant to registration rights we have granted to them. We cannot predict whether substantial amounts of our common stock will be sold in the open market in anticipation of, or following, any divestiture by any of our existing stockholders, our directors or executive officers of their shares of common stock.

We also reserved shares of our common stock for issuance under our 2006 Long Term Incentive Plan, of which shares of common stock are issuable upon exercise of options outstanding as of the date hereof, of which are currently exercisable or will become exercisable within 60 days after March 1, 2007. The sale of shares issued upon the exercise of stock options could further dilute your investment in our common stock and adversely affect our stock price.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes “forward-looking statements” based on our current expectations, assumptions, estimates and projections about our business and our industry. 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 and our ability to successfully license and exhibit popular films;

	•	national and international growth in our industry;

	•	competition from other exhibitors and alternative forms of entertainment; and

	•	determinations in lawsuits in which we are defendants.

You can identify forward-looking statements by the use of words such as “may,” “should,” “will,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions which are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. In evaluating forward-looking statements, you should carefully consider the risks and uncertainties described in “Risk Factors” and elsewhere in this prospectus. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors contained in this prospectus. Forward-looking statements contained in this prospectus reflect our view only as of the date of this prospectus. Neither we nor the underwriter undertake any obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $ million based upon an assumed initial public offering price of $ (the midpoint of the range set forth on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the net proceeds from the sale of shares by the selling stockholders.

We intend to use the net proceeds that we will receive to repay debt outstanding under our new senior secured credit facility or to repurchase all or a part of our 93/4% senior discount notes, and for working capital and other general corporate purposes.

Our outstanding principal balance under our new senior credit facility was $1,117.2 million in term loans and there were no amounts outstanding under the revolving credit line as of the date hereof. The term loan matures on October 5, 2013 and the revolving credit line matures on October 5, 2012, except that, under certain circumstances, both would mature on August 1, 2012. Our effective interest rate on the term loan was 7.4% as of December 31, 2006. The net proceeds of the term loan were used to finance a portion of the purchase price for the Century acquisition, repay in full the loans outstanding under our former senior secured credit facility, repay certain existing indebtedness of Century and to pay for related fees and expenses. The revolving credit line is used for our general corporate purposes. As of the date hereof, we had outstanding approximately $535.6 million aggregate principal amount at maturity of our 93/4% senior discount notes. Our 93/4% senior discount notes mature in 2014. For more information on our outstanding debt, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and “— Recent Developments — Amendments to the New Senior Secured Credit Facility.”

Management will have significant flexibility in applying our net proceeds of this offering. Pending the application of the net proceeds, we expect to invest the proceeds in short-term, investment-grade marketable securities or money market obligations.

Lehman Brothers Inc. acted as initial purchaser in connection with the offerings of our 93/4% senior discount notes and our 9% senior subordinated notes. An affiliate of Lehman Brothers Inc. was the arranger and is a lender and the administrative agent under our new senior secured credit facility.

DIVIDEND POLICY

We have never declared or paid any dividends on our common stock. Following this offering and subject to legally available funds, we intend to pay a quarterly cash dividend at an annual rate initially equal to $ per share (or a quarterly rate initially equal to $ per share) of common stock, commencing in the quarter of 2007, which will be a partial dividend paid on a pro rata basis depending on the closing date of this offering. Our ability to pay dividends is limited by our status as a holding company and the terms of our indentures, our new senior secured credit facility and certain of our other debt instruments, which restrict our ability to pay dividends to our stockholders and the ability of certain of our subsidiaries to pay dividends, directly or indirectly, to us. Under our debt instruments, we may pay a cash dividend up to a specified amount, provided we have satisfied certain financial covenants in, and are not in default under, our debt instruments. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further discussion regarding the restrictions on our ability to pay dividends contained in our debt instruments. Furthermore, certain of our foreign subsidiaries currently have a deficit in retained earnings which prevents them from declaring and paying dividends from those subsidiaries. The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, limitations in our debt agreements and legal requirements. We cannot assure you that any dividends will be paid in the anticipated amounts and frequency set forth in this prospectus, if at all.

CAPITALIZATION

The following table presents our cash and cash equivalents and capitalization as of December 31, 2006. Our cash and cash equivalents and capitalization is presented:


	•	on an actual basis;


	•	on an as adjusted to reflect our receipt of the estimated net proceeds from this offering at an assumed initial public offering price of $ per share, and the application of those proceeds.

You should read this table in conjunction with the historical consolidated financial statements and related notes included elsewhere in this prospectus.


	As of December 31, 2006
	Actual			As Adjusted
	(Unaudited)
	(In thousands)

Cash and cash equivalents	$	147,099		$

Long-term debt, including current maturities:
New Senior Secured Credit Facility		1,117,200
93/4% Senior Discount Notes due 2014		434,073
9% Senior Subordinated Notes due 2013(1)		350,820
Capital lease obligations		115,827
Other indebtedness		9,560

Total debt		2,027,480
Minority interest in subsidiaries		16,613
Stockholders’ equity:
Common stock, $0.001 par value, authorized shares, actual, pro forma and pro forma as adjusted issued and outstanding		31
Additional paid-in capital		685,495
Accumulated other comprehensive loss		11,463
Retained earnings (deficit)		(7,692	)

Total stockholders’ equity		689,297

Total capitalization	$	2,733,390


(1)		Actual and as adjusted amounts shown include unamortized debt premiums of approximately $18.6 million associated with the issuance of the 9% senior subordinated notes. On March 6, 2007, we commenced a cash tender offer for any and all of our 9% senior subordinated notes, of which approximately $332.2 million aggregate principal amount remains outstanding. We expect to fund the repurchase with the net proceeds received from the NCM transactions.

The number of shares of our common stock to be outstanding immediately after this offering does not include shares of common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of approximately $ per share, an aggregate of shares of common stock reserved for future issuance under our 2006 Long Term Incentive Plan.

DILUTION

Purchasers of common stock offered by this prospectus will suffer an immediate and substantial dilution in net tangible book value per share. Our net tangible book value as of December 31, 2006 was approximately $ million, or approximately $ per share of common stock. Net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the number of shares of common stock outstanding.

Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of our common stock in this offering and the net tangible book value per share of our common stock immediately after this offering. After giving effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share and after deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value as of , 2007 would have been approximately $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share of common stock to existing stockholders and an immediate dilution of $ per share to purchasers of common stock in this offering.


Assumed initial public offering price per share of common stock		$
Net tangible book value per share as of December 31, 2006	$
Increase per share attributable to new investors	$
Net tangible book value per share after the offering		$
Net tangible book value dilution per share to new investors		$

The following table sets forth, as of December 31, 2006, the total consideration paid and the average price per share paid by our existing stockholders and by new investors, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us at an assumed initial public offering price of $ per share.

Average

Shares Purchased

Total Consideration

Price Per

Number

Percent

Amount

Percent

Share

Existing stockholders

New investors

Total

As of December 31, 2006, there were outstanding options to purchase a total of shares of our common stock at a weighted average exercise price of approximately $ per share, which excludes shares reserved for issuance under our 2006 Long Term Incentive Plan. To the extent that options are exercised in the future, there will be further dilution to new investors.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

The following tables set forth our selected historical consolidated financial and operating information as of and for the periods indicated. The selected historical information for periods through April 1, 2004 are of Cinemark, Inc., the predecessor, and the selected historical information for all subsequent periods are of Cinemark Holdings, Inc., the successor. Our financial information for the period January 1, 2004 to April 1, 2004, the period April 2, 2004 to December 31, 2004 and the years ended December 31, 2005 and 2006 is derived from our audited consolidated financial statements appearing elsewhere in this prospectus. Our financial information for each of the years ended December 31, 2002 and 2003 is derived from our audited consolidated financial statements which are not included in this prospectus.

You should read the selected historical consolidated financial and operating information set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Consolidated Financial Information” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.


										Cinemark Holdings, Inc.
	Cinemark, Inc.									Successor
	Predecessor									Period from
							Period from			April 2,									Pro Forma
	Year Ended						January 1,2004			2004			Year Ended						Year Ended
	December 31,						to			to			December 31,						December 31,
	2002			2003			April 1, 2004			December 31, 2004			2005			2006			2006
	(Dollars in thousands, except per share data)
Statement of Operations Data(1):
Revenues:
Admissions	$	595,287		$	597,548		$	149,134		$	497,865		$	641,240		$	760,275		$	1,029,881
Concession		291,807			300,568			72,480			249,141			320,072			375,798			487,416
Other		48,760			52,756			12,011			43,611			59,285			84,521			94,807

Total Revenue	$	935,854		$	950,872		$	233,625		$	790,617		$	1,020,597		$	1,220,594		$	1,612,104
Operating Income		130,443			135,563			556			73,620			63,501			127,369			175,579
Income (loss) from continuing operations		40,509			47,389			(9,068	)		(7,842	)		(25,408	)		841			(3,548	)
Net income (loss)	$	35,476		$	44,649		$	(10,633	)	$	(3,687	)	$	(25,408	)	$	841			(3,548	)
Net income (loss) per share:
Basic	$	0.88		$	1.10		$	(0.26	)	$	(0.13	)	$	(0.91	)	$	0.03			(0.11	)
Diluted	$	0.87		$	1.09		$	(0.26	)	$	(0.13	)	$	(0.91	)	$	0.03			(0.11	)
Weighted average shares outstanding:
Basic		40,513			40,516			40,614			27,675			27,784			28,713			31,284
Diluted		40,625			40,795			40,614			27,675			27,784			29,278			31,284
Other Financial Data:
Cash flow provided by (used for):
Operating activities	$	150,119		$	135,522		$	10,100		$	112,986		$	165,270		$	155,662
Investing activities		(34,750	)		(47,151	)		(16,210	)		(100,737	)		(81,617	)		(631,747	)(2)
Financing activities		(96,140	)		(45,738	)		346,983			(361,426	)		(3,750	)		439,977
Capital expenditures		(38,032	)		(51,002	)		(17,850	)		(63,158	)		(75,605	)		(107,081	)
Non-GAAP Data(1)(3):
Adjusted EBITDA	$	206,270		$	210,122		$	50,608		$	178,632		$	210,135		$	271,615			360,364
Adjusted EBITDA margin		22.0	%		22.1	%		21.7	%		22.6	%		20.6	%		22.3	%		22.4	%


	Cinemark, Inc.				Cinemark Holdings, Inc.
	Predecessor				Successor
	As of December 31,
	2002		2003		2004		2005		2006
	(In thousands)

Balance Sheet Data:
Cash and cash equivalents	$	63,719	$	107,322	$	100,248	$	182,199	$	147,099
Theatre properties and equipment, net		791,731		775,880		794,723		803,269		1,324,572
Total assets		916,814		960,736		1,831,855		1,864,852		3,171,582
Total long-term debt and capital lease obligations, including current portion		692,587		658,431		1,026,055		1,055,095		2,027,480
Stockholders’ equity		27,664		76,946		533,200		519,349		689,297


													Cinemark
	Cinemark, Inc.						Cinemark Holdings, Inc.						and
	Predecessor						Successor						Century
					Period From		Period From						Combined
	Year Ended				January 1, 2004		April 2, 2004		Year Ended				Year Ended
	December 31,				to		to		December 31,				December 31,
	2002		2003		April 1, 2004		December 31, 2004		2005		2006		2006
	(Attendance in thousands)


Operating Data:
United States(4)(6)
Theatres operated (at period end)		188		189		191		191		200		281		281
Screens operated (at period end)		2,215		2,244		2,262		2,303		2,417		3,523		3,523
Total attendance(1)		111,959		112,581		25,790		87,856		105,573		118,714		155,981
International(5)
Theatres operated (at period end)		92		97		95		101		108		115		115
Screens operated (at period end)		816		852		835		869		912		965		965
Total attendance(1)		60,109		60,553		15,791		49,904		60,104		59,550		59,550
Worldwide(4)(5)(6)
Theatres operated (at period end)		280		286		286		292		308		396		396
Screens operated (at period end)		3,031		3,096		3,097		3,172		3,329		4,488		4,488
Total attendance(1)		172,068		173,134		41,581		137,760		165,677		178,264		215,531


(1)		Statement of Operations Data (other than net income (loss)), non-GAAP Data and attendance data exclude the results of the two United Kingdom theatres and the eleven Interstate theatres for all periods presented as these theatres were sold during the period from April 2, 2004 to December 31, 2004. The results of operations for these theatres in the 2003 and 2004 periods are presented as discontinued operations. See note 7 to our annual consolidated financial statements.


(2)		Includes the cash portion of the Century acquisition purchase price of $531.2 million.


(3)		We set forth our definitions of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of net income (loss) to Adjusted EBITDA at “— Non-GAAP Financial Measures and Reconciliation.”


(4)		The data excludes certain theatres operated by us in the U.S. pursuant to management agreements that are not part of our consolidated operations.


(5)		The data excludes certain theatres operated internationally through our affiliates that are not part of our consolidated operations.


(6)		The data for 2003 excludes theatres, screens and attendance for eight theatres and 46 screens acquired on December 31, 2003, as the results of operations for these theatres are not included in our 2003 consolidated results of operations.

Non-GAAP Financial Measures and Reconciliation

Our unaudited pro forma reconciliation information for the year ended December 31, 2006 gives effect to the Century acquisition as if it had been consummated on January 1, 2006.

The following table sets forth the reconciliation of our net income (loss) to Adjusted EBITDA:


	Cinemark, Inc.									Cinemark Holdings, Inc.
	Predecessor									Successor
										Period From
							Period From			April 2,									Pro Forma
							January 1,			2004 to			Year Ended						Year Ended
	Year Ended December 31,						2004 to			December 31,			December 31,						December 31,
	2002			2003			April 1, 2004			2004			2005			2006			2006
	(In thousands)

Net Income (loss)	$	35,476		$	44,649		$	(10,633	)	$	(3,687	)	$	(25,408	)	$	841		$	(3,548	)
Add (deduct):
Income taxes		29,092			25,041			(3,703	)		18,293			9,408			12,685			6,520
Interest expense(1)		57,793			54,163			12,562			58,149			84,082			109,328			168,051
Other (income) expense		3,150			8,970			765			5,020			(4,581	)		4,515			4,556
Cumulative effect of a change in accounting principle, net of taxes		3,390			—			—			—			—			—			—
(Income) loss from discontinued operations, net of taxes		1,542			2,740			1,565			(4,155	)		—			—			—
Depreciation and amortization		66,583			65,085			16,865			58,266			81,952			95,821			137,745
Amortization of net favorable leases					—			—			3,087			4,174			3,649			3,671
Amortization of tenant allowances		—			—			—			—			—			—			(1,303	)
Impairment of long-lived assets		3,869			5,049			1,000			36,721			51,677			28,537			28,943
(Gain) loss on sale of assets and other		470			(1,202	)		(513	)		3,602			4,436			7,645			7,706
Deferred lease expenses		3,802			4,547			560			3,336			4,395			5,730			5,159
Stock option compensation and change of control expenses related to the MDP Merger		—			—			31,995			—			—			—			—
Amortized compensation — stock options		1,103			1,080			145			—			—			2,864			2,864

Adjusted EBITDA	$	206,270		$	210,122		$	50,608		$	178,632		$	210,135		$	271,615		$	360,364

Adjusted EBITDA margin		22.0	%		22.1	%		21.7	%		22.6	%		20.6	%		22.3	%		22.4	%


(1)		Includes amortization of debt issue costs.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

We prepared the following unaudited pro forma condensed consolidated financial information by applying pro forma adjustments to our historical consolidated financial statements. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2006 gives effect to the Century acquisition as if it had occurred on January 1, 2006.

We based the unaudited pro forma adjustments upon available information and certain assumptions that we believe are reasonable under the circumstances. Assumptions underlying the unaudited pro forma adjustments are described in the accompanying notes. The unaudited pro forma information presented with respect to the Century acquisition, including allocations of purchase price, is based on preliminary estimates of the fair values of assets acquired and liabilities assumed, available information and assumptions and will be revised as requested information becomes available. The actual adjustments to our consolidated financial statements will differ from the unaudited pro forma adjustments, and the differences may be material.

We are providing the unaudited pro forma condensed consolidated financial information for informational purposes only. The unaudited pro forma condensed consolidated financial information does not purport to represent what our results of operations or financial condition would have been had the transactions described below actually occurred on the dates assumed, nor do they purport to project our results of operations or financial condition for any future period or as of any future date. You should read the unaudited pro forma condensed consolidated financial information in conjunction with our audited annual consolidated financial statements and related notes for the year ended December 31, 2006, and Century’s audited annual consolidated financial statements and related notes for its fiscal year ended September 28, 2006 included in this prospectus.

The Century Acquisition

On October 5, 2006, we completed the acquisition of Century, a national theatre chain with 77 theatres and 1,017 screens in 12 states. The purchase price was approximately $681 million and the assumption of approximately $360 million of debt. We incurred approximately $7 million of transaction fees and expenses that were capitalized as part of the acquisition. Cinemark USA, Inc., a wholly-owned subsidiary of Cinemark Holdings, Inc., acquired approximately 77% of the issued and outstanding capital stock of Century and Syufy Enterprises, LP, or Syufy, contributed the remaining shares of capital stock of Century to us in exchange for shares of our common stock.

In connection with the closing of the Century acquisition, Cinemark USA, Inc. entered into a new senior secured credit facility, and used the proceeds of the $1,120 million new term loan to fund a portion of the purchase price, to pay off approximately $360 million under Century’s then existing credit facility and to repay in full all outstanding amounts under Cinemark USA, Inc.’s former senior secured credit facility of approximately $254 million. Cinemark USA, Inc. used approximately $53 million of its existing cash to fund the payment of the remaining portion of the purchase price and related transaction expenses. Additionally, Cinemark USA, Inc. advanced approximately $17 million of cash to Century to satisfy working capital obligations.

The Century acquisition is accounted for using purchase accounting. Under the purchase method of accounting, the total consideration paid is allocated to Century’s tangible and intangible assets and liabilities based on their estimated fair values as of the date of the Century acquisition. As of the date hereof, we have not completed the valuation studies necessary to estimate the fair values of the assets acquired and liabilities assumed and the related allocation of purchase price. In presenting the unaudited pro forma financial information, we have allocated the purchase price to the assets acquired and liabilities assumed based on preliminary estimates of their fair values. A final determination of these fair values will reflect our consideration of valuations, assisted by third-party appraisers. These final valuations will be based on the actual net tangible and intangible assets that exist as of the closing date of the Century acquisition. Any final adjustments will change the allocations of the purchase price, which could affect the initial fair values assigned to the assets and liabilities and could result in changes to the unaudited pro forma condensed consolidated financial information, including a change to goodwill.

We have integrated the Century operations into our existing business. We have consolidated Century’s corporate office processes into our existing processes, resulting in a net elimination of personnel and general and administrative cost. Additionally, we have transitioned the Century theatres into our existing concession supply and screen advertising contracts. For purposes of the unaudited pro forma financial information, we have not made any pro forma adjustment to reflect synergies resulting from our integration efforts.

Century used a 52/53 week fiscal year ending with the last Thursday in September. For purposes of the unaudited pro forma financial information, Century’s historical financial information has been conformed to reflect the historical financial information on a calendar year basis, consistent with our fiscal year reporting.

Cinemark Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2006


							Century			Adjustments
	Cinemark			Century			Stub			to Reflect Century
	Historical(1)			Historical(2)			Period(3)			Acquisition			Pro Forma
	(In thousands)


REVENUES
Admissions	$	760,275		$	264,902		$	4,704		$	—		$	1,029,881
Concession		375,798			109,641			1,977			—			487,416
Other		84,521			10,161			125			—			94,807

Total revenues		1,220,594			384,704			6,806			—			1,612,104
COST OF OPERATIONS
Film rentals and advertising		405,987			137,711			2,446			—			546,144
Concession supplies		59,020			16,043			296			—			75,359
Salaries and wages		118,616			41,216			857			—			160,689
Facility lease expense		161,374			44,733			843			—			206,950
Utilities and other		144,808			39,226			665			—			184,699
General and administrative expenses		67,768			32,271			252			(15,672	)(6)		84,619
Depreciation and amortization		95,821			36,200			795			4,929	(4)		137,745
Amortization of net favorable leases		3,649			—			—			22	(5)		3,671
Impairment of long-lived assets		28,537			406			—			—			28,943
Loss on sale of assets and other		7,645			61			—			—			7,706

Total cost of operations		1,093,225			347,867			6,154			(10,721	)		1,436,525

OPERATING INCOME		127,369			36,837			652			10,721			175,579
OTHER INCOME (EXPENSE)
Interest expense		(105,986	)		(26,033	)		(617	)		(29,392	)(7)		(162,028	)
Amortization of debt issue costs		(3,342	)		(454	)		(14	)		(2,213	)(7)		(6,023	)
Interest income		7,040			567			—			—			7,607
Other income (expense)		(11,555	)		(609	)		1			—			(12,163	)

Total other expenses		(113,843	)		(26,529	)		(630	)		(31,605	)		(172,607	)

INCOME BEFORE INCOME TAXES		13,526			10,308			22			(20,884	)		2,972
Income taxes		12,685			4,376			—			(10,541	)(8)		6,520

NET INCOME (LOSS)	$	841		$	5,932		$	22		$	(10,343	)	$	(3,548	)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		28,713												31,284

Diluted		29,278												31,284

EARNINGS PER SHARE
Basic earnings (loss) per share	$	0.03											$	(0.11	)

Diluted earnings (loss) per share	$	0.03											$	(0.11	)

See notes to unaudited proforma condensed consolidated financial information.

Cinemark Holdings, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

(Dollars in thousands)


(1)		Cinemark historical results include the results of operations of Century Theatres from October 5, 2006 to December 31, 2006.


(2)		Century historical results include the results of operations of Century Theatres from December 29, 2005 to September 28, 2006.


(3)		Century stub period results include the results of operations of Century Theatres from September 29, 2006 to October 4, 2006 (the period prior to the Century Acquisition).


(4)		Reflects the depreciation related to the increase in theatre property and equipment to fair value pursuant to purchase accounting for the Century acquisition.


(5)		Reflects the amortization associated with intangible assets recorded pursuant to the purchase method of accounting for the Century acquisition as follows:


	Amount			Amortization Period

Goodwill	$	602,695		Indefinite life
Tradenames		136,000		Indefinite life
Net unfavorable leases		(5,600	)	Remaining term of the lease commitments ranging from one to thirty years

Both goodwill and tradenames are indefinite-lived intangible assets. As a result, goodwill and tradenames will not be amortized but will be evaluated for impairment at least annually. Pro forma amortization expense for the net unfavorable leases is estimated at $22.

The unaudited pro forma condensed consolidated financial information reflect our preliminary allocation of the purchase price to tangible assets, liabilities, goodwill and other intangible assets. The final purchase price allocation may result in a different allocation for tangible and intangible assets than that presented in these unaudited pro forma condensed consolidated financial information. An increase or decrease in the amount of purchase price allocated to amortizable assets would impact the amount of annual amortization expense. Identifiable intangible assets have been amortized on a straight-line basis in the unaudited pro forma condensed consolidated statements of operation.


(6)		To give effect to the elimination of change of control payments to Century’s management.


(7)		Reflects interest expense and amortization of debt issuance costs resulting from the changes to our debt structure:


Interest expense recorded on the Cinemark USA, Inc.’s existing term loan	$	(13,879	)
Interest expense recorded on Century’s existing credit facility		(18,217	)
Interest expense on the new $1,120,000 term loan(a)		61,488

Interest expense	$	29,392


	(a)	Reflects estimated interest rate of 7.32% (the initial LIBOR borrowing rate) on the new senior credit facility for the period January 1, 2006 to October 4, 2006, the period in 2006 during which the new senior secured credit facility was not in effect.


Amortization of debt issue costs on Cinemark USA, Inc.’s existing term loan	$	(179	)
Amortization of debt issue costs on Century’s existing credit facility		(454	)
Amortization of debt issue costs on the new $1,120,000 term loan(a)		2,846

Amortization of debt issue costs	$	2,213


	(a)	Reflects debt issue costs on the new senior secured credit facility for the period January 1, 2006 to October 4, 2006, the period in 2006 during which the new senior secured credit facility was not in effect.


(8)		To reflect the tax effect of the pro forma adjustments at our statutory income tax rate of 39%.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes included in this prospectus.

Overview

On April 2, 2004, an affiliate of MDP acquired approximately 83% of the capital stock of Cinemark, Inc., pursuant to which a newly formed subsidiary owned by an affiliate of MDP was merged with and into Cinemark, Inc. with Cinemark, Inc. continuing as the surviving corporation. Management, including Lee Roy Mitchell, Chairman and then Chief Executive Officer, retained approximately 17% ownership interest in Cinemark, Inc. In December 2004, MDP sold approximately 10% of its stock in Cinemark, Inc., to outside investors and in July 2005, Cinemark, Inc. issued additional shares to another outside investor.

Cinemark Holdings, Inc. was formed on August 2, 2006. On August 7, 2006, the Cinemark, Inc. stockholders entered into a share exchange agreement pursuant to which they agreed to exchange their shares of Class A common stock for an equal number of shares of common stock of Cinemark Holdings, Inc. The Cinemark Share Exchange and the Century Theatres, Inc. acquisition were completed on October 5, 2006. Prior to October 5, 2006, Cinemark Holdings, Inc. had no assets, liabilities or operations. On October 5, 2006, Cinemark, Inc. became a wholly owned subsidiary of Cinemark Holdings, Inc.

For purposes of the financial presentation in this prospectus, the historical financial information reflects the change in reporting entity that occurred as a result of the Cinemark Share Exchange. Cinemark Holdings, Inc.’s consolidated financial information reflects the historical accounting basis of its stockholders for all periods presented. Accordingly, financial information for periods preceding the MDP Merger is presented as Predecessor and for the periods subsequent to the MDP Merger is presented as Successor. The Century acquisition is reflected in the historical financial information of Cinemark Holdings, Inc. from October 5, 2006. Because of the significance of the Century acquisition, we have included in this prospectus historical financial statements for Century as well as pro forma financial information giving effect to the Century acquisition as more fully described in “Unaudited Pro Forma Condensed Consolidated Financial Information.”

We have prepared our discussion and analysis of the results of operations for the year ended December 31, 2005 (successor) by comparing those results with the results of operations of the Predecessor for the period January 1, 2004 to April 1, 2004 combined with the results of operations of the Successor for the period April 2, 2004 to December 31, 2004. Although this combined presentation does not comply with GAAP we believe this presentation provides a meaningful method of comparison of the 2004 and 2005 results.

For financial reporting purposes at December 31, 2006, we have two reportable operating segments, our U.S. operations and our international operations.

Revenues and Expenses

We generate revenues primarily from box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as vendor marketing programs, pay phones, ATM machines and electronic video games located in some of our theatres. Our investment in NCM has assisted us in expanding our offerings to advertisers, exploring ancillary revenue sources such as digital video monitor advertising, third party branding, and the use of theatres for non-film events. In addition, we are able to use theatres during non-peak hours for concerts, sporting events, and other cultural events. Successful films released during the year ended December 31, 2006 included Ice Age 2: The Meltdown, Pirates of the Caribbean: Dead Man’s Chest, The Da Vinci Code, X Men 3, Cars, Talladega Nights and Superman Returns. 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. Films scheduled for release during 2007 include Spider-Man 3, Shrek the Third, Pirates of the Caribbean: At World’s End, and Harry Potter and the Order of the Phoenix.

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 more blockbuster films are released. Film rental costs can also vary based on the length of a film’s run. Generally, a film that runs for a longer period results in lower film rental costs as a percentage of revenues. Film rental rates are negotiated on a film-by-film and theatre-by-theatre basis. Advertising costs, which are expensed as incurred, are primarily fixed at the theatre level as daily movie directories placed in newspapers represent the largest component of advertising costs. The monthly cost of these advertisements is based on, among other things, the size of the directory and the frequency and size of the newspaper’s circulation.

Concession supplies expense is variable in nature and fluctuates with our concession revenues. We purchase concession supplies to replace units sold. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain bulk rates.

Although salaries and wages include a fixed cost component (i.e. the minimum staffing costs to operate a theatre facility during non-peak periods), salaries and wages move in relation to revenues as theatre staffing is adjusted to handle changes in attendance.

Facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment. Certain of our leases are subject to percentage rent only while others are subject to percentage rent in addition to their fixed monthly rent if a target annual revenue level is achieved. Facility lease expense as a percentage of revenues is also affected by the number of theatres under operating leases versus the number of theatres under capital leases and the number of fee-owned theatres.

Utilities and other costs include certain costs that are fixed such as property taxes, certain costs that are variable such as liability insurance, and certain costs that possess both fixed and variable components such as utilities, repairs and maintenance and security services.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies, which we believe are the most critical to aid in fully understanding and evaluating our reported consolidated financial results, include the following:

Revenue and Expense Recognition

Revenues are recognized when admissions and concession sales are received at the box office. Other revenues primarily consist of screen advertising. Screen advertising revenues are recognized over the period that the related advertising is delivered on-screen or in-theatre. We record proceeds from the sale of gift cards and other advanced sale-type certificates in current liabilities and recognize admissions and concession revenue when a holder redeems the card or certificate. We recognize unredeemed gift cards and other advanced sale-type certificates as revenue only after such a period of time indicates, based on historical experience, the likelihood of redemption is remote, and based on applicable laws and regulations. In evaluating the likelihood of redemption, we consider the period outstanding, the level and frequency of activity, and the period of inactivity.

Film rental costs are accrued based on the applicable box office receipts and either the mutually agreed upon firm terms established prior to the opening of the picture or estimates of the final mutually agreed upon settlement, which occurs at the conclusion of the picture run, subject to the film licensing arrangement. Estimates are based on the expected success of a film over the length of its run in theatres. The success of a film can typically be determined a few weeks after a film is released when initial box office performance of the film is known. Accordingly, final settlements typically approximate estimates since box office receipts are

known at the time the estimate is made and the expected success of a film over the length of its run in theatres can typically be estimated early in the film’s run. The final film settlement amount is negotiated at the conclusion of the film’s run based upon how a film actually performs. If actual settlements are higher than those estimated, additional film rental costs are recorded at that time. We recognize advertising costs and any sharing arrangements with film distributors in the same accounting period. Our advertising costs are expensed as incurred.

Facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment. Certain of our leases are subject to monthly percentage rent only, which is accrued each month based on actual revenues. Certain of our other theatres require payment of percentage rent in addition to fixed monthly rent if a target annual revenue level is achieved. Percentage rent expense is recorded for these theatres on a monthly basis if the theatre’s historical performance or forecasted performance indicates that the annual target will be reached. The estimate of percentage rent expense recorded during the year is based on a trailing twelve months of revenues. Once annual revenues are known, which is generally at the end of the year, the percentage rent expense is adjusted based on actual revenues.

Theatre properties and equipment are depreciated using the straight-line method over their estimated useful lives. In estimating the useful lives of our theatre properties and equipment, we have relied upon our experience with such assets and our historical replacement period. We periodically evaluate these estimates and assumptions and adjust them as necessary. Adjustments to the expected lives of assets are accounted for on a prospective basis through depreciation expense.

Impairment of Long-Lived Assets

We review long-lived assets for impairment on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. We assess many factors including the following to determine whether to impair individual theatre assets:


	•	actual theatre level cash flows;

	•	future years budgeted theatre level cash flows;

	•	theatre property and equipment carrying values;


	•	goodwill carrying values;


	•	amortizing intangible asset carrying values;


	•	the age of a recently built theatre;


	•	competitive theatres in the marketplace;


	•	changes in foreign currency exchange rates;

	•	the impact of recent ticket price changes;

	•	available lease renewal options; and

	•	other factors considered relevant in our assessment of impairment of individual theatre assets.

Long-lived assets are evaluated for impairment on an individual theatre basis, 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, which includes the possibility of renewal periods, for leased properties and a period of twenty years for fee owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, we then compare the carrying value of the asset group (theatre) with its estimated fair value. Fair values are determined based on a multiple of undiscounted cash flows, which was seven times as of December 31, 2005 and eight times for the evaluation performed as of December 31, 2006. When estimated fair value is determined to be lower than the carrying value of the asset group (theatre), the asset group (theatre) is written down to its estimated fair value.

Significant judgment is involved in estimating cash flows and fair value. Management’s estimates are based on historical and projected operating performance as well as recent market transactions.

Impairment of Goodwill and Intangible Assets

We evaluate goodwill and tradename for impairment annually at fiscal year-end and any time events or circumstances indicate the carrying amount of the goodwill and intangible assets may not be fully recoverable. We evaluate goodwill for impairment at the reporting unit level (generally a theatre) and have allocated goodwill to the reporting unit based on an estimate of its relative fair value. The evaluation is a two-step approach requiring us to compute the fair value of a theatre and compare it with its carrying value. If the carrying value exceeds fair value, a second step is performed to measure the potential goodwill impairment. Fair value is determined based on a multiple of cash flows, which was seven times as of December 31, 2005 and eight times for the evaluation performed as of December 31, 2006. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates are based on historical and projected operating performance as well as recent market transactions.

Acquisitions

We account for acquisitions under the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations”. The purchase method requires that we estimate the fair value of the assets acquired and liabilities assumed and allocate consideration paid accordingly. For significant acquisitions, we obtain independent third party valuation studies for certain of the assets acquired and liabilities assumed to assist us in determining fair value. The estimation of the fair values of the assets acquired and liabilities assumed involves a number of estimates and assumptions that could differ materially from the actual amounts recorded.

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 basis 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 those assets will be realized. Income taxes are provided on unremitted earnings from foreign subsidiaries unless such earnings are expected to be indefinitely reinvested. Income taxes have also been provided for potential tax assessments. The related tax accruals are recorded in accordance with SFAS No. 5, “Accounting for Contingencies”. To the extent contingencies are probable and estimable, an accrual is recorded within current liabilities in the consolidated balance sheet. To the extent tax accruals differ from actual payments or assessments, the accruals will be adjusted.

Recent Developments

National CineMedia

In March 2005, Regal and AMC formed NCM, and on July 15, 2005, we joined NCM, as one of the founding members. NCM operates the largest digital in-theatre network in the U.S. for cinema advertising and non-film events and combines the cinema advertising and non-film events businesses of the three largest motion picture exhibition companies in the U.S. On February 13, 2007, NCM, Inc., a newly formed entity that now serves as a member and the sole manager of NCM, completed an initial public offering of its common stock. In connection with the NCM, Inc. public offering, NCM, Inc. became a member and the sole manager of NCM, and we amended the operating agreement of NCM and the Exhibitor Services Agreement pursuant to which NCM provides advertising, promotion and event services to our theatres.

preferred unit. As a result, we received 14,159,437 common units and 14,159,437 preferred units. All existing preferred units of NCM, or 55,850,951 preferred units, held by us, Regal and AMC were redeemed by NCM on a pro rata basis on February 13, 2007. NCM utilized the proceeds of its new $725.0 million term loan facility and a portion of the proceeds it received from NCM, Inc.’s initial public offering to redeem all of its outstanding preferred units. Each preferred unit was redeemed for $13.7782 and we received approximately $195.1 million as payment in full for redemption of all of our preferred units in NCM. Upon payment of such amount, each preferred unit was cancelled and the holders of the preferred units ceased to have any rights with respect to the preferred units.

NCM has also paid us a portion of the proceeds it received from NCM, Inc. in the initial public offering for agreeing to modify NCM’s payment obligation under the prior exhibitor services agreement. The modification agreed to by us reflects a shift from circuit share expense under the prior exhibitor service agreement, which obligated NCM to pay us a percentage of revenue, to the monthly theatre access fee described below. The theatre access fee will significantly reduce the contractual amounts paid to us by NCM. In exchange for our agreement to so modify the agreement, NCM paid us approximately $174 million upon execution of the Exhibitor Services Agreement on February 13, 2007. Regal and AMC similarly altered their exhibitor services arrangements with NCM.

At the closing of the initial public offering, the underwriters exercised their over-allotment option to purchase additional shares of common stock of NCM, Inc. at the initial public offering price, less underwriting discounts and commissions. In connection with the over-allotment option exercise, Regal, AMC and us each sold to NCM, Inc. common units of NCM on a pro rata basis at the initial public offering price, less underwriting discounts and expenses. We sold 1,014,088 common units to NCM, Inc. for proceeds of $19.9 million, and upon completion of this sale of common units, we owned 13,145,349 common units of NCM, or a 14% interest. In the future, we expect to receive mandatory quarterly distributions of excess cash from NCM.

In consideration for NCM’s exclusive access to our theatre attendees for on-screen advertising and use of off-screen locations within our theatres for the lobby entertainment network and lobby promotions, we will receive a monthly theatre access fee under the Exhibitor Services Agreement. The theatre access fee is composed of a fixed payment per patron, initially $0.07, and a fixed payment per digital screen, which may be adjusted for certain enumerated reasons. The payment per theatre patron will increase by 8% every five years, with the first such increase taking effect after 2011, and the payment per digital screen, initially $800 per digital screen per year, will increase annually by 5%, beginning after 2007. The theatre access fee paid in the aggregate to Regal, AMC and us will not be less than 12% of NCM’s Aggregate Advertising Revenue (as defined in the Exhibitor Services Agreement), or it will be adjusted upward to reach this minimum payment. Additionally, with respect to any on-screen advertising time provided to our beverage concessionaire, we are required to purchase such time from NCM at a negotiated rate. The Exhibitor Services Agreement has, except with respect to certain limited services, a term of 30 years.

We intend to use the proceeds from the Exhibitor Services Agreement modification payment, the preferred unit redemption and the sale of common units to NCM, Inc. in connection with the exercise of the over-allotment option and cash on hand to purchase our 9% senior subordinated notes due 2013 issued by Cinemark USA, Inc. pursuant to an offer to purchase and consent solicitation described below.

Digital Cinema Implementation Partners, LLC

Repurchase of 9% Senior Subordinated Notes

Amendments to the New Senior Secured Credit Facility

Results of Operations

On October 5, 2006, we completed the Century acquisition for a purchase price of approximately $681 million and the assumption of approximately $360 million of debt of Century. Of the total purchase price, $150 million consisted of the issuance of shares of our common stock. We also incurred approximately $7.4 million in transaction costs. Results of operations for the year ended December 31, 2006 reflect the inclusion of operations for the 77 Century theatres acquired beginning on the date of acquisition, October 5, 2006. See note 4 to our annual consolidated financial statements.

The following table sets forth, for the periods indicated, the percentage of revenues represented by certain items reflected in our consolidated statements of operations:


	Year Ended December 31,
	2004			2005			2006

Operating data (in millions)⁽¹⁾:
Revenues
Admissions	$	647.0		$	641.2		$	760.3
Concession		321.6			320.1			375.8
Other		55.6			59.3			84.5


Total revenues	$	1,024.2		$	1,020.6		$	1,220.6


Theatre operating costs⁽²⁾⁽³⁾
Film rentals and advertising	$	348.8		$	347.7		$	406.0
Concession supplies		53.8			52.5			59.0
Salaries and wages		103.1			101.5			118.6
Facility lease expense		128.7			138.5			161.4
Utilities and other		113.0			123.8			144.8


Total theatre operating costs	$	747.4		$	764.0		$	889.8


Operating data as a percentage of total revenues⁽¹⁾:
Revenues
Admissions		63.2	%		62.8	%		62.3	%
Concession		31.4			31.4			30.8	%
Other		5.4			5.8			6.9	%


Total revenues		100.0	%		100.0	%		100.0	%


Theatre operating costs⁽²⁾⁽³⁾
Film rentals and advertising		53.9	%		54.2	%		53.4	%
Concession supplies		16.7			16.4			15.7
Salaries and wages		10.1			9.9			9.7
Facility lease expense		12.6			13.6			13.2
Utilities and other		11.0			12.1			11.9
Total theatre operating costs		73.0	%		74.9	%		72.9	%


Average screen count (month end average)⁽¹⁾		3,135			3,239			3,628


Revenues per average screen⁽¹⁾	$	326,664		$	315,104		$	336,437


(1)		Results exclude our two United Kingdom theatres and our eleven Interstate theatres sold during 2004. The results of operations for these theatres are presented as discontinued operations for 2004.


(2)		All costs are expressed as a percentage of total revenues, except film rentals and advertising, which are expressed as a percentage of admissions revenues, and concession supplies, which are expressed as a percentage of concession revenues.


(3)		Excludes depreciation and amortization expense.

Comparison of Years Ended December 31, 2006 and December 31, 2005

Revenues. Total revenues increased $200.0 million to $1,220.6 million for 2006 from $1,020.6 million for 2005, representing a 19.6% increase. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.


	U.S. Operating Segment							International Operating Segment							Consolidated
	Year Ended							Year Ended							Year Ended
	December 31,							December 31,							December 31,
	2005		2006		% Change			2005		2006		% Change			2005		2006		% Change

Admissions revenues (in millions)	$	472.0	$	577.9		22.4	%	$	169.2	$	182.4		7.8	%	$	641.2	$	760.3		18.6	%
Concession revenues (in millions)	$	248.7	$	297.4		19.6	%	$	71.4	$	78.4		9.8	%	$	320.1	$	375.8		17.4	%
Other revenues (in millions)⁽¹⁾	$	35.6	$	59.4		66.9	%	$	23.7	$	25.1		5.9	%	$	59.3	$	84.5		42.5	%
Total revenues (in millions)⁽¹⁾	$	756.3	$	934.7		23.6	%	$	264.3	$	285.9		8.2	%	$	1,020.6	$	1,220.6		19.6	%

Attendance (in millions)		105.6		118.7		12.4	%		60.1	$	59.6		(1.0	)%		165.7		178.3		7.6	%
Revenues per screen⁽¹⁾	$	321,833	$	346,812		7.8	%	$	297,316	$	306,459		3.1	%	$	315,104	$	336,437		6.8	%


(1)		U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See note 20 to our consolidated financial statements.


	•	Consolidated. The increase in admissions revenues of $119.1 million was attributable to a 7.6% increase in attendance from 165.7 million patrons for 2005 to 178.3 million patrons for 2006, which contributed $57.2 million, and a 10.2% increase in average ticket price from $3.87 for 2005 to $4.26 for 2006, which contributed $61.9 million. This increase included additional admissions revenues for the 77 Century theatres acquired during the fourth quarter of 2006. The increase in concession revenues of $55.7 million was attributable to the 7.6% increase in attendance, which contributed $30.3 million, and a 9.1% increase in concession revenues per patron from $1.93 for 2005 to $2.11 for the 2006, which contributed $25.4 million. This increase included additional concession revenues for the 77 Century theatres acquired during the fourth quarter. The increase in attendance was attributable to the additional attendance from the 77 Century theatres acquired, the solid slate of films released during 2006 and new theatre openings. The increases in average ticket price and concession revenues per patron were due to the higher ticket price structure at the 77 Century theatres acquired, price increases and favorable exchange rates in certain countries in which we operate. The 42.5% increase in other revenues was primarily attributable to incremental screen advertising revenues resulting from our participation in the NCM joint venture.


	•	U.S. The increase in admissions revenues of $105.9 million was attributable to a 12.4% increase in attendance from 105.6 million patrons for 2005 to 118.7 million patrons for 2006, which contributed $58.7 million, and an 8.9% increase in average ticket price from $4.47 for 2005 to $4.87 for 2006, which contributed $47.2 million. This increase included additional admissions revenues for the 77 Century theatres acquired during the fourth quarter of 2006. The increase in concession revenues of $48.7 million was attributable to the 12.4% increase in attendance, which contributed $31.0 million, and a 6.3% increase in concession revenues per patron from $2.36 for 2005 to $2.51 for 2006, which contributed $17.7 million. This increase included additional concession revenues for the 77 Century theatres acquired during the fourth quarter. The increase in attendance was attributable to the additional attendance from the 77 Century theatres acquired, the solid slate of films released during 2006 and new theatre openings. The increases in average ticket price and concession revenues per patron were due to the higher ticket price structure at the 77 Century theatres acquired and price increases. The 66.9% increase in other revenues was primarily attributable to incremental screen advertising revenues resulting from our participation in the joint venture with NCM.


	•	International. The increase in admissions revenues of $13.2 million was attributable to an 8.8% increase in average ticket price from $2.82 for 2005 to $3.06 for 2006, which contributed $14.7 million, partially offset by a 1.0% decrease in attendance, which contributed $(1.5) million. The decrease in attendance was due to increased competition in certain markets. The increase in concession revenues of $7.0 million was attributable to a 10.9% increase in concession revenues per patron from $1.19 for 2005 to $1.32 for 2006, which contributed $7.7 million, partially offset by the 1.0% decrease in attendance, which contributed $(0.7) million. The increases in average ticket price and concession revenues per patron were due to price increases and favorable exchange rates in certain countries in which we operate.

Theatre Operating Costs (excludes depreciation and amortization expense). Theatre operating costs were $889.8 million, or 72.9% of revenues, for 2006 compared to $764.0 million, or 74.9% of revenues, for 2005. The decrease, as a percentage of revenues, was primarily due to the increase in revenues and the fixed nature of some of our theatre operating costs, such as components of salaries and wages, facility lease expense, and utilities and other costs. The table below, presented by reportable operating segment, summarizes our year-over-year theatre operating costs.


	U.S. Operating Segment				International Operating Segment				Consolidated
	Year Ended				Year Ended				Year Ended
	December 31,				December 31,				December 31,
	2005		2006		2005		2006		2005		2006

Film rentals and advertising	$	263.7	$	315.4	$	84.0	$	90.6	$	347.7	$	406.0
Concession supplies		34.5		38.7		18.0		20.3	$	52.5	$	59.0
Salaries and wages		80.8		95.8		20.7		22.8	$	101.5	$	118.6
Facility lease expense		97.7		117.0		40.8		44.4	$	138.5	$	161.4
Utilities and other		90.7		108.3		33.1		36.5	$	123.8	$	144.8

Total theatre operating costs	$	567.4	$	675.2	$	196.6	$	214.6	$	764.0	$	889.8


	•	Consolidated. Film rentals and advertising costs were $406.0 million, or 53.4% of admissions revenues, for 2006 compared to $347.7 million, or 54.2% of admissions revenues, for 2005. The increase in film rentals and advertising costs for 2006 of $58.3 million is due to increased admissions revenues, which contributed $65.7 million, and a decrease in our film rental and advertising rate, which contributed $(7.4) million. The decrease in film rentals and advertising costs as a percentage of admissions revenues was due to a more favorable mix of films resulting in lower average film rental rates in 2006 compared with 2005 which had certain blockbuster films with higher than average film rental rates. Concession supplies expense was $59.0 million, or 15.7% of concession revenues, for 2006 compared to $52.5 million, or 16.4% of concession revenues, for 2005. The increase in concession supplies expense of $6.5 million is primarily due to increased concession revenues, which contributed $8.5 million, and a decrease in our concession supplies rate, which contributed $(2.0) million. The decrease in concession supplies expense as a percentage of revenues was primarily due to concession sales price increases.

Salaries and wages increased to $118.6 million for 2006 from $101.5 million for 2005 primarily due to the additional salaries and wages related to the 77 Century theatres, the increase in attendance and new theatre openings. Facility lease expense increased to $161.4 million for 2006 from $138.5 million for 2005 primarily due to the additional expense related to the 77 Century theatres, increased percentage rent related to the increased revenues and new theatre openings. Utilities and other costs increased to $144.8 million for 2006 from $123.8 million for 2005 primarily due to the additional costs related to the 77 Century theatres, higher utility and janitorial supplies costs at our existing theatres and new theatre openings.


	•	U.S. Film rentals and advertising costs were $315.4 million, or 54.6% of admissions revenues, for 2006 compared to $263.7 million, or 55.9% of admissions revenues, for 2005. The increase in film rentals and advertising costs for 2006 of $51.7 million is due to increased admissions revenues, which


		contributed $59.2 million, and a decrease in our film rentals and advertising rate, which contributed $(7.5) million. The decrease in film rentals and advertising costs as a percentage of admissions revenues was due to a more favorable mix of films resulting in lower average film rental rates in 2006 compared with 2005 which had certain blockbuster films with higher than average film rental rates. Concession supplies expense was $38.7 million, or 13.0% of concession revenues, for 2006 compared to $34.5 million, or 13.9% of concession revenues, for 2005. The increase in concession supplies expense of $4.2 million is due to increased concession revenues, which contributed $6.7 million, and a decrease in our concession supplies rate, which contributed $(2.5) million. The decrease in concession supplies expense as a percentage of revenues was primarily due to concession sales price increases.

Salaries and wages increased to $95.8 million for 2006 from $80.8 million for 2005 primarily due to the additional salaries and wages related to the 77 Century theatres, the increase in attendance and new theatre openings. Facility lease expense increased to $117.0 million for 2006 from $97.7 million for 2005 primarily due to the additional expense related to the 77 Century theatres, increased percentage rent related to increased revenues and new theatre openings. Utilities and other costs increased to $108.3 million for 2006 from $90.7 million for 2005 primarily due to additional costs related to the 77 Century theatres, higher utility and janitorial supplies costs at our existing theatres and new theatre openings.


	•	International. Film rentals and advertising costs were $90.6 million, or 49.7% of admissions revenues, for 2006 compared to $84.0 million, or 49.6% of admissions revenues, for 2005. The increase in film rentals and advertising costs for 2006 is primarily due to increased admissions revenues. Concession supplies expense was $20.3 million, or 25.9% of concession revenues, for 2006 compared to $18.0 million, or 25.2% of concession revenues, for 2005. The increase in concession supplies expense of $2.3 million is due to increased concession revenues, which contributed $1.8 million, and an increase in our concession supplies rate, which contributed $0.5 million.

Salaries and wages increased to $22.8 million for 2006 from $20.7 million for 2005 primarily due to new theatre openings. Facility lease expense increased to $44.4 million for 2006 from $40.8 million for 2005 primarily due to increased percentage rent related to increased revenues and new theatre openings. Utilities and other costs increased to $36.5 million for 2006 from $33.1 million for 2005 primarily due to higher utility and janitorial supplies costs at our existing theatres and new theatre openings.

General and Administrative Expenses. General and administrative expenses increased to $67.8 million for 2006 from $50.9 million for 2005 primarily due to a $3.7 million increase due to incentive compensation expense, a $3.0 million increase to salaries and wages, a $2.9 million increase to stock option compensation expense related to the adoption of SFAS No. 123 (R), and a $1.3 million increase in service charges related to increased credit card activity and additional overhead costs associated with the integration of the Century.

Depreciation and Amortization. Depreciation and amortization expense, including amortization of favorable leases, was $99.5 million for 2006 compared to $86.1 million for 2005 primarily due to the Century acquisition and new theatre openings.

Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $28.5 million for 2006 compared to $51.7 million for 2005. Impairment charges for 2006 and 2005 included the write-down of theatres to their fair values. Impairment charges for 2006 consisted of $13.6 million of theatre properties, $13.6 million of goodwill associated with theatre properties and $1.3 million of intangible assets associated with theatre properties. Impairment charges for 2005 consisted of $6.4 million of theatre properties and $45.3 million of goodwill associated with theatre properties. We record goodwill at the theatre level, which results in more volatile impairment charges on an annual basis due to changes in market conditions and box office performance and the resulting impact on individual theatres. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates are based on historical and projected operating performance as well as recent market transactions. See notes 9 and 10 to our consolidated financial statements.

Loss on Sale of Assets and Other. We recorded a loss on sale of assets and other of $7.6 million during 2006 compared to $4.4 million during 2005. The loss recorded during 2006 primarily related to a loss on the exchange of a theatre in the United States with a third party, lease termination fees and asset write-offs incurred due to theatre closures and the replacement of certain theatre assets. The loss recorded during 2005 was primarily due to property damages sustained at three of our theatres due to hurricanes along the Gulf of Mexico coast and the write-off of some theatre equipment that was replaced.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, was $109.3 million for 2006 compared to $84.1 million for 2005. The increase was primarily due to the financing associated with the Century acquisition.

Loss on Early Retirement of Debt. During 2006, we recorded a loss on early retirement of debt of $8.3 million which was a result of the refinancing associated with the Century acquisition, the repurchase of $10.0 million aggregate principal amount of Cinemark USA, Inc.’s 9% senior subordinated notes, and the repurchase of $39.8 million aggregate principal amount at maturity of our 93/4% senior discount notes, all of which resulted in the write-off of unamortized debt issue costs and the payment of fees and expenses. See notes 4 and 12 to our consolidated financial statements.

Income Taxes. Income tax expense of $12.7 million was recorded for 2006 compared to $9.4 million recorded for 2005. The effective tax rate for 2006 reflects the impact of purchase accounting adjustments resulting from the Century acquisition. The effective tax rate for 2005 reflects the impact of purchase accounting adjustments and related goodwill impairment charges resulting from the MDP Merger. See note 18 to our consolidated financial statements.

Comparison of Years Ended December 31, 2005 and December 31, 2004

Revenues. Total revenues for 2005 decreased to $1,020.6 million from $1,024.2 million for 2004, representing a 0.4% decrease. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.


	U.S. Operating Segment							International Operating Segment							Consolidated
	Year Ended December 31,				%			Year Ended December 31,				%			Year Ended December 31,				%
	2004		2005		Change			2004		2005		Change			2004		2005		Change

Admissions revenues (in millions)	$	489.0	$	472.0		(3.5	)%	$	158.0	$	169.2		7.1	%	$	647.0	$	641.2		(0.9	)%
Concession revenues (in millions)	$	255.9	$	248.7		(2.8	)%	$	65.7	$	71.4		8.7	%	$	321.6	$	320.1		(0.5	)%
Other revenues (in millions)⁽¹⁾	$	37.1	$	35.6		(4.0	)%	$	18.5	$	23.7		28.1	%	$	55.6	$	59.3		6.7	%
Total revenues (in millions)⁽¹⁾	$	782.0	$	756.3		(3.3	)%	$	242.2	$	264.3		9.1	%	$	1,024.2	$	1,020.6		(0.4	)%
Attendance (in millions)		113.6		105.6		(7.1	)%		65.7		60.1		(8.5	)%		179.3		165.7		(7.6	)%
Revenues per screen⁽¹⁾	$	341,747	$	321,833		(5.8	)%	$	286,364	$	297,316		3.8	%	$	326,664	$	315,104		(3.5	)%


	(1)	U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See note 20 to our consolidated financial statements.


	•	Consolidated. The decrease in admissions revenues of $5.8 million was due to the 7.6% decline in attendance, which contributed $(48.1) million, partially offset by the 7.3% increase in average ticket prices, which contributed $42.3 million. The decline in concession revenues of $1.5 million was also attributable to the decline in attendance, which contributed $(23.7) million, partially offset by the 7.7% increase in concession revenues per patron, which contributed $22.2 million. The decline in attendance for 2005 was primarily due to the decline in the quality of films released during 2005 compared to 2004. The increases in average ticket prices and concession revenues per patron were


		primarily due to price increases and also due to favorable exchange rates in certain countries in which we operate.


	•	U.S. The decrease in admissions revenues of $17.0 million was attributable to the 7.1% decrease in attendance from 113.6 million patrons for 2004 to 105.6 million patrons for 2005, which contributed $(34.7) million, partially offset by a 3.9% increase in average ticket price from $4.30 for 2004 to $4.47 for 2005, which contributed $17.7 million. The decline in concession revenues of $7.2 million was attributable to the 7.1% decrease in attendance, which contributed $(18.2) million, partially offset by a 4.6% increase in concession revenues per patron from $2.25 per patron for 2004 to $2.36 per patron for 2005, which contributed $11.0 million. The decline in attendance for 2005 was primarily due to the decline in the quality of films released during 2005 compared to 2004. The increases in average ticket prices and concession revenues per patron were primarily due to price increases.


	•	International. The increase in admissions revenues of $11.2 million was attributable to a 17.1% increase in average ticket price from $2.40 for 2004 to $2.82 for 2005, which contributed $24.6 million, partially offset by the 8.5% decrease in attendance from 65.7 million patrons for 2004 to 60.1 million patrons for 2005, which contributed $(13.4) million. The increase in concession revenues of $5.7 million was attributable to an 18.6% increase in concession revenues per patron from $1.00 per patron for 2004 to $1.19 per patron for 2005, which contributed $11.2 million, partially offset by the 8.5% decrease in attendance, which contributed $(5.5) million. The decline in attendance for 2005 was primarily due to the decline in the quality of films released during 2005 compared to 2004. The increases in average ticket prices and concession revenues per patron were primarily due to price increases and also favorable exchange rates in certain countries in which we operate.

Theatre Operating Costs (excludes depreciation and amortization expense). Theatre operating costs were $764.0 million, or 74.9% of revenues, for 2005 compared to $747.4 million, or 73.0% of revenues, for 2004. The increase, as percentage of revenues, was primarily due to the decrease in revenues and the fixed nature of some of our theatre operating costs, such as components of facility lease expense and utilities and other costs. The table below, presented by reportable operating segment, summarizes our year-over-year theatre operating costs.


					International				Consolidated
	U.S. Operating Segment				Operating Segment				Year Ended
	Year Ended December 31,				Year Ended December 31,				December 31,
	2004		2005		2004		2005		2004		2005

Film rentals and advertising	$	270.1	$	263.7	$	78.7	$	84.0	$	348.8	$	347.7
Concession supplies		37.2		34.5		16.6		18.0	$	53.8	$	52.5
Salaries and wages		84.9		80.8		18.2		20.7	$	103.1	$	101.5
Facility lease expense		93.7		97.7		35.0		40.8	$	128.7	$	138.5
Utilities and other		85.2		90.7		27.8		33.1	$	113.0	$	123.8

Total theatre operating costs	$	571.1	$	567.4	$	176.3	$	196.6	$	747.4	$	764.0


	•	Consolidated. Film rentals and advertising costs were $347.7 million, or 54.2% of admissions revenues, for 2005 compared to $348.8 million, or 53.9% of admissions revenues, for 2004. The $1.1 million decrease in film rentals and advertising costs for 2005 is due to decreased admissions revenues, which contributed $(3.8) million, offset by an increase in our film rentals and advertising rate, which contributed $2.7 million. The increase in film rentals and advertising costs as a percentage of admissions revenues was primarily related to the high film rental costs associated with certain blockbuster films released during 2005. Concession supplies expense was $52.5 million, or 16.4% of concession revenues, for 2005 compared to $53.8 million, or 16.7% of concession revenues, for 2004. The decrease in concession supplies expense of $1.3 million is primarily due to a decrease in our concession supplies rate. The decrease in concession supplies expense as a percentage of concession revenues was primarily due to concession sales price increases and an increase in concession rebates received from certain vendors.

Salaries and wages decreased to $101.5 million for 2005 from $103.1 million for 2004 primarily due to strategic reductions in certain variable salaries and wages related to the decrease in attendance. Facility lease expense increased to $138.5 million for 2005 from $128.7 million for 2004 primarily due to new theatre openings. Utilities and other costs increased to $123.8 million for 2005 from $113.0 million for 2004 primarily due to higher utility costs and new theatre openings.


	•	U.S. Film rentals and advertising costs were $263.7 million, or 55.9% of admissions revenues, for 2005 compared to $270.1 million, or 55.2% of admissions revenues, for 2004. The decrease of $6.4 million in film rentals and advertising costs for 2005 is due to decreased admissions revenues, which contributed $(9.4) million, offset by an increase in our film rentals and advertising rate, which contributed $3.0 million. The increase in film rentals and advertising costs as a percentage of admissions revenues was due to high film rental costs associated with certain blockbuster films released during 2005. Concession supplies expense was $34.5 million, or 13.9% of concession revenues, for 2005 compared to $37.2 million, or 14.5% of concession revenues, for 2004. The decrease in concession supplies expense of $2.7 million is due to decreased concession revenues, which contributed $(1.0) million, and a decrease in our concession supplies rate, which contributed $(1.7) million. The decrease in concession supplies expense as a percentage of revenues was primarily due to concession sales price increases.

Salaries and wages decreased to $80.8 million for 2005 from $84.9 million for 2004 primarily due to strategic reductions in certain variable salaries and wages related to the decrease in attendance. Facility lease expense increased to $97.7 million for 2005 from $93.7 million for 2004 primarily due to increased percentage rent related to increased revenues and new theatre openings. Utilities and other costs increased to $90.7 million for 2005 from $85.2 million for 2004 primarily due to higher utility and janitorial supplies costs at our existing theatres and new theatre openings.


	•	International. Film rentals and advertising costs were $84.0 million, or 49.6% of admissions revenues, for 2005 compared to $78.7 million, or 49.8% of admissions revenues, for 2004. The increase in film rentals and advertising costs of $5.3 million for 2005 is primarily due to increased admissions revenues. Concession supplies expense was $18.0 million, or 25.2% of concession revenues, for 2005 compared to $16.6 million, or 25.3% of concession revenues, for 2004. The increase in concession supplies expense of $1.4 million is primarily due to increased concession revenues.

Salaries and wages increased to $20.7 million for 2005 from $18.2 million for 2004 primarily due to new theatre openings. Facility lease expense increased to $40.8 million for 2005 from $35.0 million for 2004 primarily due to increased percentage rent related to increased revenues and new theatre openings. Utilities and other costs increased to $33.1 million for 2005 from $27.8 million for 2004 primarily due to higher utility and janitorial supplies costs at our existing theatres and new theatre openings.

General and Administrative Expenses. General and administrative expenses decreased to $50.9 million for 2005 from $51.7 million for 2004. The decrease was primarily due to a reduction in incentive compensation expense.

Stock Option Compensation and Change of Control Expenses related to the MDP Merger. Stock option compensation expense of $16.3 million and change of control fees of $15.7 million were recorded during 2004 as a result of the MDP Merger. See note 3 to our consolidated financial statements.

Depreciation and Amortization. Depreciation and amortization expense, including amortization of net favorable leases, was $86.1 million for 2005 compared to $78.2 million for 2004. The increase was primarily due to the amortization of intangible assets recorded during April 2004 as a result of the MDP Merger, new theatre openings during the latter part of 2004 and 2005 and amortization of intangible assets recorded as a result of the final purchase price allocations for the Brazil and Mexico acquisitions. See note 5 to our consolidated financial statements.

Impairment of Long-Lived Assets. We recorded asset impairment charges on long-lived assets held and used of $51.7 million during 2005 and $37.7 million during 2004. Impairment charges for 2005 and 2004 included the write-down of certain theatres to their fair values. Impairment charges for 2005 consisted of

$6.4 million of theatre properties and $45.3 million of goodwill associated with theatre properties. Impairment charges for 2004 consisted of $2.0 million of theatre properties and $35.7 million of goodwill associated with theatre properties. During 2004, we recorded $620.5 million of goodwill as a result of the MDP Merger. We record goodwill at the theatre level which results in more volatile impairment charges on an annual basis due to changes in market conditions and box office performance and the resulting impact on individual theatres. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates are based on historical and projected operating performance as well as recent market transactions. See notes 8 and 9 to our consolidated financial statements.

Loss on Sale of Assets and Other. We recorded a loss on sale of assets and other of $4.4 million during 2005 and $3.1 million during 2004. The loss recorded during 2005 was primarily due to property damages sustained at certain of our theatres due to the recent hurricanes along the Gulf of Mexico coast and the write-off of theatre equipment that was replaced. The loss recorded during 2004 consisted of a loss on sale of a land parcel, the write-off of a license agreement that was terminated, the write-off of theatre equipment that was replaced, and the write-off of theatre equipment and goodwill associated with theatres that closed during the year.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, was $84.1 million for 2005 compared to $70.7 million for 2004. The increase in interest expense is due to the issuance of the 9 3/4% senior discount notes on March 31, 2004, the amortization of the related debt issue costs and an increase in average interest rates on our variable rate debt.

Interest Income. Interest income of $6.6 million was recorded for 2005 compared to $2.0 million for 2004. The increase in interest income is due to increased cash balances and increased average interest rates earned on such balances.

Loss on Early Retirement of Debt. During 2004, we recorded a loss on early retirement of debt of $3.3 million, which represented the write-off of unamortized debt issue costs, unamortized bond discount, tender offer repurchase costs, including premiums paid, and other fees associated with the repurchase and subsequent retirement of our 8 1/2% senior subordinated notes and a portion of our 9% senior subordinated notes related to the MDP Merger. See note 12 to our consolidated financial statements.

Income Taxes. Income tax expense of $9.4 million was recorded for 2005 compared to $14.6 million recorded for 2004. The 2005 and 2004 effective tax rates reflect the impact of purchase accounting adjustments and related goodwill impairment charges resulting from the MDP Merger. See Note 18 to our consolidated financial statements.

Income from Discontinued Operations, Net of Taxes. We recorded income from discontinued operations, net of taxes, of $2.6 million during 2004. The income for 2004 includes the results of operations of our two United Kingdom theatres that were sold on April 30, 2004, the loss on sale of the two United Kingdom theatres, the results of operations of the eleven Interstate theatres that were sold on December 23, 2004 and the gain on sale of the Interstate theatres. See note 7 to our 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. In addition, a majority of our theatres provide the patron a choice of using a credit card, in place of cash, which we convert to cash over a range of one to six days. Because our revenues are received in cash prior to the payment of related expenses, we have an operating “float” and historically have not required traditional working capital financing. Cash provided by operating activities amounted to $123.1 million, $165.3 million and $155.7 million for the years ended December 31, 2004, 2005 and 2006, respectively. The increase in cash provided by operating activities from 2004 to 2005 is primarily the result of an increase in our income tax payable balance of approximately $20.2 million at December 31, 2005 compared to December 31, 2004 related to the timing of our income tax payments. Our accounts payable and accrued liabilities also increased approximately $14.1 million at December 31, 2005 compared to December 31, 2004 primarily due

to the increase in business and resulting expenses in December 2005 compared with December 2004 and the timing of our payments of such liabilities.

Since the issuance of the 93/4% senior discount notes on March 31, 2004, interest has accreted rather than been paid in cash, which has benefited our operating cash flows for the periods presented. Interest will be paid in cash commencing September 15, 2009, at which time our operating cash flows will be impacted by these cash payments.

We have experienced a net loss for two of the last three fiscal years, which is primarily a result of our increased interest expense related to our capital structure, increased goodwill impairment expense related to the 2004 MDP Merger and the Century acquisition in 2006 combined with our policy of recording goodwill at the theatre level, which results in more volatile impairment charges on an annual basis due to changes in market conditions and box office performance and the resulting impact on individual theatres. Upon completion of this offering, we plan to use a portion of the proceeds to prepay a portion of our long-term debt, which will result in lower interest expense.

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 consolidated statements of cash flows, amounted to $116.9 million, $81.6 million and $631.7 million for the years ended December 31, 2004, 2005 and 2006, respectively. The increase in cash used for investing activities for the year ended December 31, 2006 is primarily due to the cash portion of the Century acquisition purchase price of $531.2 million (See Note 4 to our consolidated financial statements) and increased capital expenditures.

Capital expenditures for the years ended December 31, 2004, 2005 and 2006 were as follows (in millions):


	New		Existing
Period	Theatres		Theatres		Total

Year Ended December 31, 2004	$	61.5	$	19.5	$	81.0
Year Ended December 31, 2005	$	50.3	$	25.3	$	75.6
Year Ended December 31, 2006	$	68.8	$	38.3	$	107.1

During August 2004, our Brazilian partners exercised their option to cause us to purchase all of their shares of common stock of Cinemark Brasil S.A., which represented 47.2% of total common stock of Cinemark Brasil S.A. We purchased the partners’ shares of Cinemark Brasil S.A. for approximately $45.0 million with available cash on August 18, 2004. See note 5 to our consolidated financial statements for further discussion of this acquisition.

During September 2004, we purchased shares of common stock of Cinemark Mexico USA, Inc. from our Mexican partners, increasing our ownership interest in this subsidiary from 95.0% to 99.4%. The purchase price was approximately $5.4 million and was funded with available cash and borrowings on our revolving credit line of our former senior secured credit facility. See note 5 to our consolidated financial statements for further discussion of this acquisition.

During July 2005, we purchased a 20.7% interest in NCM for approximately $7.3 million. Under the terms of the Exhibitor Services Agreement with NCM, we installed digital distribution technology for advertising and other non-film content in certain of our domestic theatres, which resulted in capital expenditures of $9.7 million during the year ended December 31, 2005 and $11.3 million during the year ended December 31, 2006. As a result of the Century acquisition, we owned approximately 25% of NCM and committed to install digital distribution technology in the majority of the theatres acquired, which we estimate will result in capital expenditures of approximately $6.6 million of which as of December 31, 2006, we had spent approximately $3.8 million. We expect to complete the installation of digital technology in our theatres

for advertising and other non-film content at a cost of $2.8 million during the first quarter of 2007. See note 6 to our consolidated financial statements for further discussion of the NCM joint venture.

During October 2006, we completed the Century acquisition for a purchase price of approximately $681 million and the assumption of approximately $360 million of debt of Century. Of the total purchase price, $150 million consisted of the issuance of shares of our common stock. We also incurred approximately $7.4 million in transaction costs. See note 4 to our consolidated financial statements for further discussion of this acquisition.

We continue to expand our U.S. theatre circuit. We opened 14 new theatres with 179 screens and acquired one theatre with 12 screens in an exchange for one of our theatres during the year ended December 31, 2006. We also completed the acquisition of Century with 77 theatres and 1,017 screens. At December 31, 2006, our total domestic screen count was 3,523 screens (12 of which are in Canada). At December 31, 2006, we had signed commitments to open 13 new theatres with 200 screens in domestic markets during 2007 and open eight new theatres with 126 screens subsequent to 2007. We estimate the remaining capital expenditures for the development of all of the 326 domestic screens will be approximately $123.0 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.

We also continue to expand our international theatre circuit. We opened seven new theatres with 53 screens during the year ended December 31, 2006, bringing our total international screen count to 965 screens. At December 31, 2006, we had signed commitments to open four new theatres with 27 screens in international markets during 2007 and open three new theatres with 29 screens subsequent to 2007. We estimate the remaining capital expenditures for the development of all of the 56 international screens will be approximately $32.0 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.

We plan to fund capital expenditures for our continued development with cash flow from operations, borrowings under our new senior secured credit facility, subordinated note borrowings, proceeds from sale leaseback transactions and/or sales of excess real estate.

Financing Activities

Cash provided by (used for) financing activities, as reflected in the consolidated statements of cash flows, amounted to $(14.4) million, $(3.8) million and $440.0 million during the years ended December 31, 2004, 2005 and 2006, respectively. We may from time to time, subject to compliance with our debt instruments, purchase on the open market our debt securities depending upon the availability and prices of such securities.

Long-term debt consisted of the following as of December 31, 2005 and 2006:


	December 31, 2005		December 31, 2006

Cinemark, Inc. 93/4% senior discount notes due 2014	$	423,978	$	434,073
Cinemark USA, Inc. 9% senior subordinated notes due 2013		364,170		350,820
Cinemark USA, Inc. term loan		255,450		1,117,200
Other long-term debt		11,497		9,560

Total long-term debt		1,055,095		1,911,653
Less current portion		6,871		14,259

Long-term debt, less current portion	$	1,048,224	$	1,897,394

As of December 31, 2006, we had borrowings of $1,117.2 million outstanding on the term loan under our new senior secured credit facility, $434.1 million accreted amount at December 31, 2006 outstanding under our 93/4% senior discount notes and approximately $332.2 million aggregate principal amount outstanding under the 9% senior subordinated notes, respectively, and had $149.9 million in available borrowing capacity under our revolving credit facility. On a pro forma basis, we incurred $168.0 million of interest expense for

the year ended December 31, 2006. We were in full compliance with all agreements governing our outstanding debt at December 31, 2006.

As of December 31, 2006, our long-term debt obligations, scheduled interest payments on long-term debt, future minimum lease obligations under non-cancelable operating and capital leases, scheduled interest payments under capital leases, outstanding letters of credit, obligations under employment agreements and purchase commitments for each period indicated are summarized as follows:


	Payments Due by Period
			Less Than						After
	Total		One Year		1-3 Years		4-5 Years		5 Years
	(In millions)

Long-term debt(1)(2)	$	2,013.2	$	14.3	$	27.7	$	23.6	$	1,947.6
Scheduled interest payments on long-term debt(3)		953.4		112.6		237.2		322.6		281.0
Operating lease obligations		2,004.2		163.7		334.7		320.1		1,185.7
Capital lease obligations		115.8		3.6		8.7		10.4		93.1
Scheduled interest payments on capital leases		119.0		12.4		23.5		21.4		61.7
Letters of credit		0.1		0.1		—		—		—
Employment agreements		9.3		3.1		6.2		—		—
Purchase commitments(4)		162.7		78.1		71.6		12.5		0.5

Total	$	5,377.7	$	387.9	$	709.6	$	710.6	$	3,569.6


(1)		Includes the 93/4% senior discount notes in the aggregate principal amount at maturity of $535.6 million.


(2)		On March 6, 2007, we commenced a tender offer for any and all of our 9% senior subordinated notes, of which $332.2 million aggregate principal amount remains outstanding. See note 26 of our consolidated financial statements.


(3)		Amounts include scheduled interest payments on fixed rate and variable rate debt agreements. Estimates for the variable rate interest payments were based on interest rates in effect on December 31, 2006. The average interest rates on our fixed rate and variable rate debt were 9.5% and 7.4%, respectively, as of December 31, 2006.


(4)		Includes estimated remaining capital expenditures associated with the construction of new theatres to which we were committed as of December 31, 2006.

Cinemark, Inc. 93/4% Senior Discount Notes

On March 31, 2004, Cinemark, Inc. issued approximately $577.2 million aggregate principal amount at maturity of 93/4% senior discount notes due 2014. The gross proceeds at issuance of approximately $360.0 million were used to fund in part the MDP Merger. Interest on the notes accretes until March 15, 2009 up to their aggregate principal amount. Cash interest will accrue and be payable semi-annually in arrears on March 15 and September 15, commencing on September 15, 2009. Due to Cinemark, Inc.’s holding company status, payments of principal and interest under these notes will be dependent on loans, dividends and other payments from its subsidiaries. Cinemark, Inc. may redeem all or part of the 93/4% senior discount notes on or after March 15, 2009.

On September 22, 2005, Cinemark, Inc. repurchased $1.8 million aggregate principal amount at maturity of its 93/4% senior discount notes as part of an open market purchase for approximately $1.3 million, including accreted interest. During May 2006, as part of four open market purchases, Cinemark, Inc. repurchased $39.8 million aggregate principal amount at maturity of its 93/4% senior discount notes for approximately $31.7 million, including accreted interest of $5.4 million. Cinemark, Inc. funded these transactions with available cash from its operations. As of December 31, 2006, the accreted principal balance of the notes was approximately $434.1 million and the aggregate principal amount at maturity will be approximately

$535.6 million. The open market repurchase costs, including premiums paid and a portion of the unamortized debt issue costs of $0.1 million and $2.4 million related to the repurchase of the 93/4% senior discount notes, were recorded as a loss on early retirement of debt in our consolidated statements of operations for the years ended December 31, 2005 and 2006, respectively.

The indenture governing the 93/4% senior discount notes contains covenants that limit, among other things, dividends, transactions with affiliates, investments, sales of assets, mergers, repurchases of our capital stock, liens and additional indebtedness. The dividend restriction contained in the indenture prevents Cinemark, Inc. from paying a dividend or otherwise distributing cash to its stockholders unless (1) it is not in default, and the distribution would not cause it to be in default, under the indenture; (2) it would be able to incur at least $1.00 more of indebtedness without the ratio of its consolidated cash flow to its fixed charges (each as defined in the indenture, and calculated on a pro forma basis for the most recently ended four full fiscal quarters for which internal financial statements are available, using certain assumptions and modifications specified in the indenture, and including the additional indebtedness then being incurred) falling below two to one (the “senior notes debt incurrence ratio test”); and (3) the aggregate amount of distributions made since March 31, 2004, including the distribution proposed, is less than the sum of (a) half of its consolidated net income (as defined in the indenture) since February 11, 2003, (b) the net proceeds to it from the issuance of stock since April 2, 2004, and (c) certain other amounts specified in the indenture, subject to certain adjustments specified in the indenture. The dividend restriction is subject to certain exceptions specified in the indenture.

Upon certain specified types of change of control of Cinemark, Inc., Cinemark, Inc. would be required under the indenture to make an offer to repurchase all of the 93/4% senior discount notes at a price equal to 101% of the accreted value of the notes plus accrued and unpaid interest, if any, through the date of repurchase. This initial public offering is not considered a change of control under the indenture.

Cinemark USA, Inc. 9% Senior Subordinated Notes

On February 11, 2003, Cinemark USA, Inc. issued $150 million principal amount of 9% senior subordinated notes due 2013 and on May 7, 2003, Cinemark USA, Inc. issued an additional $210 million aggregate principal amount of 9% senior subordinated notes due 2013, collectively referred to as the 9% senior subordinated notes. Interest is payable on February 1 and August 1 of each year. On April 6, 2004, as a result of the MDP Merger and in accordance with the terms of the indenture governing the 9% senior subordinated notes, Cinemark USA, Inc. made a change of control offer to purchase the 9% senior subordinated notes at a purchase price of 101% of the aggregate principal amount. Approximately $17.8 million aggregate principal amount of the 9% senior subordinated notes were tendered. The payment of the change of control price was funded with available cash by Cinemark USA, Inc. on June 1, 2004. The unamortized bond premiums paid, and other fees of $1.0 million related to the retirement of the 9% notes were recorded as a gain on early retirement of debt in our consolidated statements of operations for the period from April 2, 2004 to December 31, 2004.

During May 2006, as part of three open market purchases, Cinemark USA, Inc. repurchased $10.0 million aggregate principal amount of its 9% senior subordinated notes for approximately $11.0 million, including accrued and unpaid interest. The transactions were funded by Cinemark USA, Inc. with available cash from operations. As a result of the transactions, we recorded a loss on early retirement of debt of $0.1 million during the year ended December 31, 2006, which included the write-off of unamortized debt issue costs and unamortized bond premium related to the retired subordinated notes.

As of December 31, 2006, Cinemark USA, Inc. had outstanding approximately $332.2 million aggregate principal amount of 9% senior subordinated notes. Cinemark USA, Inc. may redeem all or part of the 9% senior subordinated notes on or after February 1, 2008.

The 9% senior subordinated notes are general, unsecured obligations and are subordinated in right of payment to the new senior secured credit facility and other senior indebtedness. The notes are guaranteed by certain of Cinemark USA, Inc.’s domestic subsidiaries. The guarantees are subordinated to the senior indebtedness of the subsidiary guarantors, including their guarantees of the new senior secured credit facility.

The notes are effectively subordinated to the indebtedness and other liabilities of Cinemark USA, Inc.’s nonguarantor subsidiaries.

The indenture governing the 9% senior subordinated notes contains covenants that limit, among other things, dividends, transactions with affiliates, investments, sales of assets, mergers, repurchases of our capital stock, liens and additional indebtedness. The dividend restriction contained in the indenture prevents Cinemark USA, Inc. from paying a dividend or otherwise distributing cash to its capital stockholders unless (1) it is currently not in default, and the distribution would not cause it to be in default, under the indenture; (2) it would be able to incur at least $1.00 more of indebtedness without the ratio of its EBITDA (as defined in the indenture) for the four full fiscal quarters prior to the incurrence of such indebtedness to the amount of its consolidated interest expense (as defined in the indenture) for the quarter in which the indebtedness is incurred and the following three fiscal quarters (each calculated on a pro forma basis using certain assumptions and modifications specified in the indenture, and including the additional indebtedness then being incurred) falling below two to one (the “senior sub notes debt incurrence ratio test”); and (3) the aggregate amount of distributions made since February 11, 2003, including the distribution currently proposed, is less than the sum of (a) half of its consolidated net income (as defined in the indenture) since February 11, 2003, (b) the net proceeds to it from the issuance of stock since February 11, 2003, and (c) certain other amounts specified in the indenture, subject to certain adjustments specified in the indenture. The dividend restriction is subject to certain exceptions specified in the indenture.

Upon certain specified types of change of control of Cinemark USA, Inc., Cinemark USA, Inc. would be required under the indenture to make an offer to repurchase all of the 9% senior subordinated notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest through the date of repurchase. This initial public offering is not considered a change of control under the indenture.

On March 6, 2007, we commenced an offer to purchase for cash, on the terms and subject to the conditions set forth in an Offer to Purchase and Consent Solicitation Statement, any and all of our 9% senior subordinated notes. As of the date of this prospectus, the outstanding principal amount of the 9% senior subordinated notes is approximately $332.2 million. In connection with the tender offer, we are soliciting consents for certain proposed amendments to the indenture. We intend to use the proceeds from the Exhibitor Services Agreement modification payment, the preferred unit redemption and the sale of common units to NCM, Inc. in connection with the exercise of the over-allotment option and cash on hand to purchase our 9% senior subordinated notes pursuant to the tender offer and consent solicitation.

Debt Transactions in Connection with MDP Merger

On March 16, 2004, in connection with the MDP Merger, Cinemark USA, Inc. initiated a tender offer for its then outstanding $105 million aggregate principal amount 81/2% 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 MDP Merger. In April 2004, Cinemark USA, Inc. redeemed approximately $94.2 million aggregate principal amount of 81/2% senior subordinated notes that were tendered, pursuant to the tender offer, utilizing a portion of the proceeds from its former senior secured credit facility. On April 14, 2004, after the expiration of the tender offer, Cinemark USA, Inc. redeemed an additional $50,000 aggregate principal amount of 81/2% senior subordinated notes that were tendered, leaving outstanding approximately $10.8 million aggregate principal amount of 81/2% senior subordinated notes. The unamortized bond discount, tender offer repurchase costs, including premiums paid, and other fees of $4.4 million related to the retirement of the 81/2% notes were recorded as a loss on early retirement of debt in our consolidated statements of operations for the period from April 2, 2004 to December 31, 2004.

On April 6, 2004, as a result of the consummation of the MDP Merger and in accordance with the terms of the indenture governing its 9% senior subordinated notes, Cinemark USA, Inc. made a change of control offer to purchase the 9% senior subordinated notes at a purchase price of 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, at the date of purchase. Approximately $17.8 million in aggregate principal amount of the 9% senior subordinated notes were tendered and not withdrawn in the

change of control offer, which expired on May 26, 2004. Cinemark USA, Inc. paid the change of control price with available cash on June 1, 2004.

On July 28, 2004, Cinemark USA, Inc. provided notice to the holders of its remaining outstanding 81/2% senior subordinated notes due 2008 of its election to redeem all outstanding notes at a redemption price of 102.833% of the aggregate principal amount plus accrued interest. On August 27, 2004, Cinemark USA, Inc. redeemed the remaining $10.8 million aggregate principal amount of notes utilizing available cash and borrowings under its former revolving credit line. The unamortized bond premium, tender offer repurchase costs, including premiums paid, and other fees of $0.1 million related to the retirement of the 81/2% notes were recorded as a gain on early retirement of debt in our consolidated statements of operations for the period from April 2, 2004 to December 31, 2004.

New Senior Secured Credit Facility

On October 5, 2006, in connection with the Century acquisition, Cinemark USA, Inc., entered into a new senior secured credit facility. The new senior secured credit facility provides for a seven year term loan of $1.12 billion and a $150 million revolving credit line that matures in six years unless its 9% senior subordinated notes have not been refinanced by August 1, 2012 with indebtedness that matures no earlier than seven and one-half years after the closing date of the new senior secured credit facility, in which case the maturity date of the revolving credit line becomes August 1, 2012. The net proceeds of the term loan were used to finance a portion of the $531.2 million cash portion of the Century acquisition, repay in full the $253.5 million outstanding under the former senior secured credit facility, repay $360.0 million of existing indebtedness of Century and to pay for related fees and expenses. The revolving credit line was left undrawn at closing. The revolving credit line is used for our general corporate purposes.

At December 31, 2006, there was $1,117.2 million outstanding under the new term loan and no borrowings outstanding under the new revolving credit line. Approximately $149.9 million was available for borrowing under the new revolving credit line, giving effect to a $69,000 letter of credit outstanding. The average interest rate on outstanding borrowings under the new senior secured credit facility at December 31, 2006 was 7.4% per annum.

Under the term loan, principal payments of $2.8 million are due each calendar quarter beginning December 31, 2006 through September 30, 2012 and increase to $263.2 million each calendar quarter from December 31, 2012 to maturity at October 5, 2013. The term loan bears interest, at Cinemark USA, Inc.’s option, at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5 or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 0.75% to 1.00% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 1.75% to 2.00% per annum, in each case as adjusted pursuant to Cinemark USA, Inc.’s corporate credit rating. Borrowings under the revolving credit line bear interest, at Cinemark USA, Inc.’s option, at: (A) a base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5 and (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 0.50% to 1.00% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 1.50% to 2.00% per annum, in each case as adjusted pursuant to Cinemark USA, Inc.’s consolidated net senior secured leverage ratio as defined in the credit agreement. Cinemark USA, Inc. is required to pay a commitment fee calculated at the rate of 0.50% per annum on the average daily unused portion of the new revolving credit line, payable quarterly in arrears, which rate decreases to 0.375% per annum for any fiscal quarter in which Cinemark USA, Inc.’s consolidated net senior secured leverage ratio on the last day of such fiscal quarter is less than 2.25 to 1.0.

Cinemark USA, Inc.’s obligations under the new senior secured credit facility are guaranteed by Cinemark Holdings, Inc., Cinemark, Inc., CNMK Holding, Inc., and certain of Cinemark USA, Inc.’s domestic subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of Cinemark USA, Inc.’s and the guarantors’ personal property, including, without limitation, pledges of all of Cinemark USA, Inc.’s capital stock, all of the capital stock of Cinemark, Inc., CNMK Holding, Inc. and certain of Cinemark USA, Inc.’s domestic subsidiaries and 65% of the voting stock of certain of its foreign subsidiaries.

The new senior secured credit facility contains usual and customary negative covenants for transactions of this type, including, but not limited to, restrictions on Cinemark USA, Inc.’s ability, and in certain instances, its subsidiaries’ and Cinemark Holdings, Inc.’s, Cinemark, Inc.’s and CNMK Holding, Inc.’s ability, to consolidate or merge or liquidate, wind up or dissolve; substantially change the nature of its business; sell, transfer or dispose of assets; create or incur indebtedness; create liens; pay dividends, repurchase stock and voluntarily repurchase or redeem the 93/4% senior discount notes or the 9% senior subordinated notes; and make capital expenditures and investments. The new senior secured credit facility also requires Cinemark USA, Inc. to satisfy a consolidated net senior secured leverage ratio covenant as determined in accordance with the new senior secured credit facility. The dividend restriction contained in the new senior secured credit facility prevents us and any of our subsidiaries from paying a dividend or otherwise distributing cash to its stockholders unless (1) we are not in default, and the distribution would not cause us to be in default, under the new senior secured credit facility; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since October 5, 2006, including the distribution currently proposed, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since October 5, 2006, (b) Cinemark USA, Inc.’s consolidated EBITDA minus two times its consolidated interest expense, each as defined in the new senior secured credit facility, since October 1, 2006, (c) $150,000,000 and (d) certain other amounts specified in the new senior secured credit facility, subject to certain adjustments specified in the new senior secured credit facility. The dividend restriction is subject to certain exceptions specified in the new senior secured credit facility.

The new senior secured credit facility also includes customary events of default, including, among other things, payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, certain types of change of control, material money judgments and failure to maintain subsidiary guarantees. If an event of default occurs, all commitments under the new senior secured credit facility may be terminated and all obligations under the new senior secured credit facility could be accelerated by the lenders, causing all loans outstanding (including accrued interest and fees payable thereunder) to be declared immediately due and payable. This initial public offering is not considered a change of control under the new senior secured credit facility.

Former Senior Secured Credit Facility

On April 2, 2004, Cinemark USA, Inc. amended its then existing senior secured credit facility in connection with the MDP Merger. The former senior secured credit facility provided for a $260 million seven year term loan and a $100 million six and one-half year revolving credit line. The net proceeds from the former senior secured credit facility were used to repay the term loan under its then existing senior secured credit facility of approximately $163.8 million and to redeem the approximately $94.2 million aggregate principal amount of its then outstanding $105 million aggregate principal amount 8 1/2% senior subordinated notes due 2008 that were tendered pursuant to the tender offer.

On October 5, 2006, in connection with the Century acquisition, the $253.5 million outstanding under the former senior secured credit facility was repaid in full with a portion of the proceeds from the new senior secured credit facility. The unamortized debt issue costs of $5.8 million related to the former senior secured credit facility that was repaid in full were recorded as a loss on early retirement of debt in our consolidated statements of operations for the year ended December 31, 2006.

Covenant Compliance

The indenture governing the 93/4% senior discount notes requires Cinemark, Inc. to have a fixed charge coverage ratio (as determined under the indenture) of at least 2.0 to 1.0 in order to incur additional indebtedness, issue preferred stock or make certain restricted payments, including dividends to us. Fixed charge coverage ratio is defined as the ratio of consolidated cash flow of Cinemark, Inc. and its subsidiaries to their fixed charges for the four most recent fiscal quarters, giving pro forma effect to certain events as specified in the indenture. Fixed charges is defined as consolidated interest expense of Cinemark, Inc. and its subsidiaries, subject to certain adjustments as provided in the indenture. Consolidated cash flow as defined in the indenture is substantially consistent with our presentation of Adjusted EBITDA in this prospectus. Because Cinemark, Inc.’s failure to meet the fixed charge coverage ratio described above could restrict its ability to incur debt or make dividend payments, management believes that the indenture governing the 93/4% senior discount notes and these covenants and the Adjusted EBITDA and Adjusted EBITDA margins are material to us. As of December 31, 2006, Cinemark, Inc.’s fixed charge coverage ratio under the indenture was in excess of the 2.0 to 1.0 requirement described above.

The following table sets forth a reconciliation of net income (loss) to Adjusted EBITDA.


	Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,
	2004			2005			2006
	(In thousands)

Net Income (loss)	$	(14,320	)	$	(25,408	)	$	841
Add (deduct):
Income taxes		14,590			9,408			12,685
Interest expense(1)		70,711			84,082			109,328
Other (income) expense		5,785			(4,581	)		4,515
Income (loss) from discontinued operations, net of taxes		(2,590	)		—			—
Depreciation and amortization		75,131			81,952			95,821
Amortization of net favorable leases		3,087			4,174			3,649
Amortization of tenant allowances		—			—			—
Impairment of long-lived assets		37,721			51,677			28,537
Gain (loss) on sale of assets and other		3,089			4,436			7,645
Deferred lease expenses		3,896			4,395			5,730
Stock option compensation and change of control expenses related to the MDP Merger		31,995			—			—
Amortized compensation — stock options		145			—			2,864

Adjusted EBITDA	$	229,240		$	210,135		$	271,615


(1)		Includes amortization of debt issue costs.

As of December 31, 2006, we are in full compliance with all agreements, including related covenants, governing our outstanding debt.

Ratings

We are rated by nationally recognized rating agencies. The significance of individual ratings varies from agency to agency. However, companies’ assigned ratings at the top end of the range have, in the opinion of certain rating agencies, the strongest capacity for repayment of debt or payment of claims, while companies at the bottom end of the range have the weakest capability. Ratings are always subject to change and there can be no assurance that our current ratings will continue for any given period of time. A downgrade of our debt ratings, depending on the extent, could increase the cost to borrow funds. Below are our latest ratings per category, which were current as of February 28, 2007.


Category	Moody’s		Standard and Poor’s

Cinemark, Inc. 9 3/4% Senior Discount Notes		B3		CCC+
Cinemark USA, Inc. Senior Secured Credit Facility		Ba2		B
Cinemark USA, Inc. 9% Senior Subordinated Notes		B2		CCC+

New Accounting Pronouncements

On May 18, 2006, the State of Texas passed a bill to replace the current franchise tax with a new margin tax to be effective January 1, 2008. We estimate the new margin tax will not have a significant impact on our income tax expense or its deferred tax assets and liabilities.

In June 2006, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes an Interpretation of FASB No. 109” (FIN 48). FIN 48 clarifies the accounting and reporting for income taxes recognized in accordance with SFAS No. 109 “Accounting for Income Taxes”, and recognition, measurement, presentation and disclosure of uncertain tax positions taken or

expected to be taken in income tax returns. The evaluation of a tax position in accordance with this interpretation is a two-step process. The first step is recognition: The enterprise determines whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the enterprise should presume that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant information. The second step is measurement: A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in (1) an increase in a liability for income taxes payable or (2) a reduction of an income tax refund receivable or a reduction in a deferred tax asset or an increase in a deferred tax liability or both (1) and (2). The Company will adopt FIN 48 in the first quarter of 2007. The Company is currently evaluating the impact the interpretation may have on its consolidated financial position, cash flows and results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” Among other requirements, this statement defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The statement applies whenever other statements require or permit assets or liabilities to be measured at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are evaluating the impact of SFAS No. 157 on our consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” which provides interpretive guidance regarding the consideration given to prior year misstatements when determining materiality in current year financial statements. SAB No. 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB No. 108 did not have a significant impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are in the process of evaluating the impact of the adoption of this statement on our consolidated financial statements.

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.

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 December 31, 2006, there was an aggregate of approximately $1,126.7 million of variable rate debt outstanding under these

facilities. Based on the interest rates in effect on the variable rate debt outstanding at December 31, 2006, a 1% increase in market interest rates would increase our annual interest expense by approximately $11 million.

The tables below provide information about our long-term fixed rate and variable rate debt agreements as of December 31, 2005 and 2006:


	Expected Maturity as of December 31, 2006
																	Average
															Fair		Interest
	2007		2008		2009		2010		2011		Thereafter		Total		Value		Rate

Fixed rate	$	0.1	$	—	$	—	$	—	$	—	$	886.4	$	886.5	$	812.1		9.5	%
Variable rate		14.2		14.9		12.8		12.4		11.2		1,061.2		1,126.7		1,146.8		7.4	%

Total debt	$	14.3	$	14.9	$	12.8	$	12.4	$	11.2	$	1,947.6	$	2,013.2	$	1,958.9


	Expected Maturity as of December 31, 2005
																	Average
															Fair		Interest
	2006		2007		2008		2009		2010		Thereafter		Total		Value		Rate

Fixed rate	$	0.1	$	—	$	—	$	—	$	—	$	939.5	$	939.6	$	792.8		9.5	%
Variable rate		6.8		5.5		4.3		4.1		185.1		61.1		266.9		268.4		6.6	%

Total debt	$	6.9	$	5.5	$	4.3	$	4.1	$	185.1	$	1,000.6	$	1,206.5	$	1,061.2

Foreign Currency Exchange Rate Risk

We are also exposed to market risk arising from changes in foreign currency exchange rates as a result of our international operations. Generally, we export from the U.S. certain of the equipment and construction interior finish items and other operating supplies used by our international subsidiaries. Principally all the revenues and operating expenses of our international subsidiaries are transacted in the country’s local currency. Generally accepted accounting principles in the U.S. require that our subsidiaries use the currency of the primary economic environment in which they operate as their functional currency. If our subsidiaries operate in a highly inflationary economy, generally accepted accounting principles in the U.S. require that the U.S. dollar be used as the functional currency for the subsidiary. Currency fluctuations result in us reporting exchange gains (losses) or foreign currency translation adjustments relating to our international subsidiaries depending on the inflationary environment of the country in which we operate. As of December 31, 2006, none of the international countries in which we operate were considered highly inflationary. Based upon our equity ownership in our international subsidiaries as of December 31, 2006, 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 $30 million.

BUSINESS

Our Company

We grew our total revenue per patron at the highest CAGR during the last three fiscal years among the three largest motion picture exhibitors in the U.S. Revenues, operating income, net income and Adjusted EBITDA for the year ended December 31, 2006 were $1,220.6 million, $127.4 million, $0.8 million, and $271.6 million, respectively, with operating income and Adjusted EBITDA margins of 10.4% and 22.3%, respectively. On a pro forma basis for the Century acquisition, revenues, operating income, net loss and Adjusted EBITDA for the year ended December 31, 2006 were $1,612.1 million, $175.6 million, $(3.5) million and $360.4 million, respectively, with pro forma operating income and Adjusted EBITDA margins of 10.9% and 22.4%, respectively. At December 31, 2006, we had cash and cash equivalents of $147.1 million and long-term debt, excluding capital leases, of $1,911.7 million. Approximately $1,126.7 million, or 59%, of our total long-term debt accrues interest at variable rates.

On April 2, 2004, an affiliate of MDP acquired approximately 83% of the capital stock of Cinemark, Inc., pursuant to which a newly formed subsidiary owned by an affiliate of MDP was merged with and into Cinemark, Inc. with Cinemark, Inc. continuing as the surviving corporation. Simultaneously with the merger, MDP purchased shares of common stock of Cinemark, Inc. for approximately $518.2 million in cash. Management, including Lee Roy Mitchell, Chairman and then Chief Executive Officer, retained approximately 17% ownership interest in Cinemark, Inc. Concurrently with the closing of the MDP Merger, we entered into a number of financing transactions, which significantly increased our indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

In December 2004, MDP sold approximately 10% of its stock in Cinemark, Inc., to outside investors and in July 2005, Cinemark, Inc. issued additional shares to another outside investor.

Cinemark Holdings, Inc. was formed on August 2, 2006. On August 7, 2006, the Cinemark, Inc. stockholders entered into a share exchange agreement pursuant to which they agreed to exchange their shares of Class A common stock for an equal number of shares of common stock of Cinemark Holdings, Inc. The Cinemark Share Exchange and the Century Theatres, Inc. acquisition were completed on October 5, 2006. Prior to October 5, 2006, Cinemark Holdings, Inc. had no assets, liabilities or operations. On October 5, 2006, Cinemark, Inc. became a wholly owned subsidiary of Cinemark Holdings, Inc.

Acquisition of Century Theatres, Inc.

Participation in National CineMedia

In March 2005, Regal and AMC formed NCM and on July 15, 2005, we joined NCM, as one of the founding members. NCM operates the largest in-theatre network in the U.S. which delivers digital advertising content and digital non-film event content to the screens and lobbies of the three largest motion picture companies in the country. The digital projectors currently used to display advertising will not be used to exhibit digital film content or digital cinema. NCM’s primary activities that impact us include the following activities:


	•	*Advertising:* NCM develops, produces, sells and distributes a branded, pre-feature entertainment and advertising program called “FirstLook,” along with an advertising program for its LEN and various marketing and promotional products in theatre lobbies;

	•	*CineMeetings:* NCM provides live and pre-recorded networked and single-site meetings and events in the theatres throughout its network; and


	•	*Digital Programming Events:* NCM distributes live and pre-recorded concerts, sporting events and other non-film entertainment programming to theatres across its digital network.

On February 13, 2007, we received $389.0 million in connection with NCM, Inc.’s initial public offering and related transactions. As a result of these transactions, we will no longer receive a percentage of NCM’s revenue but rather a monthly theatre access fee which we expect will reduce the contractual amounts required to be paid to us by NCM. In addition, we expect to receive mandatory quarterly distributions of excess cash from NCM. Prior to the initial public offering of NCM, Inc. common stock, our ownership interest in NCM was approximately 25% and subsequent to the completion of the offering we owned a 14% interest in NCM.

In our international markets, we generally outsource our screen advertising to local companies who have established relationships with local advertisers that provide similar benefits as NCM.

Motion Picture Industry Overview

Domestic Markets

The U.S. motion picture exhibition industry has a track record of long-term growth, with box office revenues growing at a CAGR of 5.7% over the last 35 years. Against this background of steady long-term growth, the exhibition industry has experienced periodic short-term increases and decreases in attendance and consequently box office revenues. In 2006 the motion picture exhibition industry experienced a marked improvement over 2005 with box office revenue increasing 5.5%, after a decrease of 5.7% in 2005 over the prior year. Strong revenue and attendance growth has been driven by a steadily growing number of movie releases, which, according to MPAA, reached an all-time high of 607 in 2006, up 11%. We believe this trend will continue into 2007 with a strong slate of franchise films, such as Spider-Man 3, Shrek the Third, Pirates of the Caribbean: At World’s End and Harry Potter and the Order of the Phoenix.

The following table represents the results of a survey by MPAA Worldwide Market Research outlining the historical trends in U.S. box office revenues for the ten year period from 1996 to 2006.


	U.S. Box				Average
	Office				Ticket
Year	Revenues		Attendance		Price
	($ in millions)		(in millions)

1996	$	5,912		1,339	$	4.42
1997	$	6,366		1,388	$	4.59
1998	$	6,949		1,481	$	4.69
1999	$	7,448		1,465	$	5.06
2000	$	7,661		1,421	$	5.39
2001	$	8,413		1,487	$	5.65
2002	$	9,520		1,639	$	5.80
2003	$	9,489		1,574	$	6.03
2004	$	9,539		1,536	$	6.21
2005	$	8,991		1,403	$	6.41
2006	$	9,488		1,449	$	6.55

International Markets

Growth in Latin America is expected to be fueled by a combination of continued development of modern theatres, attractive demographics (i.e., a significant teenage population), strong product from Hollywood and the emergence of a local film industry. In many Latin American countries the local film industry had been dormant because of the lack of sufficient theatres to screen the film product. The development of new modern multiplex theatres has revitalized the local film industry and, in Mexico, Brazil and Argentina, successful local film product often provides incremental growth opportunities.

We believe many international markets for theatrical exhibition have historically been underserved and that certain of these markets, especially those in Latin America, will continue to experience growth as additional modern stadium-styled theatres are introduced.

Drivers of Continued Industry Success

We believe the following market trends will drive the continued growth and strength of our industry:

which “brands” a film is one of the major factors in determining its success in “downstream” markets, such as home video, DVD, and network, syndicated and pay-per-view television.

Increased Importance of International Markets for Box Office Success. International markets are becoming an increasingly important component of the overall box office revenues generated by Hollywood films, accounting for $16 billion, or 63% of 2006 total worldwide box office revenues according to MPAA with many international blockbusters such as Pirates of the Caribbean: Dead Man’s Chest, The Da Vinci Code, Ice Age: The Meltdown, and Mission Impossible III. With continued growth of the international motion picture exhibition industry, we believe the relative contribution of markets outside North America will become even more significant.

Competitive Strengths

We believe the following strengths allow us to compete effectively.

successfully established a significant presence in major cities in the region, with theatres in twelve of the fifteen largest metropolitan areas. With the most geographically diverse circuit in Latin America, we are an important distribution channel to the movie studios. The region’s improved economic climate and rising disposable income are also a source for growth. Over the last three years, the CAGR of our international revenue has been greater than that of our U.S. operations. We are well-positioned with our modern, large-format theatres and new screens to take advantage of this favorable economic environment for further growth and diversification of our revenues.

Our Strategy

We believe our operating philosophy and management team will enable us to continue to enhance our leading position in the motion picture exhibition industry. Key components of our strategy include:

Recent Developments

National CineMedia

non-film events and combines the cinema advertising and non-film events businesses of the three largest motion picture exhibition companies in the country. On February 13, 2007, NCM, Inc., a newly formed entity that now serves as a member and the sole manager of NCM, completed an initial public offering of its common stock. In connection with the NCM, Inc. public offering, NCM, Inc. became a member and the sole manager of NCM, and we amended the operating agreement of NCM and the Exhibitor Services Agreement pursuant to which NCM provides advertising, promotion and event services to our theatres.

Prior to the initial public offering of NCM, Inc. common stock, our ownership interest in NCM was approximately 25% and subsequent to the completion of the offering we owned a 14% interest in NCM. Prior to pricing the initial public offering of NCM, Inc., NCM completed a recapitalization whereby (1) each issued and outstanding Class A unit of NCM was split into 44,291 Class A units, and (2) following such split of Class A Units, each issued and outstanding Class A Unit was recapitalized into one common unit and one preferred unit. As a result, we received 14,159,437 common units and 14,159,437 preferred units. All existing preferred units of NCM, or 55,850,951 preferred units, held by us, Regal, AMC were redeemed on a pro rata basis on February 13, 2007. NCM utilized the proceeds of its new $725.0 million term loan facility and a portion of the proceeds it received from NCM, Inc. from the initial public offering to redeem all of its outstanding preferred units. Each preferred unit was redeemed by NCM for $13.7782 and we received approximately $195.1 million as payment in full for redemption of all of our preferred units in NCM. Upon payment of such amount, each preferred unit was cancelled and the holders of the preferred units ceased to have any rights with respect to the preferred units.

Digital Cinema Implementation Partners LLC

On February 12, 2007, we, along with AMC and Regal, entered into a joint venture known as Digital Cinema Implementation Partners LLC to explore the possibility of implementing digital cinema in our theatres and to establish agreements with major motion picture studios for the implementation and financing of digital cinema. In addition, DCIP has entered into a digital cinema services agreement with NCM for purposes of assisting DCIP in the development of digital cinema systems. Future digital cinema developments will be managed by DCIP, subject to certain approvals by us, AMC and Regal.

Theatre Operations

As of December 31, 2006, we operated 396 theatres and 4,488 screens in 37 states, one Canadian province and 12 Latin American countries. Our theatres in the U.S. are primarily located in mid-sized U.S. markets, including suburbs of major metropolitan areas. We believe these markets are generally less competitive and generate high, stable margins. Our theatres in Latin America are primarily located in major metropolitan markets, which we believe are generally underscreened. The following tables summarize the geographic locations of our theatre circuit as of December 31, 2006.

United States Theatres


	Total		Total
State	Theatres		Screens

Texas		75		969
California		64		729
Ohio		19		207
Utah		12		155
Nevada		9		138
Colorado		7		111
Illinois		8		106
Arizona		7		98
Kentucky		7		83
Oregon		6		82
Pennsylvania		5		73
Louisiana		5		68
Oklahoma		6		67
New Mexico		4		54
Virginia		4		52
Michigan		3		50
Indiana		5		46
North Carolina		4		41
Mississippi		3		41
Florida		2		40
Iowa		4		39
Arkansas		3		30
Georgia		2		27
New York		2		27
South Carolina		2		22
Kansas		1		20
Alaska		1		16
New Jersey		1		16
Missouri		1		14
South Dakota		1		14
Tennessee		1		14
Wisconsin		1		14
Massachusetts		1		12