e10vq

CINEMARK, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(A) AND (B) OF FORM 10-Q AND THEREFORE IS FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

Commission File Number: 001-31372

CINEMARK, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		01-0687923 (I.R.S. Employer Identification No.)

3900 Dallas Parkway Suite 500 Plano, Texas (Address of principal executive offices)		75093 (Zip Code)

Registrant’s telephone number, including area code: (972) 665-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of July 31, 2007, 27,896,316 shares of common stock were outstanding.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CINEMARK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, unaudited)


	June 30,		December 31,
	2007		2006
	(Successor)		(Successor)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	138,268	$	147,099
Inventories		6,786		6,058
Accounts receivable		32,487		31,165
Income tax receivable		—		8,946
Current deferred tax asset		4,711		4,661
Prepaid expenses and other		8,124		8,424

Total current assets		190,376		206,353

THEATRE PROPERTIES AND EQUIPMENT		1,834,667		1,736,706
Less accumulated depreciation and amortization		496,101		412,134

Theatre properties and equipment — net		1,338,566		1,324,572

OTHER ASSETS
Goodwill		1,150,291		1,205,423
Intangible assets — net		356,867		360,752
Investments in and advances to affiliates		5,889		11,354
Deferred charges and other assets — net		71,223		63,092

Total other assets		1,584,270		1,640,621


TOTAL ASSETS	$	3,113,212	$	3,171,546


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Current portion of long-term debt	$	13,954	$	14,259
Current portion of capital lease obligations		3,944		3,649
Income tax payable		35,157		—
Accounts payable and accrued expenses		189,078		212,914

Total current liabilities		242,133		230,822

LONG-TERM LIABILITIES
Long-term debt, less current portion		1,561,227		1,897,394
Capital lease obligations, less current portion		113,066		112,178
Deferred income taxes		87,219		198,320
Long-term portion FIN 48 liability		12,084		—
Deferred lease expenses		16,545		14,285
Deferred revenues and other long-term liabilities		185,627		12,672

Total long-term liabilities		1,975,768		2,234,849

COMMITMENTS AND CONTINGENCIES (see Note 20)

MINORITY INTERESTS IN SUBSIDIARIES		17,300		16,613

STOCKHOLDERS’ EQUITY
Class A common stock, $0.001 par value: 40,000 shares authorized and 27,896 shares issued and outstanding		28		28
Additional paid-in-capital		686,912		685,463
Retained earnings (deficit)		156,058		(7,692	)
Accumulated other comprehensive income		35,013		11,463

Total stockholders’ equity		878,011		689,262


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,113,212	$	3,171,546

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, unaudited)


	Three months ended June 30,						Six months ended June 30,
	2007			2006			2007			2006
	(Successor)			(Predecessor)			(Successor)			(Predecessor)
REVENUES
Admissions	$	283,117		$	182,862		$	527,107		$	336,530
Concession		138,448			91,901			253,535			169,973
Other		18,471			20,342			37,416			34,591

Total revenues		440,036			295,105			818,058			541,094

COST OF OPERATIONS
Film rentals and advertising		159,084			100,298			287,378			179,246
Concession supplies		22,668			14,807			40,125			26,847
Salaries and wages		45,444			26,959			85,626			51,486
Facility lease expense		53,253			36,623			104,898			72,450
Utilities and other		48,219			33,337			92,412			65,457
General and administrative expenses		18,297			15,428			36,937			29,510
Termination of profit participation agreement		6,952			—			6,952			—
Depreciation and amortization		36,720			19,968			73,595			40,094
Amortization of favorable leases		625			43			1,559			86
Impairment of long-lived assets		7,036			647			56,766			923
(Gain) loss on sale of assets and other		(1,864	)		815			(1,559	)		1,543

Total cost of operations		396,434			248,925			784,689			467,642


OPERATING INCOME		43,602			46,180			33,369			73,452

OTHER INCOME (EXPENSE)
Interest expense		(35,301	)		(22,904	)		(76,798	)		(45,967	)
Interest income		2,266			1,580			6,049			3,474
Gain on NCM transaction		—			—			210,773			—
Gain on Fandango transaction		9,205			—			9,205			—
Foreign currency exchange gain (loss)		(57	)		695			163			755
Loss on early retirement of debt		(123	)		(3,315	)		(7,952	)		(3,315	)
Distributions from NCM		1,362			—			1,362			—
Equity in loss of affiliates		(265	)		(79	)		(1,496	)		(1,268	)
Minority interests in income of subsidiaries		(606	)		(885	)		(895	)		(1,157	)

Total other income (expense)		(23,519	)		(24,908	)		140,411			(47,478	)


INCOME BEFORE TAXES		20,083			21,272			173,780			25,974

Income taxes		(26,456	)		7,349			8,937			4,881


NET INCOME	$	46,539		$	13,923		$	164,843		$	21,093

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)


	Six months ended June 30,
	2007			2006
	(Successor)			(Predecessor)
OPERATING ACTIVITIES
Net income	$	164,843		$	21,093

Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		71,566			39,047
Amortization of intangible and other assets		3,588			1,133
Amortization of long-term prepaid rents		511			582
Amortization of debt issue costs		2,363			2,056
Amortization of debt premium		(678	)		(782	)
Amortization of deferred revenues, deferred lease incentives, and other		(875	)		(371	)
Impairment of long-lived assets		56,766			923
Stock option compensation expense		1,449			1,432
Gain on NCM transaction		(210,773	)		—
Gain on Fandango transaction		(9,205	)
(Gain) loss on sale of assets and other		(1,559	)		1,543
Write-off unamortized bond premiums and unamortized debt issue costs related to the early retirement of debt		(17,098	)		1,183
Accretion of interest on senior discount notes		21,150			20,258
Deferred lease expenses		3,311			565
Deferred income tax expenses		(126,443	)		(5,796	)
Equity in loss of affiliates		1,496			1,268
Minority interests in income of subsidiaries		895			1,157

Changes in assets and liabilities:
Inventories		(728	)		(484	)
Accounts receivable		(1,322	)		(7,447	)
Prepaid expenses and other		300			787
Other assets		(2,144	)		(4,613	)
Advances with affiliates		(742	)		(122	)
Accounts payable and accrued expenses		(21,175	)		(7,653	)
Interest paid on repurchased senior discount notes		—			(5,381	)
Increase in deferred revenues related to NCM transaction		174,001			—
Increase in deferred revenues related to Fandango transaction		5,000
Other long-term liabilities		(5,171	)		404
Income tax receivable/payable		55,094			(9,051	)

Net cash provided by operating activities		164,420			51,731

INVESTING ACTIVITIES
Additions to theatre properties and equipment		(73,148	)		(55,064	)
Proceeds from sale of theatre properties and equipment		13,915			178
Net proceeds from sale of NCM stock		214,842			—
Net proceeds from sale of Fandango stock		11,347			—
Investment in joint venture — DCIP		(1,500	)
Other		—			271

Net cash provided by (used for) investing activities		165,456			(54,615	)

FINANCING ACTIVITIES
Retirement of senior discount notes		—			(24,950	)
Retirement of senior subordinated notes		(332,066	)		(10,000	)
Proceeds from long-term debt		—			963
Repayments of long-term debt		(7,200	)		(3,570	)
Payments on capital leases		(1,760	)		—
Other		(208	)		(1,601	)

Net cash used for financing activities		(341,234	)		(39,158	)

Effect of exchange rate changes on cash and cash equivalents		2,527			(776	)


DECREASE IN CASH AND CASH EQUIVALENTS		(8,831	)		(42,818	)
CASH AND CASH EQUIVALENTS:
Beginning of period		147,099			182,199

End of period	$	138,268		$	139,381

SUPPLEMENTAL INFORMATION (see Note 17)

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1. The Company and Basis of Presentation

Cinemark, Inc. and subsidiaries (the “Company”) are leaders in the motion picture exhibition industry in terms of both revenues and the number of screens in operation, with theatres in the United States (“U.S.”), Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. The Company also managed additional theatres in the U.S., Brazil, and Colombia during the six months ended June 30, 2007.

On August 2, 2006, Cinemark Holdings, Inc. was formed as the Delaware holding company of Cinemark, Inc. 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. (“Cinemark Share Exchange”). The Cinemark Share Exchange was completed on October 5, 2006 and facilitated the acquisition of Century Theatres, Inc. (“Century Acquisition”) on that date. On October 5, 2006, Cinemark, Inc. became a wholly owned subsidiary of Cinemark Holdings, Inc.

Due to a change in reporting entity that occurred as a result of the Cinemark Share Exchange, Cinemark Holdings, Inc.’s accounting basis was pushed down to the Company effective on the date of the Cinemark Share Exchange, October 5, 2006. The accompanying condensed consolidated statements of income and cash flows present the results of the Company’s operations and cash flows for the periods preceding the Cinemark Share Exchange as Predecessor and the periods subsequent to the Cinemark Share Exchange as Successor. See Note 3.

The condensed consolidated financial statements have been prepared by the Company, without audit, according to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these interim financial statements reflect all adjustments necessary to state fairly the financial position and results of operations as of, and for, the periods indicated. Majority-owned subsidiaries that the Company controls are consolidated while those subsidiaries of which the Company owns between 20% and 50% and does not control are accounted for as affiliates under the equity method. Those subsidiaries of which the Company owns less than 20% are generally accounted for as affiliates under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate, in which case the Company would account for its investment under the equity method. The results of these subsidiaries and affiliates are included in the condensed consolidated financial statements effective with their formation or from their dates of acquisition. Significant intercompany balances and transactions are eliminated in consolidation.

These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2006, included in the 424(b)(1) Prospectus filed April 24, 2007 by the Company pursuant to Rule 424(b)(1) of the Securities Act of 1933, as amended. Operating results for the six months ended June 30, 2007 are not necessarily indicative of the results to be achieved for the full year.

In May 2006, the Company repurchased $39.8 million aggregate principal amount at maturity of its 9 ³/4% senior discount notes for approximately $31.7 million, including accreted interest of $5.4 million and a $1.4 million cash premium paid. In the Company’s 2006 second quarter unaudited interim consolidated statements of cash flows included as part of its Form 10-Q filing, the Company presented the payment of accreted interest as a financing activity. The Company believes this presentation to be incorrect and has properly presented the payment as an operating activity in its condensed consolidated statements of cash flows for the six months ended June 30, 2006.

2. New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“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 the Company beginning January 1, 2008. Adoption of this statement is not expected to have a significant impact on the Company’s condensed 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 the

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Company beginning January 1, 2008. Adoption of this statement is not expected to have a significant impact on the Company’s condensed consolidated financial statements.

3. Merger with Madison Dearborn Partners and Related Change in Accounting Basis

On April 2, 2004, a newly formed subsidiary of an affiliate of Madison Dearborn Partners (“MDP”) was merged with and into the Company, with the Company continuing as the surviving corporation (the “MDP Merger”). Simultaneously, an affiliate of MDP purchased shares of the Company’s common stock for $518,245 in cash and became the Company’s controlling stockholder, owning approximately 83% of the Company’s capital stock as of the date of the Merger. Lee Roy Mitchell, the Company’s then Chief Executive Officer, and the Mitchell Special Trust collectively retained approximately 16% ownership of the Company’s capital stock with certain members of management owning the remaining 1% as of the date of the Merger.

On April 2, 2004, the Company accounted for the MDP Merger as a leveraged recapitalization, which resulted in the Company and its subsidiaries retaining their historical book values. As a result of the Cinemark Share Exchange on October 5, 2006, and the resulting change in reporting entity, the Company was required to prepare its financial statements to reflect the accounting basis of its parent, Cinemark Holdings, Inc. Cinemark Holdings, Inc. accounted for the MDP merger under the purchase method of accounting on April 2, 2004. The following table represents the allocation of MDP purchase price to the proportionate share of assets acquired and liabilities assumed as of April 2, 2004:


Current assets	$	79,967
Fixed assets		650,653
Goodwill		620,540
Tradename		173,882
Net favorable leases		31,047
Vendor contracts		52,012
Internally developed software		1,626
Other long term assets		42,384
Current liabilities		(90,940	)
Other long term liabilities		(120,232	)
Long-term debt		(922,694	)

Total	$	518,245

Cinemark Holdings, Inc.’s accounting basis was pushed down to the Company effective October 5, 2006. The successor accounting basis reflects the MDP merger purchase accounting as of April 2, 2004 adjusted for depreciation and amortization as well as other period charges taken subsequent to April 2, 2004 that have affected the basis of the Company’s assets and liabilities. Below is a summary of the impact of this push down on the Company’s balance sheet on October 5, 2006:


Net increase in fixed assets	$	15,013
Net increase in goodwill		508,760
Net increase in intangible assets		228,424
Net increase in investments in and advances to affiliates		2,600
Net decrease in deferred charges and other assets		(7,277	)
Net increase in long-term debt		(9,059	)
Net increase in deferred income taxes		(87,059	)
Net decrease in deferred lease expense		16,561
Net decrease in deferred revenues and other long-term liabilities		2,493

Net increase in stockholders’ equity	$	670,456

The tradename, net favorable leases, and vendor contracts are presented as intangible assets on the Company’s condensed consolidated balance sheets as of December 31, 2006 and June 30, 2007. The goodwill recorded as a result of the MDP Merger is not deductible for tax purposes.

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

4. Cinemark Holdings, Inc.’s Initial Public Offering

On April 24, 2007, Cinemark Holdings, Inc., the Company’s parent, completed its initial public offering. Cinemark Holdings, Inc. sold 13,888,889 shares of its common stock and selling stockholders sold an additional 14,111,111 shares of common stock at a price of $17.955 ($19 per share less underwriting discounts). The net proceeds (before expenses) received by Cinemark Holdings, Inc. were $249,375 and Cinemark Holdings, Inc. paid approximately $3,397 in legal, accounting and other fees, all of which are recorded in additional paid-in-capital of Cinemark Holdings, Inc. The selling stockholders granted the underwriters a 30-day option to purchase up to an additional 2,800,000 shares of Cinemark Holdings, Inc. common stock at a price of $17.955 ($19 per share less underwriting discounts). On May 21, 2007, the underwriters purchased an additional 269,100 shares from the selling stockholders pursuant to this option. Cinemark Holdings, Inc. did not receive any proceeds from the sale of shares by the selling stockholders. Cinemark Holdings, Inc. expects to use the net proceeds that it received from the offering to repurchase a portion of the outstanding 9 ³/4% senior discount notes or repay debt outstanding under the senior secured credit facility. The 9 ³/4% senior discount notes are not currently subject to repurchase at Cinemark Holdings, Inc.’s option. Accordingly, if Cinemark Holdings, Inc. is unable to repurchase the 9 ³/4% senior discount notes at acceptable prices, Cinemark Holdings, Inc. will use the net proceeds to repay term loan debt outstanding under the senior secured credit facility. Cinemark Holdings, Inc. has significant flexibility in applying the net proceeds from the offering. Pending the utilization of the net proceeds, Cinemark Holdings, Inc. expects to invest the proceeds in short-term, investment-grade marketable securities or money market obligations.

5. Acquisition of Century Theatres, Inc. and Related Refinancing of Certain Long-Term Debt

On October 5, 2006, the Company acquired Century Theatres, Inc. (“Century”), a national theatre chain headquartered in San Rafael, California with approximately 77 theatres in 12 states, for a purchase price of approximately $681,225 and the assumption of approximately $360,000 of debt of Century (“Century Acquisition”). Of the total purchase price, $150,000 consisted of the issuance of shares of Cinemark Holdings, Inc.’s common stock. The Company also incurred approximately $7,448 in transaction costs.

The transaction was accounted for under the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations”. The following table represents a preliminary allocation of purchase price to the assets acquired and liabilities assumed:


Current assets ⁽¹⁾	$	32,635
Fixed assets ⁽²⁾		548,451
Goodwill ⁽²⁾		640,436
Tradename		136,000
Other long term assets		4,956
Net unfavorable leases		(9,360	)
Current liabilities		(74,488	)
Other long term liabilities ⁽²⁾		(229,957	)

Total	$	1,048,673


⁽¹⁾		Includes cash of $7,290.

⁽²⁾		During the six months ended June 30, 2007, the Company adjusted its preliminary purchase price allocation to fixed assets (increase of $29,398), goodwill (decrease of $18,110) and other long term liabilities (increase of $11,288) due to additional information obtained regarding the fair value of these assets and liabilities acquired.

The tradename and net unfavorable leases are presented as intangible assets on the Company’s condensed consolidated balance sheets as of December 31, 2006 and June 30, 2007. Goodwill represents the excess of the costs of acquiring Century over amounts assigned to assets acquired, including identifiable intangible assets, and liabilities assumed. The goodwill recorded as a result of the Century Acquisition is not deductible for tax purposes.

On October 5, 2006, the Company entered into a new senior secured credit facility, which provided for a $1,120,000 term loan and a $150,000 revolving credit line. The net proceeds of the new term loan were used to fund a portion of the $531,225 cash portion of the purchase price, to pay off approximately $360,000 under Century’s existing senior credit facility and to refinance $253,500 under the Company’s existing senior secured credit facility. The Company used approximately $53,000 of its existing cash to fund the payment of the remaining portion of the purchase price and related

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

transaction expenses. Additionally, the Company advanced approximately $17,000 of cash to Century to satisfy working capital obligations.

The Century Acquisition is reflected in the Company’s condensed consolidated statements of income for the period subsequent to the transaction date and is reported in the Company’s U.S. operating segment.

6. Investment in National CineMedia and Transaction Related to its Initial Public Offering

In March 2005, Regal Entertainment Inc. (“Regal”) and AMC Entertainment Inc. (“AMC”) formed National CineMedia, LLC, or NCM, and on July 15, 2005, the Company joined NCM, as one of the founding members. NCM operates the largest digital in-theatre network in the U.S. for providing cinema advertising and non-film events and combines the cinema advertising and non-film events businesses of the three largest motion picture companies in the U.S. Upon joining NCM, the Company and NCM entered into an Exhibitor Services Agreement, pursuant to which NCM provides advertising, promotion and event services to the Company’s theatres. On February 13, 2007, National CineMedia, Inc., or 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. initial public offering, the Company amended its operating agreement with NCM and the Exhibitor Services Agreement pursuant to which NCM provides advertising, promotion and event services to the Company’s theatres. In connection with NCM Inc.’s initial public offering and the transactions described below (the “NCM Transaction”), the Company received an aggregate of $389,003.

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, the Company 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 Regal, AMC and the Company were redeemed on a pro-rata basis on February 13, 2007. NCM utilized the proceeds of its new $725,000 term loan facility and a portion of the proceeds it received from NCM, Inc. from its initial public offering to redeem all of its outstanding preferred units. Each preferred unit was redeemed for $13.7782 and the Company received approximately $195,092 as payment in full for redemption of all of the Company’s 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.

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 the Company 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. The Company sold 1,014,088 common units to NCM, Inc. for proceeds of $19,910, and upon completion of this sale of common units, the Company owned 13,145,349 common units of NCM. The net proceeds of $215,002 from the above described stock transactions were applied against the Company’s existing investment basis in NCM of $4,069 until such basis was reduced to $0 with the remaining $210,933 of proceeds net of $160 of transaction related costs, recorded as a gain of $210,773 in the condensed consolidated statement of income for the six months ended June 30, 2007.

NCM also paid the Company 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 the Company reflects a shift from circuit share expense under the prior Exhibitor Services Agreement, which obligated NCM to pay the Company a percentage of revenue, to the monthly theatre access fee described below. The theatre access fee will significantly reduce the contractual amounts paid to the Company by NCM. In exchange for the Company agreeing to so modify the agreement, NCM paid the Company approximately $174,001 upon modification of the Exhibitor Services Agreement on February 13, 2007, the proceeds of which were recorded as deferred revenue on the Company’s condensed consolidated balance sheet. The Company believes this payment approximates the fair value of the Exhibitor Services Agreement modification. The deferred revenue is being amortized into other revenues over the life of the agreement using the units of revenue method. Regal and AMC similarly amended their exhibitor service agreements with NCM.

In consideration for NCM’s exclusive access to the Company’s theatre attendees for on-screen advertising and use of off-screen locations within the Company’s theatres for the lobby entertainment network and lobby promotions, the

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Company 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 seven cents, 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 the end of fiscal 2011, and the payment per digital screen, initially eight hundred dollars 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 the Company 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 the Company’s beverage consessionaire, the Company is 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.

Prior to the initial public offering of NCM Inc. common stock, the Company’s ownership interest in NCM was approximately 25% and subsequent to the completion of the offering the Company held a 14% interest in NCM. Subsequent to NCM, Inc.’s initial public offering, the Company continues to account for its investment in NCM under the equity method of accounting due to its ability to exercise significant control over NCM. The Company has substantial rights as a founding member, including the right to designate a total of two nominees to the ten-member board of directors of NCM Inc., the sole manager. So long as the Company owns at least 5% of NCM’s membership interests, approval of at least 90% (80% if the board has less than 10 directors) will be required before NCM, Inc. may take certain actions including but not limited to mergers and acquisitions, issuance of common or preferred shares, approval of NCM, Inc.’s budget, incurrence of indebtedness, entering into or terminating material agreements, and modifications to its articles of incorporation or bylaws. Additionally, if any of the Company’s director designees are not appointed to the Board of Directors of NCM, Inc., nominated by NCM, Inc. or elected by NCM, Inc.’s stockholders, then the Company (so long as the Company continues to own at least 5% of NCM’s membership interest) will be entitled to approve certain actions of NCM including without limitation, approval of the budget, incurrence of indebtedness, consummating or amending material agreements, approving dividends, amending the NCM operating agreement, hiring or termination of the chief executive officer, chief financial officer, chief technology officer or chief marketing officer of NCM and the dissolution or liquidation of NCM.

During the six months ended June 30, 2007 and 2006, the Company recorded equity losses of $1,284 and $1,299, respectively. The Company recognized $4,402 and $10,444 of other revenue from NCM during the six months ended June 30, 2007 and 2006, respectively. The Company had a receivable due from NCM of $13,386 and $121 as of December 31, 2006 and June 30, 2007, respectively, related to screen advertising and other ancillary revenue. The Company is entitled to receive mandatory quarterly distributions of excess cash from NCM. During May 2007, the Company received its first quarterly distribution of approximately $1,362, which was in excess of the carrying value of its investment in NCM and is reflected as distributions from NCM on the condensed consolidated statement of income for the three and six months ended June 30, 2007.

As of June 30, 2007, the Company owned 13,145,349 common units of NCM. Each common unit is convertible into one share of NCM, Inc. common stock. As of June 30, 2007, the fair market value of the Company’s shares in NCM was approximately $368,201 based on a closing price of $28.01 per share of NCM, Inc. common stock on June 29, 2007.

7. Investment in Digital Cinema Implementation Partners

On February 12, 2007, the Company, AMC and Regal entered into a joint venture known as Digital Cinema Implementation Partners LLC (“DCIP”) to explore the possibility of implementing digital cinema in the Company’s theatres and to establish agreements with major motion picture studios for the implementation and financing of digital cinema. DCIP has also 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 the Company’s approval along with the Company’s partners, AMC and Regal. During the six months ended June 30, 2007, the Company invested $1,500 for a one-third ownership interest in DCIP. The Company is accounting for its investment in DCIP under the equity method of accounting. During the six months ended June 30, 2007, the Company recorded an equity loss of approximately $235 relating to this investment. The Company’s investment basis in DCIP was $1,265 at June 30, 2007, which is included in investments in and advances to affiliates on the condensed consolidated balance sheet.

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

8. Sale of Investment in Fandango, Inc.

In May 2007, Fandango, Inc., an on-line ticketing distributor, executed a merger agreement, which resulted in the Company selling its investment in stock of Fandango, Inc. for approximately $14,147 of consideration (the “Fandango Transaction”). Approximately $1,535 of the consideration was held in escrow to secure certain indemnification obligations contained in the merger agreement, which is included in accounts receivable on the condensed consolidated balance sheet. The Company paid $2,800 of the cash consideration to Syufy Enterprises, LP in accordance with the terms of agreements entered into as part of the Century Acquisition. The carrying value of the Company’s investment in stock of Fandango, Inc. was $2,142. As a result of the sale of its investment, the Company recorded a gain of $9,205 in the condensed consolidated statement of income for the three and six months ended June 30, 2007.

As part of the sale of its investment in stock of Fandango, Inc., the Company amended its exclusive ticketing and distribution agreement with Fandango, Inc. Certain sections of the agreement were modified in which the Company no longer is entitled to receive additional shares of stock in Fandango, Inc. nor share in future adjusted profits of Fandango, Inc. In exchange for the amendment, Fandango, Inc. paid the Company $5,000. The proceeds of $5,000 were recorded as deferred revenue on the Company’s condensed consolidated balance sheet and are being amortized over the term of the amended ticketing and distribution agreement.

In accordance with the terms of its new senior secured credit facility, the Company used approximately $9,914 of the net proceeds to pay down its term loan. The payment was made on August 10, 2007 and was applied against the current portion of long-term debt.

9. Income Taxes

On May 18, 2006, the State of Texas enacted legislation to replace the current franchise tax with a new margin tax to be effective January 1, 2008. The Company estimates the new margin tax will not have a significant impact on its income tax expense or its deferred tax assets and liabilities.

The Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized an increase to its liability for uncertain tax positions of approximately $1,093, which was accounted for as a cumulative effect on beginning retained earnings on January 1, 2007. At the adoption date, the Company had approximately $12,084 of total unrecognized tax benefits. Of this total, $7,931 represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 1, 2007, the Company had $1,572 accrued for interest and/or penalties.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and multiple state and foreign jurisdictions, and the Company is routinely under audit by many different tax authorities. Management believes that its accrual for tax liabilities is adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. The Company is no longer subject to income tax audits from the Internal Revenue Service for years before 2002. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2002. The Company is no longer subject to non-U.S. income tax examinations by tax authorities in its major non-U.S. tax jurisdictions for years before 1998.

Income tax expense of $8,937 was recorded for the six months ended June 30, 2007. The effective tax rate was 5.1% for the six months ended June 30, 2007. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items occurring during the interim period. As a result of the full inclusion in the interim rate calculation of these items, the interim rate may vary significantly from the normalized annual rate. The Company’s income tax rate for the six months ended June 30, 2007 includes the impact of the gain on the NCM transaction and the Fandango transaction as discreet items. The tax rate on the gains was 38.4%, which resulted in $84,509 of income tax expense. The tax rate without the NCM Transaction and the Fandango Transaction is 163.6% resulting in a benefit of $75,572 for the six months ended June 30, 2007. This rate is reflective of permanent differences such as goodwill impairment, which is recorded for financial statement purposes but not deductible for income tax purposes.

10. Stock Options

During September 2004, Cinemark, Inc.’s board of directors approved the 2004 Long Term Incentive Plan (the “2004 Plan”), under which 9,097,360 shares of Class A common stock are available for issuance to selected employees, directors and consultants of the Company. The 2004 Plan provided for restricted share grants, incentive option grants and nonqualified option grants.

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

On September 30, 2004, the Company granted options to purchase 6,986,731 shares of its common stock under the 2004 Plan at an exercise price of $7.63 per option (equal to the market value at the date of grant). Options to purchase 692,976 shares vested immediately and the remaining options granted in 2004 vest daily over the period ending April 1, 2009 and expire ten years from the grant date. On January 28, 2005, the Company granted options to purchase 12,055 shares of its common stock under the 2004 Plan at an exercise price of $7.63 per option (equal to the market value at the date of grant). The options granted during January 2005 vest daily over five years and the options expire ten years from the grant date.

For each 2004 and 2005 grant, the fair values of the options were estimated on the dates of grant using the Black-Scholes option-pricing model with the following assumptions:


	September 30, 2004			January 28, 2005
	Grant			Grant
Expected life	6.5		years	6.5		years
Expected volatility ⁽¹⁾		39	%		44	%
Risk-free interest rate		3.79	%		3.93	%
Dividend yield		0	%		0	%


⁽¹⁾		Expected volatility is based on historical volatility of the common stock price of comparable public companies.

Forfeitures were estimated based on the Company’s historical stock option activity.

On August 2, 2006, Cinemark Holdings, Inc. was formed as the Delaware holding company of Cinemark, Inc. Under a share exchange agreement dated August 8, 2006, each outstanding share of Cinemark, Inc.’s common stock was exchanged for an equivalent number of shares of Cinemark Holdings, Inc. common stock. The share exchange was completed on October 5, 2006.

In November 2006, Cinemark Holdings, Inc.’s board of directors amended the 2004 Plan to provide that no additional awards may be granted under the 2004 Plan. At that time, the board of directors of Cinemark Holdings, Inc. and the majority of its stockholders approved the Cinemark Holdings, Inc. 2006 Long Term Incentive Plan (the “2006 Plan”) and all options to purchase shares of Cinemark, Inc.’s common stock under the 2004 Plan were exchanged for an equal number of options to purchase shares of Cinemark Holdings, Inc.’s common stock under the 2006 Plan. The 2006 Plan is substantially similar to the 2004 Plan.

All stock option information has been adjusted to give effect to a 2.9585-for-1 stock split effected by Cinemark Holdings, Inc. on April 9, 2007.

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

A summary of Plan activity and related information for the year ended December 31, 2006 and the six months ended June 30, 2007 is as follows:


				Weighted
				Average
	Number of			Exercise
	Options			Price
Outstanding at 1/1/06		6,998,786		$	7.63
Granted		—		$	—
Exercised		(4,603	)	$	7.63
Forfeited		(13,590	)	$	7.63

Outstanding at 12/31/06		6,980,593		$	7.63

Granted		—		$	—
Exercised		(15,387	)	$	7.63
Forfeited		(65,002	)	$	7.63

Outstanding at 6/30/07		6,900,204		$	7.63


Options exercisable at 6/30/07		4,498,973		$	7.63

The Company recorded compensation expense of $1,449 and a tax benefit of approximately $502 during the six months ended June 30, 2007 and recorded compensation expense of $1,432 and a tax benefit of approximately $502 during the six months ended June 30, 2006. As of June 30, 2007, the unrecognized compensation expense related to outstanding stock options was $5,012 and the weighted average period over which this remaining compensation expense will be recognized is approximately 1.75 years. All options outstanding at June 30, 2007 have an average remaining contractual life of approximately 7.25 years.

11. Early Retirement of Long-Term Debt

On March 6, 2007, the Company 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 its 9% senior subordinated notes, of which $332,250 aggregate principal amount remained outstanding. In connection with the tender offer, the Company solicited consents for certain proposed amendments to the indenture to remove substantially all restrictive covenants and certain events of default provisions. On March 20, 2007, the early settlement date, approximately $332,000 aggregate principal amount of the 9% senior subordinated notes were tendered and repurchased by the Company for approximately $360,164, including accrued interest and premiums paid. The Company funded the repurchase with the net proceeds received from the NCM Transaction (see Note 6).

On March 20, 2007, the Company and the Bank of New York Trust Company, N.A. as trustee to the Indenture dated February 11, 2003, executed the Fourth Supplemental Indenture. The Fourth Supplemental Indenture became effective on March 20, 2007 and it amends the Indenture by eliminating substantially all restrictive covenants and certain events of default provisions.

On April 3, 2007, the Company repurchased an additional $66 aggregate principal amount of the 9% senior subordinated notes tendered after the early settlement date. As of June 30, 2007, the Company had outstanding $184 aggregate principal amount of 9% senior subordinated notes.

The Company recorded a loss on early retirement of debt of $7,952 during the six months ended June 30, 2007 related to the repurchases, which consisted of tender offer repurchase costs, including premiums paid and other fees, and the write-off of unamortized debt issue costs, partially offset by the write-off of the unamortized bond premium.

The loss on early retirement of debt of $3,315 recorded by the Company during the six months ended June 30, 2006 related to the repurchase of $10,000 aggregate principal amount of 9% senior subordinated notes and the repurchase of $39,775 aggregate principal amount at maturity of 9 ³/4% senior discount notes in May 2006.

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

12. Interest Rate Swap Agreements

During March 2007, the Company entered into two interest rate swap agreements with effective dates of August 13, 2007 and terms of five years each. The interest rate swaps were designated to hedge approximately $500,000 of the Company’s variable rate debt obligations under its senior secured credit facility. Under the terms of the interest rate swap agreements, the Company pays fixed rates of 4.918% and 4.922% on $375,000 and $125,000, respectively, of variable rate debt and receives interest at a variable rate based on the 3-month LIBOR. The 3-month LIBOR rate on each reset date determines the variable portion of the interest rate swaps for the three-month period following the reset date. No premium or discount was incurred upon the Company entering into the interest rate swaps because the pay and receive rates on the interest rate swaps represented prevailing rates for each counterparty at the time the interest rate swaps were consummated. The interest rate swaps qualify for cash flow hedge accounting treatment in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and as such, the Company has effectively hedged its exposure to variability in the future cash flows attributable to the 3-month LIBOR on $500,000 of variable rate debt. The change in the fair values of the interest rate swaps is recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’ gains or losses reported as a component of other comprehensive income (loss) and the ineffective portion reported in earnings.

As of June 30, 2007, the interest rate swaps were an asset with an aggregate fair value of approximately $10,426, which has been recorded as a component of deferred charges and other assets - - net with a corresponding amount of $10,426 ($6,422 net of deferred taxes) recorded as an increase in accumulated other comprehensive income on the Company’s condensed consolidated balance sheet. The interest rate swaps exhibited no ineffectiveness during the six months ended June 30, 2007.

13. Goodwill and Other Intangible Assets

The Company’s goodwill was as follows:


	U.S.			International
	Operating			Operating
	Segment			Segment			Total
Balance at December 31, 2006	$	1,056,816		$	148,607		$	1,205,423
Purchase price allocation adjustment for Century Acquisition (see Note 5)		(18,110	)		—			(18,110	)
Impairment charges		(41,322	)		(3,786	)		(45,108	)
Foreign currency translation adjustments and other		—			8,086			8,086

Balance at June 30, 2007	$	997,384		$	152,907		$	1,150,291

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, the Company reviews goodwill for impairment on an annual basis at fiscal year-end or whenever events or changes in circumstances indicate the carrying value of goodwill might exceed its estimated fair value.

As a result of the NCM Transaction discussed in Note 6, and more specifically the modification of the NCM Exhibitor Services Agreement with the Company, which significantly reduced the contractual amounts paid to the Company, the Company evaluated the carrying value of its goodwill as of March 31, 2007 resulting in the majority of the goodwill impairment charges reflected above in the table.

The Company evaluates goodwill for impairment at the reporting unit level (generally a theatre) and has allocated goodwill to the reporting unit based on an estimate of its relative fair value. The evaluation is a two-step approach requiring the Company to compute the estimated fair value of a theatre and compare it with its carrying value. If the carrying value exceeds estimated fair value, a second step is performed to measure the potential goodwill impairment. Fair values are determined based on a multiple of undiscounted cash flows, which was eight times for the evaluation performed as of March 31, 2007. 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. The Company’s policy

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

of allocating goodwill at the theatre level 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.

Intangible assets consisted of the following:


										Foreign
										Currency
										Translation
	Balance at									Adjustments			Balance at
	December 31,									and			June 30,
	2006			Amortization			Impairment			Other			2007
Intangible assets with finite lives:
Capitalized licensing fees:
Gross carrying amount	$	5,138		$	—		$	—		$	—		$	5,138
Accumulated amortization		(1,139	)		(213	)		—			—			(1,352	)

Net carrying amount	$	3,999		$	(213	)	$	—		$	—		$	3,786

Vendor contracts:
Gross carrying amount	$	56,526			—			—			362			56,888
Accumulated amortization		(19,924	)		(1,739	)		—			—			(21,663	)

Net carrying amount	$	36,602		$	(1,739	)	$	—		$	362		$	35,225

Net favorable leases:
Gross carrying amount		21,999			—			(3,700	)		3,115			21,414
Accumulated amortization		(12,023	)		(1,559	)		—			(489	)		(14,071	)

Net carrying amount	$	9,976		$	(1,559	)	$	(3,700	)	$	2,626		$	7,343

Other intangible assets:
Gross carrying amount		70			—			—			2			72
Accumulated amortization		(16	)		(2	)		—			—			(18	)

Net carrying amount	$	54		$	(2	)	$	—		$	2		$	54

Total net intangible assets with finite lives	$	50,631		$	(3,513	)	$	(3,700	)	$	2,990		$	46,408
Intangible assets with indefinite lives:
Tradename		310,118			—			—			338			310,456
Other unamortized intangible assets		3			—			—			—			3

Total intangible assets — net	$	360,752		$	(3,513	)	$	(3,700	)	$	3,328		$	356,867

Aggregate amortization expense of $3,588 for the six months ended June 30, 2007 consisted of $3,513 of amortization of intangible assets and $75 of amortization of other assets. Estimated aggregate future amortization expense for intangible assets is as follows:


For the six months ended December 31, 2007	$	4,112
For the twelve months ended December 31, 2008		6,462
For the twelve months ended December 31, 2009		5,664
For the twelve months ended December 31, 2010		5,266
For the twelve months ended December 31, 2011		4,698
Thereafter		20,206

Total	$	46,408

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

14. Impairment of Long-Lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company reviews long-lived assets for impairment on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable.

The Company considers actual theatre level cash flows, future years budgeted theatre level cash flows, theatre property and equipment carrying values, theatre goodwill carrying values, amortizing intangible assets 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 in its assessment of impairment of individual theatre assets. Long-lived assets are evaluated for impairment on an individual theatre basis, which the Company believes is the lowest applicable level for which there are identifiable cash flows. The impairment evaluation is based on the estimated undiscounted cash flows from continuing use through the remainder of the theatre’s useful life. The remainder of the useful life correlates with the available remaining lease period, 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, the Company then compares the carrying value of the asset with its estimated fair value. Fair value is determined based on a multiple of undiscounted cash flows, which was eight times for the evaluation performed as of June 30, 2007. 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.

The Company’s long-lived asset impairment losses for the six months ended June 30, 2007 were as follows:


United States theatre properties	$	7,941
International theatre properties		17

Subtotal	$	7,958
Intangible assets (see Note 13)		3,700
Goodwill (see Note 13)		45,108

Impairment of long-lived assets	$	56,766

15. Foreign Currency Translation

The accumulated other comprehensive income account in stockholders’ equity of $11,463 and $35,013 at December 31, 2006 and June 30, 2007, respectively, includes the cumulative foreign currency adjustments from translating the financial statements of the Company’s international subsidiaries into U.S. dollars.

In 2007 and 2006, all foreign countries where the Company has operations were deemed non-highly inflationary. Thus, any fluctuation in the currency results in a foreign currency translation adjustment to the accumulated other comprehensive income account recorded as an increase in, or reduction of, stockholders’ equity.

On June 30, 2007, the exchange rate for the Brazilian real was 1.93 reais to the U.S. dollar (the exchange rate was 2.14 reais to the U.S. dollar at December 31, 2006). As a result, the effect of translating the June 30, 2007 Brazilian financial statements into U.S. dollars is reflected as a foreign currency translation adjustment to the accumulated other comprehensive income account as an increase in stockholders’ equity of $15,859. At June 30, 2007, the total assets of the Company’s Brazilian subsidiaries were U.S. $184,669.

On June 30, 2007, the exchange rate for the Mexican peso was 10.80 pesos to the U.S. dollar (the exchange rate was 10.82 pesos to the U.S. dollar at December 31, 2006). As a result, the effect of translating the June 30, 2007 Mexican financial statements into U.S. dollars is reflected as a foreign currency translation adjustment to the accumulated other

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

comprehensive income account as an increase in stockholders’ equity of $183. At June 30, 2007, the total assets of the Company’s Mexican subsidiaries were U.S. $159,555.

16. Comprehensive Income

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the condensed consolidated financial statements. The Company’s comprehensive income was as follows:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2007 (Successor)		2006 (Predecessor)			2007 (Successor)		2006 (Predecessor)

Net income	$	46,539	$	13,923		$	164,843	$	21,093
Fair value adjustments on interest rate swap agreements (see Note 12)		7,629		—			6,422		—
Foreign currency translation adjustment		15,257		(4,466	)		17,127		(2,011	)

Comprehensive income	$	69,425	$	9,457		$	188,392	$	19,082

17. Supplemental Cash Flow Information

The following is provided as supplemental information to the condensed consolidated statements of cash flows:


	Six Months Ended
	June 30,
	2007 (Successor)			2006 (Predecessor)

Cash paid for interest	$	69,477		$	26,196
Cash paid for income taxes, net of refunds received	$	80,158		$	19,567

Noncash investing and financing activities:
Change in construction lease obligations related to construction of theatres	$	(2,429	)	$	(2,151	)
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment	$	(845	)	$	(2,356	)
Equipment acquired under capital lease	$	2,943		$	—

18. Segments

The Company identifies its international market and its U.S. market as separate reportable operating segments. The international segment consists of operations in Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. The U.S. segment includes U.S. and Canada operations. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues, primarily screen advertising. Adjusted EBITDA, as defined below in the reconciliation table, is the primary measure of segment profit and loss the Company uses to evaluate performance and allocate its resources. The Company’s management evaluates the performance of its assets on a consolidated basis.

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Below is a breakdown of selected financial information by reportable operating segment:


	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	(Successor)			(Predecessor)			(Successor)			(Predecessor)

Revenues
U.S.	$	349,043		$	215,956		$	655,418		$	396,996
International		91,790			79,638			164,051			144,962
Eliminations		(797	)		(489	)		(1,411	)		(864	)

Total Revenues	$	440,036		$	295,105		$	818,058		$	541,094


Adjusted EBITDA
U.S.	$	74,895		$	51,071		$	141,689		$	89,389
International		20,871			17,836			34,264			29,136

Total Adjusted EBITDA	$	95,766		$	68,907		$	175,953		$	118,525


Capital Expenditures
U.S.	$	28,148		$	21,566		$	53,045		$	45,399
International		12,935			5,251			20,103			9,665

Total Capital Expenditures	$	41,083		$	26,817		$	73,148		$	55,064

The following table sets forth a reconciliation of net income to Adjusted EBITDA:


	Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007			2006
	(Successor)			(Predecessor)		(Successor)			(Predecessor)

Net income	$	46,539		$	13,923	$	164,843		$	21,093
Add (deduct):
Income taxes		(26,456	)		7,349		8,937			4,881
Interest expense ⁽¹⁾		35,301			22,904		76,798			45,967
Gain on NCM transaction		—			—		(210,773	)		—
Gain on Fandango transaction		(9,205	)		—		(9,205	)		—
Other (income) expense		(2,577	)		2,004		2,769			1,511
Termination of profit participation agreement		6,952			—		6,952			—
Depreciation and amortization		36,720			19,968		73,595			40,094
Amortization of net favorable leases		625			43		1,559			86
Impairment of long-lived assets		7,036			647		56,766			923
(Gain) loss on sale of assets and other		(1,864	)		815		(1,559	)		1,543
Deferred lease expenses		1,704			237		3,311			413
Amortization of long-term prepaid rents		275			301		511			582
Stock option compensation expense		716			716		1,449			1,432

Adjusted EBITDA	$	95,766		$	68,907	$	175,953		$	118,525


⁽¹⁾		Includes amortization of debt issue costs.

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Financial Information About Geographic Areas

The Company has operations in the U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia, which are reflected in the condensed consolidated financial statements. Below is a breakdown of selected financial information by geographic area:


	Three Months Ended June 30,						Six Months Ended June 30,
Revenues	2007			2006			2007			2006
	(Successor)			(Predecessor)			(Successor)			(Predecessor)

U.S. and Canada	$	349,043		$	215,956		$	655,418		$	396,996
Brazil		41,613			35,589			76,025			64,417
Mexico		21,209			19,770			37,888			36,295
Other foreign countries		28,968			24,279			50,138			44,250
Eliminations		(797	)		(489	)		(1,411	)		(864	)

Total	$	440,036		$	295,105		$	818,058		$	541,094


	June 30,		December 31,
Theatre Properties and Equipment-net	2007		2006

U.S. and Canada	$	1,172,530	$	1,169,456
Brazil		69,884		55,749
Mexico		49,864		51,272
Other foreign countries		46,288		48,095

Total	$	1,338,566	$	1,324,572

19. Related Party Transactions

The Company entered into an amended and restated profit participation agreement on March 12, 2004 with its CEO, Alan Stock, which became effective on April 2, 2004, and amended the profit participation agreement with Mr. Stock in effect since May 2002. Under the agreement, Mr. Stock received a profit interest in two theatres once the Company recovered its capital investment in these theatres plus its borrowing costs. Upon consummation of Cinemark Holdings, Inc.’s initial public offering on April 24, 2007, the Company exercised its option to terminate the amended and restated profit participation agreement and purchased Mr. Stock’s interest in the theatres on May 3, 2007 for a price of $6,853 pursuant to the terms of the agreement. The Company also paid payroll taxes of approximately $99 related to the payment made to terminate the amended and restated profit participation agreement. The aggregate amount paid of $6,952 is reflected within cost of operations in the Company’s condensed consolidated statement of income for the three and six months ended June 30, 2007 and the agreement with Mr. Stock has been terminated.

The Company leases 25 theatres and two parking facilities from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy, which owns approximately 7.7% of Cinemark Holdings, Inc.’s issued and outstanding shares of common stock as of June 30, 2007. Raymond Syufy is one of Cinemark Holdings, Inc.’s directors and is an officer of the general partner of Syufy. Of these 27 leases, 22 have fixed minimum annual rent in an aggregate amount of approximately $23,500. Of these 22 leases with fixed minimum annual rent, 17 have a remaining lease term plus extension option(s) that exceed 30 years, four have a remaining lease term plus extension option(s) that exceed 18 years, and one has a remaining lease term of approximately three years. Three of these 22 leases have triggering events that allow the Company to convert the fixed minimum rent to a fixed percentage of gross sales as defined in the lease with the further right to terminate the lease if the theatre level cash flow drops below $0. Five of these 22 leases have triggering events that allow the Company to terminate the lease prior to expiration of the term. The five leases without minimum annual rent have rent based upon a specified percentage of gross sales as defined in the lease with no minimum annual rent. Four of these percentage rent leases have remaining terms of 3 months plus automatic 12 month renewal options, and the Company has the right to terminate the lease if the theatre level cash flow drops below $0. One of these percentage rent leases has a remaining term of 15 months, and Syufy has the right to terminate this lease prior to the end of the term.

The Company also has an office lease with Syufy for corporate office space in San Rafael, California. The lease will expire in September 2008. The lease has a fixed minimum annual rent of approximately $300.

Prior to the completion of the Century Acquisition, Century Theatres, Inc. owned certain shares of Fandango, Inc., an on-line ticketing distributor. In connection with the Century Acquisition, the Company agreed to pay Syufy

CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

the cash proceeds received by the Company in connection with any sale of such shares of Fandango, Inc. up to a maximum amount of $2,800. As discussed in Note 8, the Company sold all of its shares of Fandango, Inc. stock during May 2007 for approximately $14,147 of consideration and paid $2,800 of the cash consideration to Syufy in accordance with the Century Acquisition agreement.

The Company manages one theatre for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5% of annual theatre revenues up to $50,000 and 3% of annual theatre revenues in excess of $50,000. The Company recorded $39 of management fee revenues during the six months ended June 30, 2007. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.

The Company leases one theatre from Plitt Plaza Joint Venture (“Plitt Plaza”). Plitt Plaza is indirectly owned by Lee Roy Mitchell. Annual rent is approximately $118 plus certain taxes, maintenance expenses and insurance. The Company recorded $62 of facility lease expense payable to Plitt Plaza joint venture during the six months ended June 30, 2007.

20. Commitments and Contingencies

From time to time, the Company is involved in various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters and contractual disputes, most of which are covered by insurance. The Company believes its potential liability with respect to proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.

21. Subsequent Event – Dividend Declaration

On August 13, 2007, Cinemark Holdings, Inc., the Company’s parent, declared a dividend of $0.13 per common share payable to stockholders of record on September 4, 2007. The dividend will be paid on September 18, 2007.

22. Subsequent Event – Repurchase of Senior Discount Notes

During July and August 2007, as part of six open market purchases, the Company repurchased $47,000 aggregate principal amount at maturity of its 9 ³/4% senior discount notes for approximately $42,758. The Company funded the transactions with proceeds from Cinemark Holdings, Inc.’s initial public offering. As a result of the transactions, the Company will record a loss on early retirement of debt of approximately $3,484, which includes premiums paid and the write-off of unamortized debt issue costs related to the repurchased notes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes and schedules included elsewhere in this report.

Results of Operations

On October 5, 2006, we completed the Century Acquisition. Results of operations for the three months and six months ended June 30, 2006 do not reflect the inclusion of the Century theatres.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
Operating data (in millions)	2007			2006			2007			2006

Revenues
Admissions	$	283.1		$	182.9		$	527.1		$	336.5
Concession		138.4			91.9			253.5			170.0
Other		18.5			20.3			37.4			34.6

Total revenues	$	440.0		$	295.1		$	818.0		$	541.1


Theatre operating costs ⁽¹⁾
Film rentals and advertising	$	159.1		$	100.3		$	287.4		$	179.2
Concession supplies		22.7			14.8			40.1			26.8
Salaries and wages		45.4			27.0			85.6			51.5
Facility lease expense		53.3			36.6			104.9			72.5
Utilities and other		48.2			33.3			92.4			65.5

Total theatre operating costs	$	328.7		$	212.0		$	610.4		$	395.5


Operating data as a percentage of revenues ⁽²⁾
Revenues
Admissions		64.3	%		62.0	%		64.4	%		62.2	%
Concession		31.5	%		31.1	%		31.0	%		31.4	%
Other		4.2	%		6.9	%		4.6	%		6.4	%

Total revenues		100.0	%		100.0	%		100.0	%		100.0	%


Theatre operating costs ^{(1) (2)}
Film rentals and advertising		56.2	%		54.8	%		54.5	%		53.3	%
Concession supplies		16.4	%		16.1	%		15.8	%		15.8	%
Salaries and wages		10.3	%		9.1	%		10.5	%		9.5	%
Facility lease expense		12.1	%		12.4	%		12.8	%		13.4	%
Utilities and other		11.0	%		11.3	%		11.3	%		12.1	%
Total theatre operating costs		74.7	%		71.8	%		74.6	%		73.1	%

Average screen count (month end average)		4,521			3,383			4,504			3,360

Revenues per average screen (in dollars)	$	97,326		$	87,225		$	181,612		$	161,026


⁽¹⁾		Excludes depreciation and amortization expense.

⁽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.

Three months ended June 30, 2007 and 2006

Revenues. Total revenues increased $144.9 million to $440.0 million for the three months ended June 30, 2007 (“second quarter of 2007”) from $295.1 million for the three months ended June 30, 2006 (“second quarter of 2006”), a 49.1% 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.


								International Operating
	U.S. Operating Segment							Segment							Consolidated
	Three Months Ended							Three Months Ended							Three Months Ended
	June 30,							June 30,							June 30,
					%							%							%
	2007		2006		Change			2007		2006		Change			2007		2006		Change
Admissions revenues (in millions)	$	225.2	$	131.4		71.4	%	$	57.9	$	51.5		12.4	%	$	283.1	$	182.9		54.8	%
Concession revenues (in millions)	$	112.7	$	70.3		60.3	%	$	25.7	$	21.6		19.0	%	$	138.4	$	91.9		50.6	%
Other revenues (in millions) ⁽¹⁾	$	10.3	$	13.8		(25.4	)%	$	8.2	$	6.5		26.2	%	$	18.5	$	20.3		(8.9	)%
Total revenues (in millions) ⁽¹⁾	$	348.2	$	215.5		61.6	%	$	91.8	$	79.6		15.3	%	$	440.0	$	295.1		49.1	%
Attendance (in millions)		38.9		28.3		37.5	%		16.8		16.6		1.2	%		55.7		44.9		24.1	%
Revenues per screen (in dollars) ⁽¹⁾	$	97,870	$	87,659		11.6	%	$	95,317	$	86,072		10.7	%	$	97,326	$	87,225		11.6	%


⁽¹⁾		U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 18 of our condensed consolidated financial statements.

•		Consolidated. The increase in admissions revenues of $100.2 million was attributable to a 24.1% increase in attendance from 44.9 million patrons for the second quarter of 2006 to 55.7 million patrons for the second quarter of 2007, which contributed $49.6 million, and a 25.1% increase in average ticket price from $4.07 for the second quarter of 2006 to $5.09 for the second quarter of 2007, which contributed $50.6 million. The increase in concession revenues of $46.5 million was attributable to the 24.1% increase in attendance, which contributed $26.5 million, and a 21.5% increase in concession revenues per patron from $2.05 for the second quarter of 2006 to $2.49 for the second quarter of 2007, which contributed $20.0 million. The increases in admissions revenues, concession revenues, attendance, average ticket prices and concession revenues per patron were primarily a result of the 77 Century theatres acquired during the fourth quarter of 2006. The $1.8 million, or 8.9% decrease in other revenues was primarily attributable to reduced screen advertising revenues which resulted from the NCM transaction and related Exhibitor Services Agreement amendment.

•		U.S. The increase in admissions revenues of $93.8 million was attributable to a 37.5% increase in attendance from 28.3 million patrons for the second quarter of 2006 to 38.9 million patrons for the second quarter of 2007, which contributed $49.2 million, and a 24.8% increase in average ticket price from $4.64 for the second quarter of 2006 to $5.79 for the second quarter of 2007, which contributed $44.6 million. The increase in concession revenues of $42.4 million was attributable to the 37.5% increase in attendance, which contributed $26.4 million, and a 16.5% increase in concession revenues per patron from $2.49 for the second quarter of 2006 to $2.90 for the second quarter of 2007, which contributed $16.0 million. The increases in admissions revenues, concession revenues, attendance, average ticket prices and concession revenues per patron were primarily a result of the 77 Century theatres acquired. The $3.5 million, or 25.4% decrease in other revenues was primarily attributable to reduced screen advertising revenues which resulted from the NCM transaction and related Exhibitor Services Agreement amendment.

•

International. The increase in admissions revenues of $6.4 million was attributable to an 11.6% increase in average ticket price from $3.10 for the second quarter of 2006 to $3.46 for the second quarter of 2007, which contributed $6.0 million, and a 1.2% increase in attendance, which contributed $0.4 million. The increase in concession revenues of $4.1 million was attributable to an 18.5% increase in concession revenues per patron from $1.30 for the second quarter of 2006 to $1.54 for the second quarter of 2007, which contributed $4.0 million, and a 1.2% increase in attendance, which contributed $0.1 million. The increases in average ticket price and concession revenues per patron were primarily due to price increases and exchange rates. The increase in attendance was primarily due to new theatre openings.

Theatre Operating Costs (excludes depreciation and amortization expense). Theatre operating costs were $328.7 million, or 74.7% of revenues, for the second quarter of 2007 compared to $212.0 million, or 71.8% of revenues, for the second quarter of 2006. The table below, presented by reportable operating segment, summarizes our year-over-year theatre operating costs.


					International Operating
	U.S. Operating Segment				Segment				Consolidated
	Three Months Ended				Three Months Ended				Three Months Ended
	June 30,				June 30,				June 30,
	2007		2006		2007		2006		2007		2006
Film rentals and advertising	$	129.7	$	73.9	$	29.4	$	26.4	$	159.1	$	100.3
Concession supplies		16.3		9.2		6.4		5.6		22.7		14.8
Salaries and wages		38.6		21.3		6.8		5.7		45.4		27.0
Facility lease expense		40.3		25.5		13.0		11.1		53.3		36.6
Utilities and other		36.3		24.2		11.9		9.1		48.2		33.3

Total theatre operating costs	$	261.2	$	154.1	$	67.5	$	57.9	$	328.7	$	212.0

•		Consolidated. Film rentals and advertising costs were $159.1 million, or 56.2% of admissions revenues, for the second quarter of 2007 compared to $100.3 million, or 54.8% of admissions revenues, for the second quarter of 2006. The increase in film rentals and advertising costs of $58.8 million is due to a $100.2 million increase in admissions revenues, and an increase in our film rentals and advertising rate. The increase in film rentals and advertising costs as a percentage of admissions revenues was due to higher film rental rates on certain blockbuster films released during the second quarter of 2007, three of which grossed over $100 million domestically during their opening weekends. Concession supplies expense was $22.7 million, or 16.4% of concession revenues, for the second quarter of 2007, compared to $14.8 million, or 16.1% of concession revenues, for the second quarter of 2006. The increase in concession supplies expense was primarily due to the 77 Century theatres acquired.

		Salaries and wages increased to $45.4 million for the second quarter of 2007 from $27.0 million for the second quarter of 2006. Facility lease expense increased to $53.3 million for the second quarter of 2007 from $36.6 million for the second quarter of 2006. Utilities and other costs increased to $48.2 million for the second quarter of 2007 from $33.3 million for the second quarter of 2006. Increases in salaries and wages, facility lease expense and utilities and other costs were primarily due to the additional costs related to the 77 Century theatres acquired and new theatre openings. Salaries and wages expense was also impacted by minimum wage increases in certain U.S. states in which we operate.

•		U.S. Film rentals and advertising costs were $129.7 million, or 57.6% of admissions revenues, for the second quarter of 2007 compared to $73.9 million, or 56.2% of admissions revenues, for the second quarter of 2006. The increase in film rentals and advertising costs of $55.8 million is due to a $93.8 million increase in admissions revenues, and an increase in our film rentals and advertising rate. The increase in film rentals and advertising costs as a percentage of admissions revenues was due to higher film rental rates on certain blockbuster films released during the second quarter of 2007, three of which grossed over $100 million domestically during their opening weekends. Concession supplies expense was $16.3 million, or 14.5% of concession revenues, for the second quarter of 2007 compared to $9.2 million, or 13.1% of concession revenues, for the second quarter of 2006. The increase in concession supplies expense was primarily due to the 77 Century theatres acquired.

		Salaries and wages increased to $38.6 million for the second quarter of 2007 from $21.3 million for the second quarter of 2006. Facility lease expense increased to $40.3 million for the second quarter of 2007 from $25.5 million

		for the second quarter of 2006. Utilities and other costs increased to $36.3 million for the second quarter of 2007 from $24.2 million for the second quarter of 2006. Increases in salaries and wages, facility lease expense and utilities and other costs, were primarily due to the additional costs related to the 77 Century theatres acquired and new theatre openings. Salaries and wages expense was also impacted by minimum wage increases in certain U.S. states in which we operate.

•		International. Film rentals and advertising costs were $29.4 million, or 50.8% of admissions revenues, for the second quarter of 2007 compared to $26.4 million, or 51.3% of admissions revenues, for the second quarter of 2006. The increase in film rentals and advertising costs is primarily due to increased admissions revenues. Concession supplies expense was $6.4 million, or 24.9% of concession revenues, for the second quarter of 2007 compared to $5.6 million, or 25.9% of concession revenues, for the second quarter of 2006. The increase in concession supplies expense was primarily due to increased concession revenues.

		Salaries and wages increased to $6.8 million for the second quarter of 2007 from $5.7 million for the second quarter of 2006 primarily due to new theatre openings. Facility lease expense increased to $13.0 million for the second quarter of 2007 from $11.1 million for the second quarter of 2006 primarily due to new theatre openings. Utilities and other costs increased to $11.9 million for the second quarter of 2007 from $9.1 million for the second quarter of 2006 primarily due to new theatre openings.

General and Administrative Expenses. General and administrative expenses increased to $18.3 million for the second quarter of 2007 from $15.4 million for the second quarter of 2006. The increase was primarily due to increased salaries, consulting fees, and increased service charges related to credit card activity, all of which increased, in part, as a result of the Century Acquisition.

Termination of Profit Participation Agreement. Upon consummation of our initial public offering on April 24, 2007, we exercised our option to terminate the amended and restated profit participation agreement with our CEO Alan Stock and purchased Mr. Stock’s interest in the theatres on May 3, 2007 for a price of $6.9 million pursuant to the terms of the agreement. In addition, the Company incurred $0.1 million of payroll taxes related to the termination. See Note 19 to our condensed consolidated financial statements.

Depreciation and Amortization. Depreciation and amortization expense, including amortization of favorable leases, increased to $37.3 million for the second quarter of 2007 from $20.0 million for the second quarter of 2006 primarily due to the 77 Century theatres acquired.

Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $7.0 million for the second quarter of 2007 compared to $0.6 million during the second quarter of 2006. Impairment charges for the second quarter of 2007 consisted of $1.6 million of theatre properties, $4.3 million of goodwill associated with theatre properties and $1.1 million of intangible assets 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 13 and 14 to our condensed consolidated financial statements.

(Gain) Loss on Sale of Assets and Other. We recorded a gain on sale of assets and other of $1.9 million during the second quarter of 2007 compared to a loss of $0.8 million during the second quarter of 2006. The gain recorded during the second quarter of 2007 was primarily due to a gain recorded on the sale of two U.S. theatres.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, was $35.3 million for the second quarter of 2007 compared to $22.9 million for the second quarter of 2006. The increase was primarily due to the increased long-term debt related to the financing of the Century Acquisition during the fourth quarter of 2006.

Gain on Fandango transaction. We recorded a gain of $9.2 million as a result of the sale of our investment in stock of Fandango, Inc. See Note 8 to our condensed consolidated financial statements.

Loss on Early Retirement of Debt. We recorded a loss on early retirement of debt of approximately $3.3 million during the second quarter of 2006 related to the repurchase of $10 million aggregate principal amount of our 9% senior subordinated notes and $39.8 million aggregate principal amount at maturity of our 9 ³/4% senior discount notes. See Note 11 to our condensed consolidated financial statements.

Distributions from NCM. We recorded distributions received from NCM of $1.4 million during the second quarter of 2007 as a result of the mandatory quarterly distribution required under our agreements with NCM. See Note 6 to our condensed consolidated financial statements.

Income Taxes. We recorded an income tax benefit of $26.5 million for the second quarter of 2007 compared to income tax expense of $7.3 million recorded for the second quarter of 2006. Income tax provisions for interim (quarterly) period are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate. See Note 9 to our condensed consolidated financial statements.

Six months ended June 30, 2007 and 2006

Revenues. Total revenues increased $276.9 million to $818.0 million for the six months ended June 30, 2007 (“the 2007 period”) from $541.1 million for the six months ended June 30, 2006 (“the 2006 period”), a 51.2% 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.


								International Operating
	U.S. Operating Segment							Segment							Consolidated
	Six Months Ended							Six Months Ended							Six Months Ended
	June 30,							June 30,							June 30,
					%							%							%
	2007		2006		Change			2007		2006		Change			2007		2006		Change
Admissions revenues (in millions)	$	422.7	$	242.4		74.4	%	$	104.4	$	94.1		10.9	%	$	527.1	$	336.5		56.6	%
Concession revenues (in millions)	$	208.2	$	130.7		59.3	%	$	45.3	$	39.3		15.3	%	$	253.5	$	170.0		49.1	%
Other revenues (in millions) ⁽¹⁾	$	23.1	$	23.0		0.4	%	$	14.3	$	11.6		23.3	%	$	37.4	$	34.6		8.1	%
Total revenues (in millions) ⁽¹⁾	$	654.0	$	396.1		65.1	%	$	164.0	$	145.0		13.1	%	$	818.0	$	541.1		51.2	%
Attendance (in millions)		73.9		52.9		39.7	%		31.0		30.5		1.6	%		104.9		83.4		25.8	%
Revenues per screen (in dollars) ⁽¹⁾	$	184,569	$	162,302		13.7	%	$	170,709	$	157,641		8.3	%	$	181,612	$	161,026		12.8	%


⁽¹⁾		U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 18 of our condensed consolidated financial statements.

•		Consolidated. The increase in admissions revenues of $190.6 million was attributable to a 25.8% increase in attendance from 83.4 million patrons for the 2006 period to 104.9 million patrons for the 2007 period, which contributed $97.4 million, and a 24.8% increase in average ticket price from $4.03 for the 2006 period to $5.03 for the 2007 period, which contributed $93.2 million. The increase in concession revenues of $83.5 million was attributable to the 25.8% increase in attendance, which contributed $52.4 million, and an 18.6% increase in concession revenues per patron from $2.04 for the 2006 period to $2.42 for the 2007 period, which contributed $31.1 million. The increases in admissions revenues, concession revenues, attendance, average ticket prices and concession revenues per patron were primarily due to the 77 Century theatres acquired during the fourth quarter of 2006. The 8.1% increase in other revenues was primarily attributable to incremental screen advertising revenues resulting from the 77 Century theatres acquired.

•		U.S. The increase in admissions revenues of $180.3 million was attributable to a 39.7% increase in attendance from 52.9 million patrons for the 2006 period to 73.9 million patrons for the 2007 period, which contributed $95.8 million, and a 24.9% increase in average ticket price from $4.58 for the 2006 period to $5.72 for the 2007 period, which contributed $84.5 million. The increase in concession revenues of $77.5 million was attributable to the 39.7% increase in attendance, which contributed $51.7 million, and a 14.2% increase in concession revenues per patron from $2.47 for the 2006 period to $2.82 for the 2007 period, which contributed $25.8 million. The increase in admissions revenues, concession revenues, attendance, average ticket prices and concession revenues per patron were primarily a result of the 77 Century theatres acquired.

•

International. The increase in admissions revenues of $10.3 million was attributable to a 9.1% increase in average ticket price from $3.09 for the 2006 period to $3.37 for the 2007 period, which contributed $8.7 million, and a 1.6% increase in attendance, which contributed $1.6 million. The increase in concession revenues of $6.0 million was attributable to a 13.2% increase in concession revenues per patron from $1.29 for the 2006 period to $1.46 for the 2007 period, which contributed $5.3 million, and a 1.6% increase in attendance, which contributed $0.7 million. The increases in average ticket price and concession revenues per patron were primarily due to price increases and exchange rates. The increase in attendance was primarily due to new theatre openings.

Theatre Operating Costs (excludes depreciation and amortization expense). Theatre operating costs were $610.4 million, or 74.6% of revenues, for the 2007 period compared to $395.5 million, or 73.1% of revenues, for the 2006 period. The table below, presented by reportable operating segment, summarizes our year-over-year theatre operating costs.


					International Operating
	U.S. Operating Segment				Segment				Consolidated
	Six Months Ended				Six Months Ended				Six Months Ended
	June 30,				June 30,				June 30,
	2007		2006		2007		2006		2007		2006
Film rentals and advertising	$	235.2	$	132.1	$	52.2	$	47.1	$	287.4	$	179.2
Concession supplies		28.7		16.8		11.4		10.0		40.1		26.8
Salaries and wages		73.0		40.5		12.6		11.0		85.6		51.5
Facility lease expense		80.2		50.6		24.7		21.9		104.9		72.5
Utilities and other		70.6		47.2		21.8		18.3		92.4		65.5

Total theatre operating costs	$	487.7	$	287.2	$	122.7	$	108.3	$	610.4	$	395.5

•		Consolidated. Film rentals and advertising costs were $287.4 million, or 54.5% of admissions revenues, for the 2007 period compared to $179.2 million, or 53.3% of admissions revenues, for the 2006 period. The increase in film rentals and advertising costs of $108.2 million is due to a $190.6 million increase in admissions revenues and an increase in our film rentals and advertising rate. The increase in film rentals and advertising costs as a percentage of admissions revenues was due to higher film rental rates on certain films in the 2007 period compared with the 2006 period. Concession supplies expense was $40.1 million, or 15.8% of concession revenues, for the 2007 period, compared to $26.8 million, or 15.8% of concession revenues, for the 2006 period. The increase in concession supplies expense was primarily due to the 77 Century theatres acquired.

		Salaries and wages increased to $85.6 million for the 2007 period from $51.5 million for the 2006 period. Facility lease expense increased to $104.9 million for the 2007 period from $72.5 million for the 2006 period. Utilities and other costs increased to $92.4 million for the 2007 period from $65.5 million for the 2006 period. Increases in salaries and wages, facility lease expense and utilities and other costs were primarily due to the additional costs related to the 77 Century theatres acquired and new theatre openings. Salaries and wages expense was also impacted by minimum wage increases in certain U.S. states in which we operate.

•		U.S. Film rentals and advertising costs were $235.2 million, or 55.6% of admissions revenues, for the 2007 period compared to $132.1 million, or 54.5% of admissions revenues, for the 2006 period. The increase in film rentals and advertising costs of $103.1 million is due to a $180.3 million increase in admissions revenues, and an increase in our film rentals and advertising rate. The increase in film rentals and advertising costs as a percentage of admissions revenues was due to higher film rental rates on certain films in the 2007 period compared with the 2006 period. Concession supplies expense was $28.7 million, or 13.8% of concession revenues, for the 2007 period compared to $16.8 million, or 12.9% of concession revenues, for the 2006 period. The increase in concession supplies expense was primarily due to the 77 Century theatres acquired.

		Salaries and wages increased to $73.0 million for the 2007 period from $40.5 million for the 2006 period. Facility lease expense increased to $80.2 million for the 2007 period from $50.6 million for the 2006 period. Utilities and other costs increased to $70.6 million for the 2007 period from $47.2 million for the 2006 period. Increases in salaries and wages, facility lease expense and utilities and other costs were primarily due to the additional costs

		related to the 77 Century theatres acquired and new theatre openings. Salaries and wages expense was also impacted by minimum wage increases in certain U.S. states in which we operate.

•		International. Film rentals and advertising costs were $52.2 million, or 50.0% of admissions revenues, for the 2007 period compared to $47.1 million, or 50.1% of admissions revenues, for the 2006 period. The increase in film rentals and advertising costs is primarily due to increased admissions revenues. Concession supplies expense was $11.4 million, or 25.2% of concession revenues, for the 2007 period compared to $10.0 million, or 25.4% of concession revenues, for the 2006 period. The increase in concession supplies expense is primarily due to increased concession revenues.

		Salaries and wages increased to $12.6 million for the 2007 period from $11.0 million for the 2006 period primarily due to new theatre openings. Facility lease expense increased to $24.7 million for the 2007 period from $21.9 million for the 2006 period primarily due to new theatre openings. Utilities and other costs increased to $21.8 million for the 2007 period from $18.2 million for the 2006 period primarily due to new theatre openings.

General and Administrative Expenses. General and administrative expenses increased to $36.9 million for the 2007 period from $29.5 million for the 2006 period. The increase was primarily due to increased salaries, consulting fees, and increased service charges related to credit card activity, all of which increased, in part, as a result of the Century Acquisition.

Depreciation and Amortization. Depreciation and amortization expense, including amortization of favorable leases, was $75.2 million for the 2007 period compared to $40.2 million for the 2006 period primarily due to the 77 Century theatres acquired.

Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $56.8 million for the 2007 period compared to $0.9 million during the 2006 period. Impairment charges for the 2007 period consisted of $8.0 million of theatre properties, $45.1 million of goodwill associated with theatre properties and $3.7 million of intangible assets 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 6, 13 and 14 to our condensed consolidated financial statements. See also discussion of gain on NCM Transaction.

(Gain) Loss on Sale of Assets and Other. We recorded a gain on sale of assets and other of $1.6 million during the 2007 period compared to a loss of $1.5 million during the 2006 period. The gain for the 2007 period was primarily due to a gain recorded on the sale of two U.S. theatres.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, was $76.8 million for the 2007 period compared to $46.0 million for the 2006 period. The increase was primarily due to the increased long-term debt related to the financing of the Century Acquisition during the fourth quarter of 2006.

Gain on NCM transaction. We recorded a gain of $210.8 million on the sale of a portion of our equity investment in NCM in conjunction with the initial public offering of NCM, Inc. during the 2007 period. Our ownership interest in NCM was reduced from approximately 25% to approximately 14% as part of this sale of stock in the offering. See Note 6 to our condensed consolidated financial statements.

Gain on Fandango transaction. We recorded a gain of $9.2 million as a result of the sale of our investment in stock of Fandango, Inc. See Note 8 to our condensed consolidated financial statements.

Loss on Early Retirement of Debt. We recorded a loss on early retirement of debt of $8.0 million during the 2007 period, which consisted of tender offer repurchase costs, including premiums paid and other fees, and the write-off of unamortized debt issue costs, partially offset by the write-off of the unamortized bond premium, associated with the repurchase of a total of $332.1 million aggregate principal amount of our 9% senior subordinated notes during March and April 2007. We recorded a loss on early retirement of debt of approximately $3.3 million during the 2006 period related to the repurchase of $10 million aggregate principal amount of our 9% senior subordinated notes and $39.8 million aggregate principal amount at maturity of our 9 ³/4% senior discount notes. See Note 11 to our condensed consolidated financial statements.

Distributions from NCM. We recorded distributions received from NCM of $1.4 million during the 2007 period as a result of the mandatory quarterly distribution required under our agreements with NCM. See Note 6 to our condensed consolidated financial statements.

Income Taxes. We recorded income tax expense of $8.9 million for the 2007 period compared to $4.9 million recorded for the 2006 period. The effective tax rate was 5.1% for the 2007 period and 18.8% for the 2006 period. See Note 9 to our condensed consolidated financial statements.

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report on Form 10-Q includes “forward-looking statements” based on our current expectations, assumptions, estimates, and projections about our and our subsidiaries’ business and industry. We intend that this quarterly report be governed by the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995 (the “PSLR Act”) with respect to statements that may be deemed to be forward-looking statements under the PSLR Act. They include statements relating to:

	•		future revenues, expenses and profitability;

	•		the future development and expected growth of our business;

	•		projected capital expenditures;

	•		attendance at movies generally, or in any of the markets in which we operate;

	•		the number or diversity of popular movies released;

	•		our ability to successfully license and exhibit popular films;

	•		competition from other exhibitors; and

	•		determinations in lawsuits in which we are a defendant.

You can identify forward-looking statements by the use of words such as “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions which are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. In evaluating these forward-looking statements, you should carefully consider the risks and uncertainties described in this report. These forward-looking statements reflect our view only as of the date of this report. Actual results could differ materially from those indicated by such forward-looking statements due to a number of factors. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. We undertake no current obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain a system of controls and other procedures designed to ensure that information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. These disclosure controls and procedures have been evaluated under the direction of our Chief Executive Officer and Chief Financial Officer for the period covered by this report. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures are effective in alerting them in a timely basis to material information relating to the Company and its consolidated subsidiaries required to be included in our reports filed or submitted under the Exchange Act.

Changes in Internal Controls

There have been no material changes in our system of internal controls or in other factors that could significantly affect internal controls within the period covered by this report.

CINEMARK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF JUNE 30, 2007

(In thousands, unaudited)


	Restricted		Unrestricted
	Group		Group			Eliminations			Consolidated
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	123,177	$	15,091		$	—		$	138,268
Other current assets		53,446		(1,338	)		—			52,108

Total current assets		176,623		13,753			—			190,376

THEATRE PROPERTIES AND EQUIPMENT — net		1,338,566		—			—			1,338,566

OTHER ASSETS		1,591,230		1,265			(8,225	)		1,584,270


TOTAL ASSETS	$	3,106,419	$	15,018		$	(8,225	)	$	3,113,212


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Current portion of long-term debt	$	13,954	$	—		$	—		$	13,954
Current portion of capital lease obligations		3,944		—			—			3,944
Income tax payable		35,436		(279	)		—			35,157
Accounts payable and accrued expenses		189,078		—			—			189,078

Total current liabilities		242,412		(279	)		—			242,133

LONG-TERM LIABILITIES
Long-term debt, excluding current portion		1,561,227		—			—			1,561,227
Other long-term liabilities		510,457		—			(95,916	)		414,541

Total long-term liabilities		2,071,684		—			(95,916	)		1,975,768

COMMITMENTS AND CONTINGENCIES

MINORITY INTERESTS IN SUBSIDIARIES		17,300		—			—			17,300

STOCKHOLDERS’ EQUITY		775,023		15,297			87,691			878,011


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,106,419	$	15,018		$	(8,225	)	$	3,113,212

Note: “Restricted Group” and “Unrestricted Group” are defined in the Indenture for the senior discount notes.

CINEMARK, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2007

(In thousands, unaudited)


	Restricted			Unrestricted
	Group			Group			Eliminations			Consolidated
OPERATING ACTIVITIES
Net income	$	58,993		$	129,934		$	(24,084	)	$	164,843
Noncash items in net income		101,635			(209,255	)		(95,916	)		(203,536	)
Changes in assets and liabilities		202,051			1,062			—			203,113

Net cash provided by (used for) operating activities		362,679			(78,259	)		(120,000	)		164,420

INVESTING ACTIVITIES
Additions to theatre properties and equipment		(73,148	)		—			—			(73,148	)
Proceeds from sale of theatre properties and equipment		13,915			—			—			13,915
Net proceeds from sale of NCM stock		—			214,842			—			214,842
Net proceeds from sale of Fandango stock		11,347			—			—			11,347
Investment in joint venture — DCIP		—			(1,500	)		—			(1,500	)

Net cash provided by (used for) investing activities		(47,886	)		213,342			—			165,456

FINANCING ACTIVITIES
Retirement of senior subordinated notes		(332,066	)		—			—			(332,066	)
Repayments of long-term debt		(7,200	)		—			—			(7,200	)
Dividends paid to parent		—			(120,000	)		120,000			—
Other		(1,968	)		—			—			(1,968	)

Net cash used for financing activities		(341,234	)		(120,000	)		120,000			(341,234	)

Effect of exchange rate changes on cash and cash equivalents		2,527			—			—			2,527


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(23,914	)		15,083			—			(8,831	)

Beginning of period		147,091			8			—			147,099

End of period	$	123,177		$	15,091		$	—		$	138,268

Note: “Restricted Group” and “Unrestricted Group” are defined in the Indenture for the senior discount notes.

Item 6. Exhibits


Number		Exhibit Title
2.1		Stock Contribution and Exchange Agreement, dated as of August 7, 2006, by and between Cinemark Holdings, Inc., Cinemark, Inc., Syufy Enterprises, LP and Century Theatres Holdings, LLC (incorporated by reference to Exhibit 10.2 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed August 11, 2006).

2.2		Contribution and Exchange Agreement, dated as of August 7, 2006, by and among Cinemark Holdings, Inc. and Lee Roy Mitchell, The Mitchell Special Trust, Alan W. Stock, Timothy Warner, Robert Copple, Michael Cavalier, Northwestern University, John Madigan, Quadrangle Select Partners LP, Quadrangle Capital Partners A LP, Madison Dearborn Capital Partners IV, L.P., K&E Investment Partners, LLC — 2004-B-DIF, Piola Investments Ltd., Quadrangle (Cinemark) Capital Partners LP and Quadrangle Capital Partners LP (incorporated by reference to Exhibit 10.3 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed August 11, 2006).

2.3		Agreement and Plan of Merger dated March 12, 2004, by and between Cinemark, Inc. and Popcorn Merger Corp. (incorporated by reference to Exhibit 2.1 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

2.4		Stock Purchase Agreement dated as of March 12, 2004 by and between Cinemark, Inc. and Madison Dearborn Capital Partners IV, L.P. (incorporated by reference to Exhibit 2.2 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

3.1		Second Amended and Restated Certificate of Incorporation of Cinemark, Inc. filed with the Delaware Secretary of State on April 2, 2004 (incorporated by reference to Exhibit 3.1 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

3.2		Amended and Restated Bylaws of Cinemark, Inc. (incorporated by reference to Exhibit 3.2 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

4.1		Exchange and Registration Rights Agreement dated March 31, 2004 among Cinemark, Inc., certain subsidiary guarantors party thereto and the initial purchasers named therein (incorporated by reference to Exhibit 4.1 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

4.2(a)		Indenture, dated as of March 31, 2004, between Cinemark, Inc. and The Bank of New York Trust Company, N.A. governing the 9 3/4% senior discount notes issued thereunder (incorporated by reference to Exhibit 4.2(a) to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

4.2(b)		Form of 9 3/4% senior discount notes (contained in the indenture listed as Exhibit 4.2(a) above) (incorporated by reference to Exhibit 4.2(b) to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

4.3(a)		Indenture, dated as of February 11, 2003, between Cinemark USA, Inc. and The Bank of New York Trust Company of Florida, N.A. governing the 9% senior subordinated notes issued thereunder (incorporated by reference to Exhibit 10.2(b) to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-47040, filed March 19, 2003).

4.3(b)		First Supplemental Indenture, dated as of May 7, 2003, between Cinemark USA, Inc., the subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A. (incorporated by reference from Exhibit 4.2(i) to Cinemark USA, Inc.’s Registration Statement on Form S-4/A, File No. 333-104940, filed May 28, 2003).

4.3(c)		Second Supplemental Indenture dated as of November 11, 2004, between Cinemark USA, Inc., the subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A. (incorporated by reference to Exhibit 4.2(c) to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-047040, filed March 28, 2005).

4.3(d)		Third Supplemental Indenture, dated as of October 5, 2006, among Cinemark USA, Inc., the subsidiaries of Cinemark USA, Inc. named therein, and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.7 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed October 12, 2006).

4.3(e)		Fourth Supplemental Indenture, dated March 20, 2007, among Cinemark USA, Inc. and the subsidiaries of Cinemark USA, Inc. named therein, and the Bank of New York Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, File No. 033-47040, filed by Cinemark USA, Inc. on March 26, 2007).

4.3(f)		Form of 9% Senior Subordinated Note, Due 2013 (contained in the Indenture listed as Exhibit 4.3(a) above) (incorporated by reference to Exhibit 10.2(b) to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-47040, filed March 19, 2003).

*31.1		Certification of Chief Executive Officer of Cinemark, Inc., pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

*31.2		Certification of Chief Financial Officer of Cinemark, Inc. pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

EXHIBIT INDEX


Number		Exhibit Title
2.1		Stock Contribution and Exchange Agreement, dated as of August 7, 2006, by and between Cinemark Holdings, Inc., Cinemark, Inc., Syufy Enterprises, LP and Century Theatres Holdings, LLC (incorporated by reference to Exhibit 10.2 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed August 11, 2006).

2.2		Contribution and Exchange Agreement, dated as of August 7, 2006, by and among Cinemark Holdings, Inc. and Lee Roy Mitchell, The Mitchell Special Trust, Alan W. Stock, Timothy Warner, Robert Copple, Michael Cavalier, Northwestern University, John Madigan, Quadrangle Select Partners LP, Quadrangle Capital Partners A LP, Madison Dearborn Capital Partners IV, L.P., K&E Investment Partners, LLC — 2004-B-DIF, Piola Investments Ltd., Quadrangle (Cinemark) Capital Partners LP and Quadrangle Capital Partners LP (incorporated by reference to Exhibit 10.3 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed August 11, 2006).

2.3		Agreement and Plan of Merger dated March 12, 2004, by and between Cinemark, Inc. and Popcorn Merger Corp. (incorporated by reference to Exhibit 2.1 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

2.4		Stock Purchase Agreement dated as of March 12, 2004 by and between Cinemark, Inc. and Madison Dearborn Capital Partners IV, L.P. (incorporated by reference to Exhibit 2.2 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

3.1		Second Amended and Restated Certificate of Incorporation of Cinemark, Inc. filed with the Delaware Secretary of State on April 2, 2004 (incorporated by reference to Exhibit 3.1 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

3.2		Amended and Restated Bylaws of Cinemark, Inc. (incorporated by reference to Exhibit 3.2 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

4.1		Exchange and Registration Rights Agreement dated March 31, 2004 among Cinemark, Inc., certain subsidiary guarantors party thereto and the initial purchasers named therein (incorporated by reference to Exhibit 4.1 to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

4.2(a)		Indenture, dated as of March 31, 2004, between Cinemark, Inc. and The Bank of New York Trust Company, N.A. governing the 9 3/4% senior discount notes issued thereunder (incorporated by reference to Exhibit 4.2(a) to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

4.2(b)		Form of 9 3/4% senior discount notes (contained in the indenture listed as Exhibit 4.2(a) above) (incorporated by reference to Exhibit 4.2(b) to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004).

4.3(a)		Indenture, dated as of February 11, 2003, between Cinemark USA, Inc. and The Bank of New York Trust Company of Florida, N.A. governing the 9% senior subordinated notes issued thereunder (incorporated by reference to Exhibit 10.2(b) to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-47040, filed March 19, 2003).

4.3(b)		First Supplemental Indenture, dated as of May 7, 2003, between Cinemark USA, Inc., the subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A. (incorporated by reference from Exhibit 4.2(i) to Cinemark USA, Inc.’s Registration Statement on Form S-4/A, File No. 333-104940, filed May 28, 2003).

4.3(c)		Second Supplemental Indenture dated as of November 11, 2004, between Cinemark USA, Inc., the subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A. (incorporated by reference to Exhibit 4.2(c) to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-047040, filed March 28, 2005).

4.3(d)		Third Supplemental Indenture, dated as of October 5, 2006, among Cinemark USA, Inc., the subsidiaries of Cinemark USA, Inc. named therein, and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.7 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed October 12, 2006).

4.3(e)		Fourth Supplemental Indenture, dated March 20, 2007, among Cinemark USA, Inc. and the subsidiaries of Cinemark USA, Inc. named therein, and the Bank of New York Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, File No. 033-47040, filed by Cinemark USA, Inc. on March 26, 2007).

4.3(f)		Form of 9% Senior Subordinated Note, Due 2013 (contained in the Indenture listed as Exhibit 4.3(a) above) (incorporated by reference to Exhibit 10.2(b) to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-47040, filed March 19, 2003).

*31.1		Certification of Chief Executive Officer of Cinemark, Inc., pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

*31.2		Certification of Chief Financial Officer of Cinemark, Inc. pursuant to Section 302 of the Sarbanes Oxley Act of 2002.


	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 (unaudited)		3
Condensed Consolidated Statements of Income for the three and six months ended June 30, 2007 and 2006 (unaudited)		4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 (unaudited)		5
Notes to Condensed Consolidated Financial Statements (unaudited)		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21

Item 4. Controls and Procedures		29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		30

Item 1A. Risk Factors		30

Item 5. Other Information		30

Item 6. Exhibits		34

SIGNATURES		36
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906


	Page
Supplemental Schedules Specified by the senior discount notes Indenture:

Condensed Consolidating Balance Sheet Information as of June 30, 2007 (unaudited)		31
Condensed Consolidating Statements of Income Information for the six months ended June 30, 2007 (unaudited)		32
Condensed Consolidating Statements of Cash Flows Information for the six months ended June 30, 2007 (unaudited)		33


Number		Exhibit Title
*32.1		Certification of Chief Executive Officer of Cinemark, Inc. pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

*32.2		Certification of Chief Financial Officer of Cinemark, Inc. pursuant to Section 906 of the Sarbanes Oxley Act of 2002.


Number		Exhibit Title
*32.1		Certification of Chief Executive Officer of Cinemark, Inc. pursuant to Section 906 of the Sarbanes Oxley of 2002.

*32.2		Certification of Chief Financial Officer of Cinemark, Inc. pursuant to Section 906 of the Sarbanes Oxley of 2002.

	(i)		the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

	(ii)		the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

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DATE: August 13, 2007	CINEMARK, INC. Registrant
	/s/ Alan W. Stock
	Alan W. Stock
	Chief Executive Officer


	/s/ Robert Copple
	Robert Copple
	Chief Financial Officer

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	c)		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.