UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the Fiscal Year Ended December 31, 2004

Commission File Number 033-47040

CINEMARK USA, INC.

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

Registrant’s corporate website: www.cinemark.com

Securities registered pursuant to Section 12(b) of the Act:

None
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

     As of February 28, 2005, 1,500 shares of Class A common stock and 182,648 shares of Class B common stock were outstanding.

Table of Contents

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Cautionary Statement Regarding Forward-Looking Statements

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

	•	future revenues, expenses and profitability;
	•	the future development and expected growth of our business;
	•	projected capital expenditures;
	•	attendance at movies generally, or in any of the markets in which we operate;
	•	the number or diversity of popular movies released;
	•	our ability to successfully license and exhibit popular films;
	•	competition from other exhibitors; and
	•	determinations in lawsuits in which we are a defendant.

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

PART I

Item 1. Business

The Company

     Cinemark USA, Inc. and subsidiaries are leaders in the motion picture exhibition industry in terms of both revenues and the number of screens in operation. We are a Texas corporation founded in 1987 by our Chairman and Chief Executive Officer, Lee Roy Mitchell, and have grown primarily through targeted worldwide new theatre development. As of December 31, 2004, we operated an aggregate of 3,172 screens in 292 theatres located in 32 states, Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. We have 2,832 screens in 254 first run theatres and 340 screens in 38 discount theatres. Our overall ratio of screens to theatres is 10.9 to 1. Any references to North America or domestic operations contained in this report refer to the U.S. and Canada.

     We are a wholly-owned subsidiary of Cinemark, Inc. On March 12, 2004, Cinemark, Inc. entered into an agreement and plan of merger with a newly formed subsidiary of Madison Dearborn Partners, LLC (“Madison”). The transaction was completed on April 2, 2004, at which time the newly formed subsidiary of Madison was merged with and into Cinemark, Inc., with Cinemark, Inc. continuing as the surviving corporation. Simultaneously, an affiliate of Madison purchased shares of common stock of Cinemark, Inc. and became the controlling stockholder of Cinemark, Inc., owning approximately 83% of Cinemark, Inc.’s capital stock. Lee Roy Mitchell, our Chief Executive Officer, and the Mitchell Special Trust collectively retained approximately 16% ownership of Cinemark, Inc.’s capital stock with certain members of management owning the remaining 1%. Since April 2, 2004, Madison sold approximately 10% of its stock in Cinemark, Inc. to outside investors. As of the date of this report, Madison owned approximately 75% of the capital stock of Cinemark, Inc., outside investors owned approximately 8%, Lee

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Roy Mitchell and the Mitchell Special Trust owned approximately 16% and certain members of management owned the remaining 1%.

     Our principal executive offices are at 3900 Dallas Parkway, Suite 500, Plano, Texas 75093. Our telephone number is (972) 665-1000. We maintain a corporate website at www.cinemark.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments, are available on our website free of charge under the heading “Company/Employment – Investor Relations” as soon as practicable after such reports are filed or furnished electronically to the Securities and Exchange Commission. Copies can also be obtained by mail from the Public Reference Section of the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330.

Description of Business

     We are one of the leaders in the motion picture exhibition industry, in terms of both revenues and the number of screens in operation. We believe we operate one of the most modern theatre circuits in the industry, with 2,088 screens (or 66% of our 3,172 screens) having been built by us since 1996. We had total revenues of $1,024.2 million, operating income of $121.9 million and net income of $44.6 million for the year ended December 31, 2004. During the year ended December 31, 2004, we reduced our long-term debt by $31.5 million. Our scale and geographic diversity within North America and Latin America has allowed us to maintain consistent revenue growth. We have increased total revenues by a compound annual growth rate of 6.8% since the beginning of 2000. Our North American theatres, located in 32 states and one Canadian province, are primarily located in mid-sized domestic markets, including suburbs of major metropolitan areas. We believe these markets are generally less competitive and generate high, stable margins. Our theatres outside of North America are primarily located in major Latin American metropolitan markets, which we believe are generally underscreened and have significant growth potential.

Domestic Developments

     During 2004, we opened 11 new theatres with 132 screens and added four screens to existing theatres. As of December 31, 2004, we operated 2,303 screens in 191 theatres in North America. We operated 1,963 screens in 153 first run theatres (12.8 screens per theatre) and 340 screens in 38 discount theatres (8.9 screens per theatre). Our overall ratio of screens to theatres in North America is 12.1 to 1. All but one theatre, with 12 screens located in Vancouver, Canada, are located in the U.S. Approximately 71% of our first run screens in North America feature stadium seating.

International Developments

     During 2004, we opened six new theatres with 43 screens. As of December 31, 2004, we operated 869 screens in 101 first run theatres in Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. All of our international theatres are first run theatres. Our ratio of screens to theatres in these international markets is 8.6 to 1. All of our international theatres have been built by us since 1993, which we believe makes our international operations among the most modern in the international market. Approximately 78% of our international screens feature stadium seating.

Competitive Strategy

     We believe our operating philosophy provides us with a competitive advantage. We will continue to focus on the following key components of our business plan.

     Focus on Less Competitive Domestic Markets and Target Profitable, High Growth International Markets. We will continue to seek growth opportunities in underserved, mid-sized domestic markets and major international metropolitan areas, by building or acquiring modern theatres that meet our strategic, financial and demographic criteria.

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     Maximize Profitability Through Continued Focus on Operational Excellence. We will continue to focus on achieving operational excellence while controlling theatre operating costs. We believe that our operating efficiency is evidenced by our high operating margins.

     Pursue Additional Revenue Opportunities. We will continue to pursue additional growth opportunities by developing and expanding other revenue streams such as advertising. We offer advertisers national, regional and local coverage in a variety of formats to reach our patrons, which numbered approximately 179.3 million during the year ended December 31, 2004. We continue to explore additional revenue sources such as digital video monitor advertising, third party branding, and the use of theatres for non-film events. We have used theatres during non-peak hours for simulcast concerts, pay-per-view sporting events, corporate meetings and cultural events.

Competitive Strengths

     We believe the following strengths allow us to compete effectively:

     Strong Balance Sheet with Significant Cash Flow. Our business strategy and disciplined building program allowed us to generate $121.9 million of operating income for the year ended December 31, 2004. During the year ended December 31, 2004, we reduced our long-term debt by $31.5 million.

     Focused Philosophy Resulting in Strong Financial Performance. We focus on negotiating favorable theatre property economics, providing a superior viewing experience and controlling both corporate and theatre operating costs. As a result of this philosophy, we generated $44.6 million of net income for the year ended December 31, 2004.

     Strong Management Team. Led by Mr. Mitchell, our management team has an average of approximately 21 years of theatre operating experience and a proven track record of superior performance. The team has successfully navigated us through many industry cycles. Mr. Mitchell and the other members of our management team retained their positions after the Recapitalization.

     Selective Building in Less Competitive Domestic Markets and Heavily Populated International Markets.

     Less Competitive Domestic Markets: We have historically built modern theatres in mid-sized U.S. markets, including suburbs of major metropolitan areas, which we believe were underserved. We believe our targeting of these markets, together with the high quality of our theatre circuit, has protected us from the negative financial impact of overbuilding and reduces the risk of competition from new entrants. As the sole exhibitor in approximately 85% of the first run film zones in which we operate, we have maximum access to film product. This enables us to select the films that we believe will deliver the highest returns in those markets.

     Heavily Populated, High Growth International Markets: We have directed our activities in international markets primarily toward Latin America due to the growth potential in these markets. We have successfully established a significant presence in most of the major cities in Latin America with theatres in twelve of the fifteen largest metropolitan areas. We generally fund our operating and capital expenditures in local currencies, thereby matching our expenses with revenues. We have also geographically diversified our international portfolio in an effort to balance risk and become one of the predominant Pan American motion picture exhibition companies.

     Modern Theatre Circuit. We have built our modern theatre circuit primarily through targeted worldwide new theatre development, which we believe provides a preferred destination for moviegoers in our markets. Since 1996, we have built 2,088 screens, or 66% of our total screen count. Our ratio of screens to theatres is one of the highest in the industry: 12.1 to 1 in North America and 8.6 to 1 internationally. Approximately 71% of our North America first run screens and 78% of our international screens feature stadium seating.

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Motion Picture Industry Overview

     Domestic Markets

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

     The following table represents the results of a survey by Motion Picture Association of America Worldwide Market Research outlining the historical trends in U.S. theatre attendance, average ticket prices and box office sales for the last ten years.

     International Markets

     The international motion picture exhibition industry has also grown significantly over the past several years. According to the Motion Picture Association of America, global box office revenues increased 48% from $17.0 billion in 2001 to $25.2 billion in 2004. This growth is the result of the strong box office showings from both local and U.S. film product, ticket price increases and new theatre construction.

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

     We believe many international markets for theatrical exhibition have historically been underserved due to antiquated or run-down theatres, among other things, and that international markets, especially those in Latin America, will continue to experience growth as additional modern stadium-styled theatres are introduced.

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     Prior History

     During 1999 and 2000, the U.S. exhibition industry felt the impact of rapid overbuilding by the largest industry players, high levels of overall capital expenditures and high leverage. As a result of the financial burden imposed on theatre operators by these three factors, the industry entered a period of significant industry rationalization. Many industry players had already begun the rationalization process in 2000 by closing hundreds of smaller, less profitable theatres. The pace of theatre closings increased during 2001 as a number of companies took advantage of the protections provided by the bankruptcy process to reject long-term leases on many underperforming theatres. According to the Motion Picture Association of America, the total number of screens in the U.S. reached an all-time high of 37,396 in 2000, and then declined in both 2001 and 2002. There were 35,786 screens at the end of 2003 and 36,594 screens at the end of 2004.

Market Trends

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

     Increased Investment in Film Production and Marketing. Theatrical exhibition is the primary distribution channel for new motion picture releases. The success of a theatrical release, which “brands” a film, is one of the primary factors in determining its success in “downstream” distribution channels, such as home video, DVD, and network, syndicated and pay-per-view television. The growing importance of downstream distribution channels has enabled studios to increase production and marketing expenditures. Production and marketing costs per new film in the U.S. have increased by compound annual growth rates of 6.4% and 7.9%, respectively from 1994 to 2004, according to the Motion Picture Association of America. This has led to an increase in “blockbuster” features, which attract larger audiences to theatres.

     Increased Importance of International Markets for Ensuring Box Office Success. International markets are becoming an increasingly important component of the overall box office revenues generated by Hollywood films. For example, box office revenues in markets outside of North America exceeded domestic box office revenues for five of the top ten domestic movies during 2004. With the continued growth of the international motion picture exhibition industry, the relative contribution of markets outside North America should become even more significant.

     Favorable Attendance Trends. Increased movie going frequency and attendance from key demographic groups have benefited the industry. According to the Motion Picture Association of America, annual admissions per capita in the U.S. increased from 4.5x to 5.2x, between 1991 and 2004. Additionally, the U.S. teenage segment, defined as 12-17 year olds, represented 19% of admissions in 2004, up from 14% in 1997.

     Reduced Seasonality of Revenues. Historically, industry revenues have been highly seasonal, coinciding with the timing of film releases by the major distributors. The most marketable motion pictures were generally released during the summer, extending from Memorial Day to Labor Day, and during the holiday season, extending from Thanksgiving through year-end. However, the seasonality of motion picture exhibition has become less pronounced in recent years. Studios have begun to release films more evenly throughout the year, and hit films have emerged during traditionally weaker periods. This benefits exhibitors by allowing them to more effectively cover their fixed cost base throughout the year.

     Convenient and Affordable Form of Out-of-Home Entertainment. Movie-going continues to be one of the most convenient and affordable forms of out-of-home entertainment, with an average ticket price in the U.S. of $6.21 in 2004. Average prices for other forms of out-of-home entertainment in the U.S., including sporting events, theme parks, musical concerts and plays, range from approximately $20.00 to $66.00 per ticket in 2004. Movie ticket prices have risen at approximately the rate of inflation, while ticket prices for other forms of out-of-home entertainment have increased at higher rates.

     Increasing Other Revenue. Advertising revenues represent a small, but growing portion of revenues for motion picture exhibitors. The proliferation in broadcast and cable channels, as well as new recording devices that allow audiences to skip television commercials, has eroded broadcast media’s advertising effectiveness. As a result,

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captive and attentive theatre audiences are becoming more attractive to advertisers. The Cinema Advertising Council, a trade group formed in 2003, reported that spending on theatre advertising came to $356 million in 2003, up 37% from 2002.

Theatre Operations

     As of December 31, 2004, we operated 3,172 screens in 292 theatres located in 32 states, one Canadian province and 12 Latin American countries. We operated 2,832 screens in 254 first run theatres and 340 screens in 38 discount theatres. Our North American theatres, located in 32 states and one Canadian province, are primarily located in mid-sized U.S. markets, including suburbs of major metropolitan areas. We believe these markets are generally less competitive and generate high, stable margins. Our theatres outside of North America are primarily located in major Latin American metropolitan markets, which we believe have significant growth potential. The following tables summarize the geographic locations of our theatre circuit as of December 31, 2004.

     North American Theatres

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International Theatres

     We have been successfully introducing American-style modern multiplex theatres to underserved international markets since 1993. Our activities in international markets have been primarily directed toward Latin America, where we have successfully established a significant presence in most of the major cities in Latin America. We presently have theatres in twelve of the fifteen largest metropolitan areas in Latin America. We have become one of the predominant Pan American exhibition companies while balancing our risk through a diversified international portfolio. In addition, we have achieved significant scale in Mexico and Brazil, the two largest Latin American economies.

     We believe that Latin America is one of the fastest growing international markets in terms of box office revenues. Penetration of movie screens per capita in Latin American markets is substantially lower than in the U.S. and European markets. Our geographic diversity throughout Latin America has allowed us to maintain consistent revenue and operating margin growth notwithstanding currency fluctuations that may affect any particular market.

     We will continue to consider selective opportunities for development of modern multiplex theatres in underserved international markets, emphasizing Latin America, funded primarily with cash flow generated in those markets. We are able to mitigate exposure to currency fluctuations by using local currencies to fund substantially all aspects of our operations, including facility lease expense.

Corporate Operations

     We maintain a corporate office in Plano, Texas that provides oversight for our domestic and international theatres. Domestic operations includes theatre operations support, film licensing and settlements, human resources, legal, finance and accounting, operational audit, theatre maintenance and construction, internet and information systems, real estate and marketing. Our North American operations are divided into eleven regions, each of which is headed by a region leader.

     International operations function relatively autonomously. International personnel in the corporate office include the International President and directors/vice presidents in charge of film licensing, marketing, concessions, theatre operations support, theatre maintenance and construction, real estate, legal, operational audit, information systems and accounting. We have eight regional offices in Latin America responsible for the local management of operations in 12 individual countries. Each regional office is headed by a general manager and includes personnel in film licensing, marketing, operations and accounting. We employ three “super-regional” chief financial officers in Brazil, Chile and Mexico. The regional offices are staffed with nationals from the region to overcome cultural and operational barriers. Training is conducted at the corporate office to establish consistent standards throughout our international operations.

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     Film Licensing

     In North America, we license films from film distributors that are owned by major film production companies or from independent film distributors that distribute films for smaller production companies. For new release films, film distributors typically establish geographic zones and offer each available film to one theatre in each zone. The size of a film zone is generally determined by the population density, demographics and box office potential of a particular market or region. A film zone can range from a radius of three to five miles in major metropolitan and suburban areas to up to fifteen miles in small towns. We currently operate theatres in 148 first run film zones in North America. New film releases are licensed at the discretion of the film distributors. As the sole exhibitor in approximately 85% of the first run film zones in which we operate, we have maximum access to film product, which allows us to select those pictures that we believe will be the most successful in our markets from those offered to us by distributors. We usually license films on an allocation basis in film zones where we face competition. Films are released to discount theatres once the attendance levels substantially drop off at the first run theatres. For discount films, film distributors generally establish availability on a market-by-market basis after the completion of exhibition at first run theatres and permit each theatre within a market to exhibit such films without regard to film zones.

     Unlike our North American operations, distributors in our international markets do not allocate film to a single theatre in a geographic film zone. Rather, competitive theatres can play the same films at the same time as other theatres. Our theatre personnel focus on providing excellent customer service, and we provide a modern facility with the most up-to-date sound systems, comfortable stadium style seating and other amenities typical of modern American-style multiplexes which we believe gives us a competitive advantage in markets where there are competing theatres. Of the 101 theatres we operate in international markets, approximately 85% of those theatres have no direct competition.

     In North America, our film rental licenses typically state that rental fees are based on either mutually agreed upon firm terms established prior to the opening of the picture or on a mutually agreed upon settlement at the conclusion of the picture run. Under a firm terms formula, we pay the distributor a specified percentage of box office receipts, which reflects either a mutually agreed upon aggregate rate for the life of the film or rates that decline over the term of the run. Firm term film rental fees that decline over the term of the run generally start at 60% or 70% of box office receipts, gradually declining to as low as 30% over a period of four to seven weeks. The settlement process allows for negotiation of film rental fees upon the conclusion of the film run based upon how the film performs. In international markets, film rental percentages are generally lower than in North American markets and gradually decline over a period of several weeks.

     We also operate discount theatres in North America, with admissions ranging from $0.50 to $2 per ticket, to serve an alternative market of patrons that extends the life of a film past the first run screening. By serving this alternative market of patrons in our discount theatres, we have been able to increase the number of potential customers beyond traditional first run moviegoers. Our discount theatres offer many of the same amenities as our first run theatres, including wall-to-wall screens, comfortable seating with cup holder armrests, digital sound and multiple concession stands. Discount film rental percentages typically begin at 35% of box office receipts and often decline to 30% after the first week.

     Film rental costs are accrued based on the applicable box office receipts and either the mutually agreed upon firm terms established prior to the opening of the picture or estimates of the final mutually agreed upon settlement, which occurs at the conclusion of the picture run, subject to the film licensing arrangement. Estimates are based on the expected success of a film over the length of its run in the theatres. The success of a film can typically be determined a few weeks after a film is released when initial box office performance of the film is known. Accordingly, final settlements typically approximate estimates since box office receipts are known at the time the estimate is made and the expected success of a film over the length of its run in theatres can typically be estimated early in the film’s run. The final film settlement amount is negotiated at the conclusion of the film’s run based upon how a film actually performs. If actual settlements are higher than those estimated, additional film rental costs are recorded at that time.

     Film distribution is highly concentrated in North America, with the major film distributors accounting for approximately 95% of industry box office revenue during 2004. Our revenue attributable to any one of these

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distributors varies from year to year depending on the number and commercial success of the films released during any given year. During 2004, no single distributor accounted for more than 14% of U.S. box office receipts.

     Concessions

     Concession sales are our second largest revenue source, representing approximately 31% of total revenues for 2004. Concession sales have a much higher margin than admissions sales. We have devoted considerable management effort to increase concession sales and improve operating margins. These efforts include implementation of the following strategies:

	•	Optimization of product mix. Concession products are primarily comprised of various sizes of popcorn, soft drinks and candy. Different varieties and flavors of candy and soft drinks are offered at theatres based on preferences in that particular geographic region. Specially priced “combo-meals” have been implemented for all patrons as well as “movie meals” targeted toward children and senior citizens. We periodically introduce new concession products designed to generate additional concession sales.
	•	Staff training. Employees are continually trained in “suggestive-selling” and “upselling” techniques. This training occurs through situational role-playing conducted at our “Customer Satisfaction University” as well as continued on-the-job training. Individual theatre managers receive additional compensation based on concession sales at their theatres and are therefore motivated to maximize concession sales.
	•	Theatre design. Our theatres are designed to optimize efficiencies at the concession stands, which include multiple service stations to facilitate serving more customers quicker. We strategically place large concession stands within theatres to heighten visibility, reduce the length of concession lines, and improve traffic flow around the concession stands.
	•	Cost control. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain bulk rates. Concession supplies are distributed through a national distribution network. The concession distributor supplies and distributes inventory to the theatres, which place volume orders directly with the vendors to replenish stock. The concession distributor is paid a percentage fee for this service. We believe that utilizing a concession distributor is more cost effective than operating a concession warehousing network.

     Marketing

     In order to attract customers, we rely on newspaper display advertisements, substantially paid for by film distributors, newspaper directory film schedules, generally paid for by the exhibitor, and internet advertising which has emerged as a strong media source to inform patrons of film titles and showtimes. Radio and television advertising spots, generally paid for by film distributors, are used to promote certain motion pictures and special events. We also exhibit previews of coming attractions and films presently playing on the other screens which we operate in the same theatre or market. We have successfully used the internet to provide patrons access to movie times, the ability to buy and print their tickets at home and purchase gift cards and other advanced sale-type certificates. The internet is becoming the primary way to check movie showtimes, replacing the traditional newspaper advertisements. In addition, many newspapers also add an internet component to their advertising and add movie showtimes to their internet offerings. Over time, the internet may allow us to reduce our advertising costs associated with newspaper directory advertisements.

     Our marketing department also focuses on maximizing revenue generating opportunities, which include the following:

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Advertising. We believe the advertising industry recognizes the value of in-theatre advertising as an important medium due to the demographics of theatre patrons. The “Arbitron Cinema Advertising Study”, which was released in 2003, measured consumer awareness of on-screen advertising in the U.S., and indicated that 86% of all theatre audiences (representing 40% of the U.S. population) remembered on-screen ads a month after seeing them. In order to effectively realize and manage this opportunity, we entered into advertising contracts for rolling stock and screen slide advertising. We deliver advertising through “lights-up” on-screen slide advertising in the auditoriums, audio advertisements paired with music

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		played throughout the theatre and rolling stock advertisements. We also advertise on digital lobby monitors located in concessions stands and game rooms. We are also exploring additional revenue sources such as digital video monitor advertising, third party branding, and the use of theatres for non-film events. We have used theatres during non-peak hours for simulcast concerts, pay-per-view sporting events, corporate meetings and cultural events. We are able to offer advertisers national, regional or local coverage in a variety of formats to reach our patrons, which numbered approximately 179.3 million during the year ended December 31, 2004. We currently carry advertising for several large advertisers. We also generate other revenue from “imaging” in the lobby, including mini-billboards and displays, and distributing coupons and samples to patrons passing through the theatre complex.
	•	Sales. We have a sales department that oversees the development and implementation of a comprehensive theatre rental and group sales effort. This department is responsible for increasing theatre rental income during periods when the theatre is normally closed and maximizing group film bookings to specialized groups such as schools, daycare centers and religious organizations. We believe the large lobbies, comfortable seating, big screens and sound capabilities make our theatres an attractive venue to hold corporate events, private parties, private screenings and team building meetings and can generate additional revenues. Our theatres have been used for simulcast concerts, pay-per-view sporting events, corporate meetings and cultural events. We believe the trend to use theatre auditoriums for non-film events during non-peak times will increase, which will add revenue and attract new audiences to our theatres while not significantly increasing costs. In addition, targeted efforts to sell niche films to particular groups will also increase overall revenues.

     Online Sales

     Our patrons may purchase advance tickets for 128 of our domestic theatres (1,747 screens) and 17 of our international theatres (143 screens) by accessing our corporate website at www.cinemark.com. Additionally, patrons may purchase advance tickets to our internet-enabled domestic theatres by accessing Fandango’s website at www.fandango.com. Our internet initiatives help improve customer satisfaction, allowing patrons who purchase tickets over the internet to often bypass lines at the box office by printing their tickets at home or picking up their tickets at kiosks in the theatre lobby.

     Point of Sale Systems

     We developed our own proprietary point of sale system to further enhance our ability to maximize revenues, control costs and efficiently manage operations. The system, which is installed in all of our domestic theatres, provides corporate management with real-time admissions and concession revenue reports that allow managers to make real-time adjustments to movie schedules, extend runs or increase the number of screens on which successful movies are being played and substitute films when gross receipts cease to meet expectations. Real-time seating and box office information is available to box office personnel, allowing theatre management to avoid overselling a particular film and providing faster and more accurate responses to customer inquiries regarding showtimes and available seating. The system tracks concession sales and provides in-theatre inventory reports allowing for efficient inventory management and control, has multiple language capabilities, offers numerous ticket pricing options, integrates internet ticket sales and processes credit card transactions. Barcode scanners, pole displays, touch screens, credit card readers and other equipment can be integrated with the system to enhance its functions. In our international theatres we use our system or point of sale systems which have been developed by third parties for the motion picture industry and which have been certified as compliant with applicable governmental regulations.

Competition

     We are one of the leading motion picture exhibitors in terms of both revenues and the number of screens in operation. We compete against local, national and international exhibitors.

     We are the sole exhibitor in approximately 85% of the first run film zones in which our first run North American theatres operate. In film zones where there is no direct competition, we select those films we believe will be the most successful from among those offered to us by film distributors. Where there is competition, we usually license films based on an allocation process. We currently operate in 148 first run film zones in North America. Of

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the 101 theatres we operate outside of North America, approximately 85% of those theatres have no direct competition. The principal competitive factors with respect to film licensing are:

	•	capacity and location of an exhibitor’s theatre;
	•	theatre comfort;
	•	quality of projection and sound equipment;
	•	level of customer service; and
	•	licensing terms.

     The competition for customers is dependent upon factors such as the availability of popular films, the location of theatres, the comfort and quality of theatres and ticket prices. Our ticket prices at first run and discount theatres are competitive with ticket prices of competing theatres.

     We also face competition from a number of other motion picture exhibition delivery systems, such as home video, DVD, and network, syndicated and pay-per-view television. We do not believe that these additional distribution channels have adversely affected theatre attendance; however, we can give no assurance that existing or future alternative delivery systems will not have an adverse impact on attendance. We also face competition from other forms of entertainment competing for the public’s leisure time and disposable income.

Seasonality

     Our revenues have historically been seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, the most successful motion pictures have been released during the summer, extending from Memorial Day to Labor Day, and during the holiday season, extending from Thanksgiving through year-end. The unexpected emergence of a blockbuster film during other periods can alter this seasonality trend. The timing of such film releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or for the same period in the following year. The seasonality of the release of successful films, however, has become less pronounced in recent years with the release of major motion pictures occurring more evenly throughout the year.

Employees

     We have approximately 8,800 employees in North America, approximately 10% of whom are full time employees and 90% of whom are part time employees. We have approximately 4,400 employees in our international markets. Approximately 25 North American employees are represented by unions under collective bargaining agreements. Some of our international operations utilize union labor. We regard our relations with our employees to be satisfactory.

Regulations

     The distribution of motion pictures is largely regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. We have not been a party to any of such cases, but the manner in which we can license films from certain major film distributors is subject to consent decrees resulting from these cases. Consent decrees bind certain major film distributors and require the films of such distributors to be offered and licensed to exhibitors, including us, on a theatre-by-theatre and film-by-film basis. Consequently, exhibitors cannot assure themselves of a supply of films by entering long-term arrangements with major distributors, but must negotiate for licenses on a film-by-film and theatre-by-theatre basis.

     We are subject to various general regulations applicable to our operations including the Americans with Disabilities Act (the “ADA”). We develop new theatres to be accessible to the disabled and we believe we are in substantial compliance with current regulations relating to accommodating the disabled. Although we believe that our theatres comply with the ADA, we are, or have been, a party to lawsuits which claim that our handicapped seating arrangements do not comply with the ADA or that we are required to provide captioning for patrons who are deaf or are severely hearing impaired. See Item 3 — Legal Proceedings.

     Our theatre operations are also subject to federal, state and local laws governing such matters as wages, working conditions, citizenship, health and sanitation requirements and licensing.

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Financial Information About Geographic Areas

     We operate in a single business segment as a motion picture exhibitor. We are a multinational corporation with consolidated operations, as of December 31, 2004, in the U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. See Note 17 of the Notes to our Consolidated Financial Statements for information on our revenues and theatre properties and equipment in the U.S. and Canada, Mexico, Brazil and other international countries.

Available Information

     We file reports, information statements and other information, including this Annual Report on Form 10-K, with the Securities and Exchange Commission. Copies of such materials can be accessed by visiting our corporate website at www.cinemark.com and selecting the link to SEC filings. Copies can also be obtained by mail from the Public Reference Section of the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330.

Item 2. Properties

North America

     As of December 31, 2004, we operated 157 theatres, with 1,795 screens, pursuant to leases and own the land and building for 34 theatres, with 508 screens, in North America. During 2004, we opened 11 new theatres with 132 screens and added four screens to existing theatres. Our North America leases are generally entered into on a long term basis with terms generally ranging from 15 to 25 years. The exercise of available renewal options can generally extend these leases by another 5 to 20 years. As of December 31, 2004, approximately 8% of our theatre leases in North America, covering 97 screens, had remaining terms, including optional renewal periods, of less than five years and approximately 80% of our theatre leases in North America, covering 1,487 screens, have remaining terms, including optional renewal periods, of more than 15 years. The leases generally provide for a fixed monthly minimum rent payment, with certain leases also subject to additional percentage rent if a target annual revenue level is achieved. We lease an office building in Plano, Texas as our corporate office. See Note 16 of our Notes to Consolidated Financial Statements for information regarding our lease commitments. We periodically review the profitability of each of our North American theatres, particularly those whose lease terms are nearing expiration, to determine whether to continue its operations.

International

     As of December 31, 2004, we operated 101 theatres, with 869 screens, internationally, all of which are leased pursuant to ground or building leases. During 2004, we opened six new theatres with 43 screens. Our international leases are generally entered into on a long term basis with terms generally ranging from 10 to 20 years. The leases generally provide for contingent rental based upon operating results (some of which are subject to an annual minimum). Generally, these leases include renewal options for various periods at stipulated rates. No international theatre leases have remaining terms, including optional renewal periods, of less than five years, and approximately 70% of our international theatre leases, covering 614 screens, have remaining terms, including optional renewal periods, of more than 15 years. We periodically review the profitability of each of our international theatres, particularly those whose lease terms are about to expire, to determine whether to continue its operations.

Item 3. Legal Proceedings

DOJ Litigation - In March 1999, the Department of Justice (“DOJ”) filed suit in the U.S. District Court, Northern District of Ohio, Eastern Division, against us alleging certain violations of the Americans with Disabilities Act of 1990 (the “ADA”) relating to our wheelchair seating arrangements and seeking remedial action. An order granting summary judgment to us was issued in November 2001. The Department of Justice appealed the district court’s ruling with the Sixth Circuit Court of Appeals. On November 7, 2003, the Sixth Circuit Court of Appeals reversed the summary judgment and sent the case back to the district court for further review without deciding whether wheelchair seating at our theatres comply with the ADA. The Sixth Circuit Court of Appeals also stated that if the district court found that the theatres did not comply with the ADA, any remedial action should be prospective only. We and the United States have resolved this lawsuit. A Consent Order was entered by the U.S. District Court for the Northern District of Ohio, Eastern Division, on November 17, 2004. This Consent Order fully and finally resolves the United States v. Cinemark USA, Inc. lawsuit, and all claims asserted against us in that lawsuit have been

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dismissed with prejudice. Under the Consent Order, over the next five years, we will make modifications to wheelchair seating locations in fourteen stadium-style movie theatres within the Sixth Circuit and elsewhere, and spacing and companion seating modifications in 67 auditoriums at other stadium-styled movie theatres. Upon completion of these modifications, such theatres will comply with all existing and pending ADA wheelchair seating requirements, and no further modifications will be necessary to remaining stadium-style movie theatres in the United States to comply with the wheelchair seating requirements of the ADA. Under the Consent Order, the DOJ approved the seating plans for nine stadium-styled movie theatres under construction. We and the DOJ have also created a safe harbor framework for us to construct all of our future stadium-style movie theatres. The DOJ has stipulated that all theatres built in compliance with the Consent Order will comply with the wheelchair seating requirements of the ADA. Management believes that our obligations under the Consent Order are not material in the aggregate to our financial position, results of operations and cash flows.

Mission, Texas Litigation - In July 2001, Sonia Rivera-Garcia and Valley Association for Independent Living filed suit in the 93^rd Judicial District Court of Hidalgo County, Texas alleging certain violations of the Human Resources Code, the Texas Architectural Barriers Act, the Texas Accessibility Standards and the Deceptive Trade Practices Act relating to accessibility of movie theatres for patrons using wheelchairs at one theatre in the Mission, Texas market. The plaintiffs are seeking remedial action and unspecified damages. A jury in a similar case in Austin, Texas found that we did not violate the Human Resources Code, the Texas Architectural Barriers Act or the Texas Accessibility Standards. The judge in that case dismissed the claim under the Deceptive Trade Practices Act. We have filed an answer denying the allegations and are vigorously defending this suit. We are unable to predict the outcome of this litigation or the range of potential loss, however, management believes that based upon current precedent our potential liability with respect to such proceeding is not material in the aggregate to our financial position, results of operations and cash flows. Accordingly, we have not established a reserve for loss in connection with this proceeding.

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

Item 4. Submission of Matters to a Vote of Security Holders

     There have not been any matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report through the solicitation of proxies or otherwise.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder’s Matters and Issuer Purchases of Equity Securities

     There is no established public trading market for our common stock. As of December 31, 2004 there was one holder of record of our common stock. We have not paid dividends on our common stock and do not expect to pay dividends on our common stock in the foreseeable future. Our senior subordinated notes indentures and senior secured credit facility contain restrictions on our ability to pay dividends on our common stock.

Item 6. Selected Financial Data

     The following tables set forth our selected consolidated financial and operating data for the periods and at the dates indicated for each of the five most recent years ended December 31, 2004. Certain reclassifications have been made to the 2000, 2001, 2002 and 2003 consolidated financial statements to conform to the 2004 presentation. You should read the selected consolidated financial and operating data set forth below in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and with our Consolidated Financial Statements and related notes and schedules thereto, appearing elsewhere in this report.

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

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(1)		Statement of Operations Data and attendance data exclude the results of the two United Kingdom theatres and the eleven Interstate theatres for all periods presented as these theatres were sold during 2004. The results of operations for these theatres are presented as discontinued operations. (See Note 5 to the consolidated financial statements.)
(2)		Includes amortization of debt issue costs and excludes capitalized interest for all periods presented.
(3)		In 2002, a cumulative effect of a change in accounting principle charge of $3.4 million (net of tax benefit) was recorded as a transitional impairment adjustment in connection with the adoption of Statement of Financial Accounting Standards No. 142 requiring that goodwill and other intangible assets with indefinite useful lives no longer be amortized but instead be tested for impairment at least annually.
(4)		For the purposes of calculating the ratio of earnings to fixed charges, earnings consist of income (loss) from continuing operations before taxes and cumulative effect of an accounting change plus fixed charges excluding capitalized interest. Fixed charges consist of interest expense, capitalized interest, amortization of debt issue cost and that portion of rental expense which we believe to be representative of the interest factor. For the years ended December 31, 2000 and 2001, earnings were insufficient to cover fixed charges by $10.4 million and $17.9 million, respectively.
(5)		The restrictive covenants in the senior subordinated notes indentures apply only to Cinemark USA, Inc. and its restricted subsidiaries (the “Restricted Group”). This data presents certain information with respect to the Restricted Group only. See the supplemental schedules to our consolidated financial statements required by the indentures for the senior subordinated notes, appearing elsewhere in this report.
(6)		The data as of period end 2000, 2001, 2002, 2003 and 2004 excludes certain theatres operated by us in North America pursuant to management agreements that are not part of our consolidated operations.
(7)		The data as of period end 2000, 2001, 2002, 2003 and 2004 excludes certain theatres operated internationally through our affiliates that are not part of our consolidated operations.
(8)		Figures for 2003 exclude theatres, screens and attendance for eight theatres and 46 screens acquired on December 31, 2003, as the results of operations for these theatres are not included in our 2003 consolidated results of operations.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes and schedules included elsewhere in this report.

Revenues and Expenses

     We are one of the leaders in the motion picture exhibition industry, in terms of both revenues and the number of screens in operation, with theatres in the U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. We generate revenues primarily from box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as vendor marketing programs, pay phones, ATM machines and electronic video games located in some of our theatres. Our revenues are affected by changes in attendance and average admissions and concession revenues per patron. Attendance is primarily affected by the quality and quantity of films released by motion picture studios. Film releases during 2004 included the blockbusters Shrek 2, which generated domestic box office receipts in excess of $400 million, The Passion of the Christ and Spider-Man 2, which generated domestic box office receipts in excess of $350 million each, and Harry Potter and the Prisoner of Azkaban and The Incredibles, which generated domestic box office receipts in excess of $200 million each. Film releases scheduled for 2005 include the highly anticipated Star Wars: Episode III Revenge of the Sith and other high-profile films such as Harry Potter and the Goblet of Fire, War of the Worlds, King Kong and Batman Begins.

     Film rental costs are variable in nature and fluctuate with our admissions revenues. Film rental costs as a percentage of revenues are generally higher for periods in which successful films are released. Film rental costs can also vary based on the length of a film’s run. Generally, a film that runs for a longer period results in lower film rental costs as a percentage of revenues. Film rental rates are negotiated on a film-by-film and theatre-by-theatre basis. Advertising costs, which are expensed as incurred, are primarily fixed at the theatre level as daily movie directories placed in newspapers represent the largest component of advertising costs. The monthly cost of these advertisements is based on, among other things, the size of the directory and the frequency and size of the newspaper’s circulation. The internet is becoming the primary way to check movie showtimes, replacing the traditional newspaper advertisements.

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

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

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

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

Critical Accounting Policies

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

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Revenue and Expense Recognition

     Revenues are recognized when admissions and concession sales are received at the box office and screen advertising is shown in the theatres. We record proceeds from the sale of gift cards and other advanced sale-type certificates in current liabilities and recognize admissions and concession revenue when a holder redeems the card or certificate. We recognize unredeemed gift cards and other advanced sale-type certificates as revenue only after such a period of time indicates, based on historical experience, the likelihood of redemption is remote.

     Film rental costs are accrued based on the applicable box office receipts and either the mutually agreed upon firm terms established prior to the opening of the picture or estimates of the final mutually agreed upon settlement, which occurs at the conclusion of the picture run, subject to the film licensing arrangement. Estimates are based on the expected success of a film over the length of its run in the theatres. The success of a film can typically be determined a few weeks after a film is released when initial box office performance of the film is known. Accordingly, final settlements typically approximate estimates since box office receipts are known at the time the estimate is made and the expected success of a film over the length of its run in theatres can typically be estimated early in the film’s run. The final film settlement amount is negotiated at the conclusion of the film’s run based upon how a film actually performs. If actual settlements are higher than those estimated, additional film rental costs are recorded at that time. We recognize advertising costs and any sharing arrangements with film distributors in the same accounting period. Our advertising costs are expensed as incurred.

Impairment of Long-Lived Assets

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

	•	actual theatre level cash flows;
	•	future years budgeted theatre level cash flows;
	•	theatre property and equipment carrying values;
	•	goodwill carrying values;
	•	the age of a recently built theatre;
	•	competitive theatres in the marketplace;
	•	the sharing of a market with our other theatres;
	•	changes in foreign currency exchange rates;
	•	the impact of recent ticket price changes;
	•	available lease renewal options; and
	•	other factors considered relevant in our assessment of impairment of individual theatre assets.

     Long-lived assets are evaluated for impairment on an individual theatre basis or a group basis if the group of theatres shares the same marketplace, which we believe is the lowest applicable level for which there are identifiable cash flows. The evaluation is based on the estimated undiscounted cash flows from continuing use through the remainder of the theatre’s useful life. The remainder of the useful life correlates with the available remaining lease period for leased properties and a period of twenty years for fee owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, we then compare the carrying value of the asset with its estimated fair value, which is determined based on a multiple of cash flows. When estimated fair value is determined to be lower than the carrying value of the long-lived asset, the asset is written down to its estimated fair value.

Goodwill

     Our recorded goodwill was $45.0 million at December 31, 2004. We evaluate goodwill for impairment annually at fiscal year-end and any time events or circumstances indicate the carrying amount of the goodwill may not be fully recoverable. We evaluate goodwill for impairment on an individual theatre basis, which is the lowest level of identifiable cash flows and the level at which goodwill is recorded. The evaluation is a two-step approach requiring us to compute the fair value of a reporting unit and compare it with its carrying value. If the carrying value exceeds fair value, a second step would be performed to measure the potential goodwill impairment. Fair value is

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determined based on a multiple of cash flows. When estimated fair value is determined to be lower than the carrying value of the asset, the asset is written down to its estimated fair value.

Acquisitions

     We account for acquisitions under the purchase method of accounting. The purchase method requires that we estimate the fair value of the assets and liabilities acquired and allocate consideration paid accordingly. For significant acquisitions, we obtain independent third party valuation studies for certain of the assets and liabilities acquired to assist us in determining fair value. The estimation of the fair values of the assets and liabilities acquired involves a number of estimates and assumptions that could differ materially from the actual amounts. We completed acquisitions in 2003 and 2004 as discussed in Note 4 to our consolidated financial statements.

Income Taxes

     We use an asset and liability approach to financial accounting and reporting for income taxes. Deferred income taxes are provided when tax laws and financial accounting standards differ with respect to the amount of income for a year and the bases of assets and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets unless it is more likely than not that such assets will be realized. Income taxes are provided on unremitted earnings from foreign subsidiaries unless such earnings are expected to be indefinitely reinvested. Income taxes have also been provided for potential tax assessments and the related tax accruals are in the consolidated balance sheets. To the extent tax accruals differ from actual payments or assessments, the accruals will be adjusted.

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Results of Operations

     Set forth below is a summary of consolidated operating revenues and expenses, certain income statement items expressed as a percentage of revenues, average screen count and revenues per average screen for the three most recent years ended December 31, 2002, 2003 and 2004.

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Comparison of Years Ended December 31, 2004 and December 31, 2003

     Revenues. Total revenues for 2004 increased to $1,024.2 million from $950.9 million for 2003, representing a 7.7% increase. Admissions revenues increased 8.3% to $647.0 million for 2004 from $597.5 million for 2003. Concession revenues increased 7.0% to $321.6 million for 2004 from $300.6 million for 2003. The increased revenues were partially attributable to a 3.6% increase in attendance from 173.1 million patrons for 2003 to 179.3 million patrons for 2004. The increase in attendance for 2004 was primarily due to new theatre openings and quality film product, including the successful release of Shrek 2, The Passion of the Christ, Spider-Man 2, Harry Potter and the Prisoner of Azkaban and The Incredibles during 2004. In addition, our average ticket price increased from $3.45 for 2003 to $3.61 for 2004 and our concession revenues per patron increased from $1.74 for 2003 to $1.79 for 2004. Revenues per screen increased 4.0% to $326,664 for 2004 from $314,178 for 2003.

     Cost of Operations. Cost of operations was $745.3 million, or 72.8% of revenues, for 2004 compared to $702.1 million, or 73.8% of revenues, for 2003. The decrease in cost of operations as a percentage of revenues was primarily due to the 7.7% increase in revenues and the fixed nature of some of our theatre operating costs, such as components of salaries and wages, facility lease expense, and utilities and other costs.

     Film rentals and advertising costs were $348.8 million, or 53.9% of admissions revenues, for 2004 compared to $324.9 million, or 54.4% of admissions revenues, for 2003. The decrease in film rentals and advertising costs as a percentage of admissions revenues was due in part to the increase in international business, which generally has lower film rental rates, and also due to the long successful run of certain high-grossing films during 2004. Concession supplies expense increased to 16.7% of concession revenues for 2004 from 16.5% for 2003 primarily due to an increase in international business, which generally has higher concession supplies costs.

     Salaries and wages increased to $103.1 million for 2004 from $97.2 million for 2003 primarily due to new theatre openings and the increase in attendance. Facility lease expense increased to $126.6 million for 2004 from $119.5 million for 2003 primarily due to new theatre openings and increased percentage rent expense. Utilities and other costs increased to $113.0 million for 2004 from $110.8 million for 2003 primarily due to new theatre openings and increased utility rates in certain regions in which we operate.

     General and Administrative Expenses. General and administrative expenses, excluding the stock option compensation and change of control expenses related to the Recapitalization, increased to $51.5 million for 2004 from $44.2 million for 2003. The increase was primarily due to increases in salary and bonus expense of approximately $4.7 million and legal fees of approximately $2.2 million.

     Stock option compensation expense of $16.3 million and change of control fees of $15.7 million were recorded during 2004 as a result of the Recapitalization. See Note 3 to the consolidated financial statements.

     Depreciation and Amortization. Depreciation and amortization expense was $67.1 million for 2004 compared to $65.1 million for 2003. The increase is primarily due to new theatre openings the latter part of 2003 and 2004.

     Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $1.7 million in 2004 and $5.0 million in 2003, as follows:

     (Gain) Loss on Sale of Assets and Other. We recorded a loss on sale of assets and other of $4.9 million in 2004 compared to a gain on sale of assets and other of $1.2 million during 2003. The loss recorded during 2004 consisted of a loss on sale of a land parcel, the write-off of a license agreement that was terminated, the write-off of theatre

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equipment that was replaced, and the write-off of theatre equipment and goodwill associated with theatres that closed during the year.

     Interest Expense. Interest costs incurred, including amortization of debt issue costs, was $45.4 million for 2004 compared to $54.2 million for 2003. The decrease is primarily due to a decrease in average outstanding debt and a reduction in average interest rates related to the refinancing transactions completed as part of the Recapitalization. See Note 3 to the consolidated financial statements.

     Loss on Early Retirement of Debt. During 2004, we recorded a loss on early retirement of debt of $6.0 million, which represented the write-off of unamortized debt issue costs, unamortized bond discount, tender offer repurchase costs, including premiums paid, and other fees associated with the repurchase and subsequent retirement of our 8 ¹/2% senior subordinated notes and a portion of our 9% senior subordinated notes related to the Recapitalization. During the 2003 period, we recorded a loss on early retirement of debt of $7.5 million, which related to the write-off of unamortized debt issue costs, unamortized bond premiums/discounts and tender offer repurchase costs, including premiums paid, and other fees associated with the retirement of certain debt agreements, including our former 9 ?% senior subordinated notes, and the refinancing of our then existing credit facility.

     Income Taxes. Income tax expense of $27.0 million was recorded for 2004 compared to $25.0 million recorded for 2003. The effective tax rate was 39.7% for 2004 versus 34.5% for 2003. The increase in the effective tax rate was primarily due to adjustments made to the inflation adjusted tax accumulated depreciation in Mexico.

     Income (Loss) from Discontinued Operations, Net of Taxes. We recorded income from discontinued operations, net of taxes, of $3.6 million during 2004 and a loss from discontinued operations, net of taxes, of $2.7 million during 2003. The income for 2004 includes the results of operations of our two United Kingdom theatres that were sold on April 30, 2004, the loss on sale of the United Kingdom theatres, the results of operations of the eleven Interstate theatres that were sold on December 23, 2004 and the gain on sale of the Interstate theatres, all of which are presented net of taxes. The loss recorded for 2003 primarily includes the results of operations of our United Kingdom theatres, including an asset impairment charge of $2.5 million. See Note 5 to the consolidated financial statements.

Comparison of Years Ended December 31, 2003 and December 31, 2002

     Revenues. Total revenues for 2003 increased to $950.9 million from $935.9 million in 2002, representing a 1.6% increase. Admissions revenues increased 0.4% to $597.5 million for 2003 from $595.3 million for 2002. Concession revenues increased 3.0% to $300.6 million for 2003 from $291.8 million for 2002. The increased revenues were partially attributable to a 0.6% increase in attendance from 172.1 million patrons for 2002 to 173.1 million patrons for 2003. Average ticket prices for 2003 were consistent with 2002. Concession revenues per patron increased from $1.70 for 2002 to $1.74 for 2003. The increase in concession revenues per patron was primarily a result of the successful implementation of a domestic concession price increase during the fourth quarter of 2002. Revenues per average screen increased 0.6% to $314,178 for 2003 from $312,183 for 2002.

     Cost of Operations. Cost of operations was $702.1 million, or 73.8% of revenues, for 2003 compared to $686.5 million, or 73.4% of revenues, for 2002.

     Film rentals and advertisings costs were $324.9 million, or 54.4% of admissions revenues, for 2003 compared to $320.7 million, or 53.9% of admissions revenues, for 2002. The increase is due to increased film rental costs and promotional activities during 2003. Concession supplies expense decreased to 16.5% of concession revenues for 2003 from 17.3% for 2002 primarily as a result of the successful implementation of a domestic concession price increase during the fourth quarter of 2002.

     Salaries and wages increased to $97.2 million for 2003 from $96.7 million for 2002. Facility lease expense increased to $119.5 million for 2003 from $115.6 million for 2002 primarily due to new theatre openings and increased percentage rent expense. Utilities and other costs increased to $110.8 million for 2003 from $103.1 million for 2002 primarily due to increased utility costs, insurance and repairs and maintenance expense.

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     General and Administrative Expenses. General and administrative expenses, as a percentage of revenues, decreased to 4.6% in 2003 from 5.1% in 2002. General and administrative expenses decreased to $44.2 million for 2003 from $47.9 million for 2002. The decrease is primarily related to the write-off of $3.1 million of legal, accounting and other professional fees and costs in 2002, associated with our parent company, Cinemark, Inc.’s, proposed initial public offering which was subsequently postponed due to unfavorable market conditions.

     Depreciation and Amortization. Depreciation and amortization decreased to $65.1 million in 2003 from $66.6 million in 2002. Depreciation and amortization as a percentage of revenues decreased to 6.8% in 2003 from 7.1% in 2002.

     Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $5.0 million in 2003 and $3.9 million in 2002, as follows:

     (Gain) Loss on Sale of Assets and Other. We recorded a gain on sale of assets and other of $1.2 million in 2003 compared to a loss on sale of assets and other of $0.5 million in 2002. The gain on sale of assets recorded during 2003 was primarily due to gains on the sale of land parcels and recovery of a construction deposit previously written off.

     Interest Expense. Interest costs incurred, including amortization of debt issue costs, decreased 6.2% to $54.2 million in 2003 from $57.8 million in 2002. The decrease in interest costs incurred during 2003 was primarily due to a decrease in average debt outstanding during the year under our long-term debt facilities.

     Foreign Currency Exchange Loss. We recorded a foreign currency exchange loss of $0.2 million in 2003 compared to a foreign currency exchange loss of $5.1 million in 2002. The loss recorded during 2002 was due to the translation of Cinemark Brasil S.A.’s assets and liabilities denominated in other than local currency and the devaluation of the real during 2002.

     Loss on Early Retirement of Debt. We recorded a loss on early retirement of debt of $7.5 million during 2003 that included a $1.6 million loss resulting from the write-off of unamortized debt issue costs associated with the retirement of our then existing credit facility and the Cinema Properties Facility that occurred during the first quarter of 2003, a $5.6 million loss resulting from the write-off of unamortized debt issue costs, unamortized bond premiums/discounts and tender offer repurchase costs associated with the tender offer to repurchase and subsequent retirement of approximately $233 million aggregate principal amount of outstanding 9 5/8% senior subordinated notes that occurred during the second quarter of 2003 and a $0.3 million loss resulting from the write-off of unamortized debt issue costs, unamortized bond premiums/discounts and other fees associated with the redemption of the remaining $42 million aggregate principal amount of our 9 5/8% senior subordinated notes due 2008 that occurred during the third quarter of 2003.

     Income Taxes. Income tax expense of $25.0 million was recorded in 2003 compared to income tax expense of $29.1 million in 2002. Our effective tax rate for 2003 was 34.5% as compared to 41.8% in 2002. The change in the effective tax rate is primarily due to a decrease in foreign losses not offset by a valuation allowance.

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Liquidity and Capital Resources

Operating Activities

     We primarily collect our revenues in cash, mainly through box office sales and the sale of concession supplies. We are expanding the number of theatres that provide the patron a choice of using a credit card, in place of cash, which we convert to cash in approximately three to four days. Because our revenues are received in cash prior to the payment of related expenses, we have an operating “float” and historically have not required traditional working capital financing. We typically operate with a negative working capital position for our ongoing theatre operations throughout the year, primarily because of the lack of significant inventory and accounts receivable. Cash flow provided by operating activities, as reflected in the consolidated statements of cash flows, amounted to $150.1 million, $135.6 million and $112.9 million in 2002, 2003 and 2004, respectively. The decrease in cash provided by operating activities in 2004 is primarily due to the Recapitalization charges of $32.0 million.

Investing Activities

     Our investing activities have been principally related to the development and acquisition of additional theatres and in 2004, purchases of minority partner shares in Brazil and Mexico. New theatre openings and acquisitions historically have been financed with internally generated cash and by debt financing, including borrowings under our amended senior secured credit facility. Cash flow used for investing activities, as reflected in the consolidated statements of cash flows, amounted to $34.7 million, $47.2 million and $116.9 million in 2002, 2003 and 2004, respectively. The increase in cash used for investing activities in 2004 is primarily due to the funding of the $45.0 million purchase price for the acquisition of the shares of our Brazilian operations owned by our Brazilian partners, the funding of the $5.4 million purchase price for the acquisition of the shares of Cinemark Mexico USA, Inc. owned by our Mexican partners and a $30.0 million increase in capital expenditures, and was partially offset by increased proceeds from sales of theatre properties and equipment.

     As a result of the Recapitalization, our Brazilian partners exercised their option to cause Cinemark, Inc. to purchase all of their shares of common stock of Cinemark Brasil S.A., which represented 47.2% of total common stock of Cinemark Brasil S.A. We purchased the partners’ shares of Cinemark Brasil S.A. for $44,957,502 with available cash on August 18, 2004. See Note 4 to the consolidated financial statements for further discussion of this acquisition.

     On September 15, 2004, we purchased shares of common stock of Cinemark Mexico USA, Inc. from our Mexican partners, increasing our ownership interest in this subsidiary from 95.0% to 99.4%. The purchase price was $5,378,768 and was funded with available cash and borrowings on our revolving credit line. See Note 4 to the consolidated financial statements for further discussion of this acquisition.

     We are continuing to expand our domestic theatre circuit. In 2004, we opened 11 new theatres with 132 screens and added four screens to existing theatres. As of December 31, 2004, we had signed commitments to build 12 new theatres with 140 screens scheduled to open in the U.S. in 2005 and thereafter. We estimate the remaining capital expenditures for the development of these 140 screens in the U.S. will be approximately $34 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.

     We are continuing to expand our international theatre circuit. In 2004, we opened six new theatres with 43 screens. As of December 31, 2004, we had signed commitments to build 11 new theatres with 87 screens scheduled to open in international markets in 2005 and thereafter. We estimate the remaining capital expenditures for the development of these 87 screens will be approximately $42 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.

     We plan to fund capital expenditures for our continued development with cash flow from operations, borrowings under our amended senior secured credit facility, proceeds from sale leaseback transactions and/or sales of excess real estate. Additionally, we may from time to time, subject to compliance with our debt instruments, purchase on the open market our debt securities depending upon the availability and prices of such securities.

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Financing Activities

     Cash flow used for financing activities amounted to $96.1 million, $45.8 million, and $4.3 million in 2002, 2003 and 2004, respectively.

     As of December 31, 2004 our long-term debt obligations, future minimum lease obligations under non-cancelable operating leases, outstanding letters of credit, obligations under employment agreements and purchase commitments were as follows:

Recapitalization of Cinemark, Inc.

     We are a wholly-owned subsidiary of Cinemark, Inc. On March 12, 2004, Cinemark, Inc., entered into an agreement and plan of merger with a newly formed subsidiary of Madison Dearborn Partners, LLC (“Madison”). The transaction was completed on April 2, 2004, at which time the newly formed subsidiary of Madison was merged with and into Cinemark, Inc., with Cinemark, Inc. continuing as the surviving corporation. Simultaneously, an affiliate of Madison purchased shares of common stock of Cinemark, Inc. for approximately $518.3 million in cash and became the controlling stockholder of Cinemark, Inc., owning approximately 83% of Cinemark, Inc.’s capital stock. Lee Roy Mitchell, our Chief Executive Officer, and the Mitchell Special Trust collectively retained approximately 16% ownership of Cinemark, Inc.’s capital stock with certain members of management owning the remaining 1%. Based on the terms of the transaction, including Mr. Mitchell’s ownership retention, the transaction was accounted for as a recapitalization, which resulted in Cinemark, Inc. and its subsidiaries retaining their historical book values. Since April 2, 2004, Madison sold approximately 10% of its stock in Cinemark, Inc. to outside investors. As of the date of this report, Madison owned approximately 75% of the capital stock of Cinemark, Inc.,

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outside investors owned approximately 8%, Lee Roy Mitchell and the Mitchell Special Trust owned approximately 16% and certain members of management own the remaining 1%.

     On March 31, 2004, Cinemark, Inc. issued $577,173,000 aggregate principal amount at maturity of 9 3/4% senior discount notes due 2014. The gross proceeds at issuance of $360,000,115 were used to fund in part the Recapitalization. Interest on the notes accretes until March 15, 2009 up to the aggregate principal amount of $577,173,000. Cash interest will accrue and be payable semi-annually in arrears on March 15 and September 15, commencing on September 15, 2009. Due to the holding company status of Cinemark, Inc., payments of principal and interest under these notes will be dependent on loans, dividends and other payments from us to Cinemark, Inc. At December 31, 2004, the accreted principal balance of the notes was $386,731,442. Upon a change of control, Cinemark, Inc. would be required to make an offer to repurchase all of the 9 3/4% senior discount notes at a price equal to 101% of the accreted value of the notes plus accrued and unpaid interest, if any, through the date of purchase. We have no obligation, contingent or otherwise, to pay the amounts due under the 9 3/4% senior discount notes or to make funds available to pay those amounts. The 9 3/4% senior discount notes are general, unsecured senior obligations of Cinemark, Inc. that are effectively subordinated to our indebtedness and other liabilities.

Historical Financings

     Senior Subordinated Notes

     On March 16, 2004, in connection with the Recapitalization, we initiated a tender offer for our then outstanding $105 million aggregate principal amount 8 1/2% senior subordinated notes due 2008 and a consent solicitation to remove substantially all restrictive covenants in the indenture governing those notes. On March 25, 2004, a supplemental indenture removing substantially all of the covenants was executed and became effective on the date of the Recapitalization. On April 2, 2004, we redeemed $94.1 million aggregate principal amount of 8 1/2% senior subordinated notes that were tendered, pursuant to the tender offer, utilizing a portion of the proceeds from our amended senior secured credit facility. On April 14, 2004, after the expiration of the tender offer, we redeemed an additional $50,000 aggregate principal amount of 8 1/2% senior subordinated notes that were tendered, leaving outstanding $10.8 million aggregate principal amount of 8 1/2% senior subordinated notes.

     On April 6, 2004, as a result of the consummation of the Recapitalization and in accordance with the terms of the indenture governing our 9% senior subordinated notes due 2013, we made a change of control offer to purchase the 9% senior subordinated notes at a purchase price of 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, at the date of purchase. Approximately $17.8 million in aggregate principal amount of the 9% senior subordinated notes were tendered and not withdrawn in the change of control offer, which expired on May 26, 2004. Payment of the change of control price was made with available cash by us on June 1, 2004.

     On July 28, 2004, we provided notice to the holders of our remaining outstanding 8 1/2% senior subordinated notes due 2008 of our election to redeem all outstanding notes at a redemption price of 102.833% of the aggregate principal amount plus accrued interest. On August 27, 2004, we redeemed the remaining notes utilizing available cash and borrowings under our revolving credit line.

     As of December 31, 2004, we had outstanding $342.3 million aggregate principal amount of 9% senior subordinated notes due 2013. Interest is payable on February 1 and August 1 of each year. We may redeem all or part of the existing 9% notes on or after February 1, 2008. Prior to February 1, 2006, we may redeem up to 35% of the aggregate principal amount of the existing 9% notes from the proceeds of certain equity offerings.

     The senior subordinated notes are general, unsecured obligations and are subordinated in right of payment to the amended senior secured credit facility or other senior indebtedness. The notes are guaranteed by certain of our domestic subsidiaries. The guarantees are subordinated to the senior debt of the subsidiary guarantors and rank pari passu with the senior subordinated debt of our guarantor subsidiaries. The notes are effectively subordinated to the indebtedness and other liabilities of our non-guarantor subsidiaries.

     The indentures governing the senior subordinated notes contain covenants that limit, among other things, dividends, transactions with affiliates, investments, sale of assets, mergers, repurchases of our capital stock, liens and additional indebtedness. Upon a change of control, we would be required to make an offer to repurchase the senior subordinated notes at a price equal to 101% of the principal amount outstanding plus accrued and unpaid

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interest through the date of repurchase. The indentures governing the senior subordinated notes allow us to incur additional indebtedness if we satisfy the coverage ratio specified in each indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.

     Senior Secured Credit Facility

     On February 14, 2003, we entered into a senior secured credit facility consisting of a $75 million five year revolving credit line and a $125 million term loan with Lehman Commercial Paper, Inc. for itself and as administrative agent for a syndicate of lenders. The net proceeds from the senior secured credit facility were used to repay, in full, certain debt agreements, including our then existing credit facility.

     On August 18, 2003, we amended the senior secured credit facility to provide a $165 million term loan expiring on March 31, 2008. The net proceeds of the $165 million term loan and additional borrowings under the $75 million five year revolving credit line were used to (i) repay $124.7 million of term loans outstanding under our senior secured credit facility entered into February 14, 2003 and (ii) redeem the remaining $42 million aggregate principal amount of our then outstanding 9 5/8% senior subordinated notes on September 18, 2003.

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

     The amended senior secured credit facility was further amended on August 18, 2004 to, among other things, reduce the interest rate applicable to the term loan. Under the amended term loan, principal payments of $650,000 are due each calendar quarter through March 31, 2010 and increase to $61,100,000 each calendar quarter from June 30, 2010 to maturity at March 31, 2011. The amended term loan bears interest, at our option, at: (A) the base rate equal to the higher of (i) the prime lending rate as set forth on the British Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to time plus 0.50%, plus a margin of 1.00% per annum, or (B) a “eurodollar rate” plus a margin of 2.00% per annum. After the completion of two fiscal quarters after the closing date, the margin under the amended term loan applicable to base rate loans ranges from 0.75% per annum to 1.00% per annum and the margin applicable to eurodollar rate loans ranges from 1.75% per annum to 2.00% per annum, and will be adjusted based upon our achieving certain performance targets.

     Borrowings under the amended revolving credit line bear interest, at our option, at: (A) a base rate equal to the higher of (i) the prime lending rate as set forth on the British Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to time plus 0.50%, plus a margin of 1.50% per annum, or (B) a “eurodollar rate” plus a margin of 2.50% per annum. After the completion of two fiscal quarters after the closing date, the margin under the amended revolving credit line applicable to base rate loans ranges from 1.00% per annum to 1.50% per annum and the margin applicable to eurodollar rate loans ranges from 2.00% per annum to 2.50% per annum, and will be adjusted based upon our achieving certain performance targets. We are required to pay a commitment fee calculated at the rate of 0.50% per annum on the average daily unused portion of the amended revolving credit line, payable quarterly in arrears.

     Our obligations under the amended senior secured credit facility are guaranteed by Cinemark, Inc., CNMK Holding, Inc. and certain of our subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of our domestic personal and intangible property, including without limitation, pledges of all of our capital stock, all of the capital stock of CNMK Holding, Inc. and certain of our domestic subsidiaries and 65% of the voting stock of certain of our foreign subsidiaries.

     At December 31, 2004, there was approximately $258.1 million outstanding under the amended term loan and no borrowings outstanding under the amended revolving credit line. Approximately $99.9 million was available for borrowing under the amended revolving credit line, giving effect to a $0.1 million letter of credit outstanding. The average interest rate on outstanding borrowings under the amended senior secured credit facility at December 31, 2004 was 4.4% per annum.

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     Cinemark Brasil Notes Payable

     As of December 31, 2004, Cinemark Brasil S.A. had four main types of funding sources executed as follows:

        (1) Banco Nacional de Desenvolvimento Econômico e Social (“BNDES”, the Brazilian National Development Bank) credit line in the U.S. dollar equivalent in Brazilian reais of US$3.8 million. Interest accrues at a BNDES basket rate, which is a multiple currency rate based on the rate at which the bank borrows, plus a spread amounting to 11.4%. At December 31, 2004, there was approximately US$0.2 million outstanding, which matures in April 2005.

        (2) BNDES credit line in the U.S. dollar equivalent in Brazilian reais of US$1.9 million executed in November 2001 with a maturity date of October 2006. Interest accrues at a BNDES basket rate plus a spread amounting to 11.2%. At December 31, 2004, there was approximately US$0.9 million outstanding under this credit line.

        (3) Project developer financing executed with two engineering companies in September 2000 in the amount of US$1.8 million with a maturity date of September 2005. Interest accrues at a rate of TJLP+5% (Taxa de Juros de Longo Prazo (a long-term interest rate published by the Brazilian government)). At December 31, 2004, there was approximately US$0.4 million outstanding under this financing arrangement.

        (4) Project developer financing executed with a mall developer in February 2004 in the amount of US$0.7 million with a maturity date of February 2009. Interest accrues at a rate of TJLP + 5.5% (Taxa de Juros de Longo Prazo (a long-term interest rate published by the Brazilian government)). At December 31, 2004, there was approximately US$0.7 million outstanding under this financing arrangement.

     These sources are secured by a variety of instruments, including comfort letters from Cinemark International, L.L.C., promissory notes for up to 130% of the value, a revenue reserve account and equipment collateral. As of December 31, 2004, an aggregate of approximately US$2.2 million was outstanding.

     Cinemark Chile Note Payable

     On March 26, 2002, Cinemark Chile S.A. entered into a Debt Acknowledgment, Rescheduling and Joint Guarantee and Co-Debt Agreement with Scotiabank Sud Americano and three local banks. Under this agreement, Cinemark Chile S.A. borrowed the U.S. dollar equivalent of approximately $10.6 million in Chilean pesos (adjusted for inflation pursuant to the Unidades de Fomento). Cinemark Chile S.A. was required to make 24 equal quarterly installments of principal plus accrued and unpaid interest, commencing March 27, 2002. On September 29, 2004, Cinemark Chile S.A. refinanced the outstanding debt under an amended debt agreement with two of the original local banks, Corpbanca and Banco Security. The amended debt agreement requires 24 equal quarterly installments of principal plus accrued and unpaid interest, commencing December 31, 2004. The agreement requires Cinemark Chile S.A. to maintain certain financial ratios and contains other restrictive covenants typical for agreements of this type such as a limitation on dividends. Funds borrowed under this agreement bear interest at the 90 day TAB Banking rate as published by the Association of Banks and Financial Institutions Act plus 1.5%. At December 31, 2004, US$7.3 million was outstanding under this agreement.

Ratings

     We are rated by nationally recognized rating agencies. The significance of individual ratings varies from agency to agency. However, companies assigned ratings at the top end of the range have, in the opinion of certain rating agencies, the strongest capacity for repayment of debt or payment of claims, while companies at the bottom end of the range have the weakest capability. Ratings are always subject to change and there can be no assurance that our current ratings will continue for any given period of time. A downgrade of our debt ratings, depending on the extent, could increase the cost to borrow funds. Below are our latest ratings per category, which were current as of February, 28, 2005.

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New Accounting Pronouncements

     In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities — an Interpretation of Accounting Research Bulletin (“ARB”) No. 51.” FIN 46 addresses consolidation by business enterprises of variable interest entities. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. We adopted FIN 46 on January 1, 2004. The adoption of FIN 46 did not have a material impact on our consolidated financial statements.

     In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 153, Exchanges of Non-monetary Assets-Amendment of APB Opinion No. 29. SFAS No. 153 amends Accounting Principles Board (“APB”) Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance, defined as transactions that are not expected to result in significant changes in the cash flows of the reporting entity. This statement is effective for exchanges of non-monetary assets occurring after June 15, 2005. The adoption of SFAS No. 153 is not expected to have a material impact on our consolidated financial statements.

     In December 2004, the FASB issued SFAS No. 123(R),Share-Based Payment, which establishes accounting standards for all transactions in which an entity exchanges its equity instruments for goods and services. SFAS No. 123(R) focuses primarily on accounting for transactions with employees, and carries forward without change prior guidance for share-based payments for transactions with non employees. SFAS No. 123(R) eliminates the intrinsic value measurement objective in APB Opinion No. 25 and generally requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the date of the grant. The standard requires grant date fair value to be estimated using either an option-pricing model which is consistent with the terms of the award or a market observed price, if such a price exists. Such cost must be recognized over the period during which an employee is required to provide service in exchange for the award (which is usually the vesting period). The standard also requires us to estimate the number of instruments that will ultimately be issued, rather than accounting for forfeitures as they occur. We are required to apply SFAS No. 123(R) to all awards granted, modified or settled in our first annual reporting period after December 15, 2005. We will be required to use the “modified prospective method’’, under which we must recognize compensation cost for all awards granted after we adopt the standard and for the unvested portion of previously granted awards that are outstanding on that date. We have commenced our analysis of the impact of SFAS 123(R), but cannot predict with reasonable certainty the number of options that will be unvested and outstanding on December 31, 2005. Accordingly, we cannot currently quantify with precision the effect that this standard will have on our financial position or results of operations.

     FASB Staff Position (“FSP”) No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (the “Jobs Act”) provides guidance on enterprises’ income tax expense and deferred tax liability. The Jobs Act was enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109 “Accounting for Income Taxes”. We have not yet completed evaluating the impact of the repatriation provisions. We are currently performing an earnings and profit study to enable us to model and evaluate the impact. Results cannot be estimated at this time. Accordingly, as provided for in FSP 109-2, we have not adjusted our tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act. We expect to complete our evaluation in 2005.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     We have exposure to financial market risks, including changes in interest rates, foreign currency exchange rates and other relevant market prices.

Interest Rate Risk

     An increase or decrease in interest rates would affect interest costs relating to our variable rate debt facilities. We and our subsidiaries are currently parties to such variable rate debt facilities. At December 31, 2004, there was an aggregate of approximately $271.8 million of variable rate debt outstanding under these facilities. Based on interest rates in effect on our variable rate debt outstanding at December 31, 2004, a 10% increase in these rates would not increase our annual interest expense by a material amount. Changes in interest rates do not have a direct impact on interest expense relating to the remaining fixed rate debt facilities.

     The tables below provide information about our fixed rate and variable rate long-term debt agreements as of December 31, 2004 and 2003:

Foreign Currency Exchange Rate Risk

     We are also exposed to market risk arising from changes in foreign currency exchange rates as a result of our international operations. Generally, we export from the U.S. certain of the equipment and construction interior finish items and other operating supplies used by our international subsidiaries. Principally all the revenues and operating expenses of our international subsidiaries are transacted in the country’s local currency. Generally accepted accounting principles in the U.S. require that our subsidiaries use the currency of the primary economic environment in which they operate as their functional currency. If our subsidiaries operate in a highly inflationary economy, generally accepted accounting principles in the U.S. require that the U.S. dollar be used as the functional currency for the subsidiary. Currency fluctuations result in us reporting exchange gains (losses) or foreign currency translation adjustments relating to our international subsidiaries depending on the inflationary environment of the country in which we operate. Based upon our equity ownership in our international subsidiaries as of December 31, 2004, holding everything else constant, a 10% immediate unfavorable change in each of the foreign currency exchange rates to which we are exposed would decrease the net fair value of our investments in our international subsidiaries by approximately $13 million.

     The accumulated other comprehensive loss account in shareholder’s equity of $86,544,422 and $77,121,825 at December 31, 2003 and December 31, 2004, respectively, primarily relates to the cumulative foreign currency adjustments from translating the financial statements of Cinemark Argentina, S.A., Cinemark Brasil S.A. and Cinemark de Mexico, S.A. de C.V. into U.S. dollars.

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     In 2003 and 2004, all foreign countries where we have operations, including Argentina, Brazil and Mexico were deemed non-highly inflationary. Thus, any fluctuation in the currency results in a cumulative foreign currency translation adjustment to the accumulated other comprehensive loss account recorded as an increase in, or reduction of, shareholder’s equity.

     On December 31, 2004, the exchange rate for the Brazilian real was 2.65 reais to the U.S. dollar (the exchange rate was 2.89 reais to the U.S. dollar at December 31, 2003). As a result, the effect of translating the December 31, 2004 Brazilian financial statements into U.S. dollars is reflected as a cumulative foreign currency translation adjustment to the accumulated other comprehensive loss account as an increase in shareholder’s equity of $8,711,434. At December 31, 2004, the total assets of our Brazilian subsidiaries were U.S. $101,268,957.

     On December 31, 2004, the exchange rate for the Mexican peso was 11.22 pesos to the U.S. dollar (the exchange rate was 11.20 pesos to the U.S. dollar at December 31, 2003). The effect of translating the December 31, 2004 Mexican financial statements into U.S. dollars was immaterial to the change in the accumulated other comprehensive loss account. At December 31, 2004, the total assets of our Mexican subsidiaries were U.S. $100,886,012.

     On December 31, 2004, the exchange rate for the Argentine peso was 2.97 pesos to the U.S. dollar (the exchange rate was 2.94 pesos to the U.S. dollar at December 31, 2003). The effect of translating the December 31, 2004 Argentine financial statements into U.S. dollars was immaterial to the change in the accumulated other comprehensive loss account. At December 31, 2004, the total assets of our Argentine subsidiaries were U.S. $16,880,777.

     During 2004, we sold our United Kingdom theatres, which resulted in a reduction of shareholder’s equity upon the realization of $1,075,684 of cumulative foreign currency translation adjustments previously recorded in the accumulated other comprehensive loss account.

Item 8. Financial Statements and Supplementary Data

     The financial statements and supplementary data are listed on the Index on page F-1. Such financial statements and supplementary data are included herein beginning on page F-3.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

     None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls

     There have been no significant changes in our system of internal controls or in other factors that could significantly affect internal controls within the period covered by this report or subsequent to the evaluation by the Chief Executive Officer and Chief Financial Officer.

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PART III

Item 10. Directors and Executive Officers of the Registrant

     As a result of the Recapitalization of our parent, Cinemark, Inc., which occurred on April 2, 2004, the following directors resigned from Cinemark USA, Inc.’s Board of Directors: Mrs. Tandy Mitchell, Mr. Alan Stock, Mr. Robert Copple, Mr. W. Bryce Anderson, Mr. Heriberto Guerra, Jr., Mr. James Stern, Mr. Denny Rydberg, and Mr. William Spiegel.

     The Company has adopted a code of ethics applicable to its principal executive officer and its principal financial officer.

     The following is a brief description of the business experience of each of our current directors and executive officers.

     Lee Roy Mitchell has served as Chairman of the Board since March 1996 and as Chief Executive Officer and a Director since our inception in 1987. Since March 1999, Mr. Mitchell has served as a director of Texas Capital Bancshares, Inc., a bank holding company. Mr. Mitchell has served on the Board of Directors of the National Association of Theatre Owners since 1991. Mr. Mitchell is the husband of Tandy Mitchell.

     Tandy Mitchell has served as Executive Vice President since October 1989 and Assistant Secretary since December 2003. Mrs. Mitchell also served as Vice Chairman of the Board from March 1996 to April 2004. Mrs. Mitchell is the wife of Lee Roy Mitchell and sister of Walter Hebert, III.

     Alan Stock has served as President since March 1993 and as Chief Operating Officer since March 1992. Mr. Stock also served as a Director from April 1992 until April 2004.

     Robert Copple has served as Senior Vice President, Treasurer, Chief Financial Officer and Assistant Secretary since August 2000 and also served as a Director from September 2001 to April 2004. Mr. Copple was acting Chief Financial Officer from March 2000 to August 2000.

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     Tim Warner has served as Senior Vice President since May 2002 and President of Cinemark International, L.L.C. since April 1996. Mr. Warner has served on the Board of Directors of the National Association of Theatre Owners since 1982 and was the Chairman of the National Association of Theatre Owners International Committee from 2002 through 2004.

     Robert Carmony has served as Senior Vice President-Operations since July 1997.

     Margaret Richards has served as Vice President-Real Estate since March 1994 and as Vice President and Assistant Secretary since October 1989.

     John Lundin has served as Vice President-Film Licensing since September 2000 and as Head Film Buyer from September 1997 to September 2000.

     Walter Hebert, III has served as Vice President–Purchasing since July 1997. Mr. Hebert is the brother of Tandy Mitchell.

     Don Harton has served as Vice President-Construction since July 1997.

     Michael Cavalier has served as Vice President-General Counsel since July 1999, as Assistant Secretary from December 2002 to December 2003 and as Secretary since December 2003.

     Terrell Falk has served as Vice President-Marketing and Communications since April 2001. From March 1998 to April 2001, Ms. Falk was Director of Large Format Theatres, overseeing the marketing and operations of our IMAX theatres.

     Tom Owens has served as Vice President-Development since December 2003 and as Director of Real Estate since April 2001. From 1998 to April 2001, Mr. Owens was President of NRE, a company he founded that specialized in the development and financing of motion picture theatres. From 1996 to 1998, Mr. Owens served as President of Silver Cinemas International, Inc., a motion picture exhibitor. In May 2002, Silver Cinemas International, Inc., filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.

     Benjamin D. Chereskin has served as a Director since April 2004. Mr. Chereskin is a Managing Director of Madison Dearborn Partners, LLC and co-founded the firm in 1993. Previously, Mr. Chereskin was with First Chicago Venture Capital for nine years. Mr. Chereskin also serves on the Board of Directors of Cornerstone Brands, Inc., Tuesday Morning Corporation, NWL Holdings, Inc., Family Christian Stores, Inc. and Carrols Holdings Corp.

     James N. Perry, Jr. has served as a Director since April 2004. Mr. Perry is a Managing Director of Madison Dearborn Partners, LLC and has been employed by the firm since 1993. Previously, Mr. Perry was with First Chicago Venture Capital for eight years. Mr. Perry currently serves on the Board of Directors of Nextel Partners, Inc., Cbeyond Communications, LLC, Madison River Telephone Company, Intelsat, Ltd., and Band-X.

     Robin P. Selati has served as a Director since April 2004. Mr. Selati is a Managing Director of Madison Dearborn Partners, LLC and has been employed by the firm since 1993. Previously, Mr. Selati was with Alex, Brown & Sons Incorporated, an investment bank. Mr. Selati currently serves on the Board of Directors of Tuesday Morning Corporation, Peter Piper, Inc., NWL Holdings, Inc., Carrols Holdings Corporation, Family Christian Stores, Inc., Ruth’s Chris Steak House, Inc., Beverages & More, Inc., and Pierre Foods, Inc.

     Vahe A. Dombalagian has served as a Director since April 2004. Mr. Dombalagian is a Director of Madison Dearborn Partners, LLC and has been employed by the firm since July 2001. From August 1997 to August 1999, Mr. Dombalagian was an Associate with Texas Pacific Group, a private equity firm. Mr. Dombalagian currently serves on the Board of Directors of Outsourcing Solutions, Inc.

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Item 11. Executive Compensation

     The following Summary Compensation Table sets forth the compensation earned by the Company’s Chief Executive Officer and the four most highly compensated executive officers:

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Options/ Stock Appreciation Right Grants in Last Fiscal Year

     There were no stock appreciation rights granted or exercised during the year ended December 31, 2004. The following table shows option grants for each of our named executive officers during the most recent fiscal year ended December 31, 2004.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value Table

     The following table shows the value realized on option exercises for each of our named executive officers during the most recent fiscal year ended December 31, 2004 and the number of securities underlying exercised and unexercised options at December 31, 2004.

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Director Compensation

     Our directors are elected each year by our shareholders to serve for a one year term and until their successors are elected and qualified. Directors are reimbursed for expenses actually incurred for each Board meeting which they attend. In addition, independent directors may receive a fee for each meeting of the Board of Directors attended by such person. Our executive officers are elected by the Board of Directors to serve at the discretion of the Board.

Committees of the Board of Directors

     The Board of Directors of Cinemark, Inc., our parent, has established an audit committee and a compensation committee. Mr. Dombalagian is serving as the initial chairman and sole member of the audit committee, and Mr. Chereskin is serving as the initial chairman of the compensation committee. The audit committee recommends the annual appointment of auditors. The audit committee reviews the scope of audit and non-audit services and related fees, accounting principles we and Cinemark, Inc. use in financial reporting, and the adequacy of our and Cinemark, Inc.’s internal control procedures. The compensation committee reviews and approves the compensation and benefits for our executive officers, authorizes and ratifies stock option grants and other incentive arrangements, and authorizes employment and related agreements. The Board of Directors may contemplate establishing other committees.

Employment Agreements

     On March 12, 2004, our parent, Cinemark, Inc., entered into new employment agreements with certain executives which became effective upon the consummation of the Recapitalization on April 2, 2004. In addition, in connection with the Recapitalization, Cinemark, Inc. paid a one-time special bonus in the amount of $2.4 million to Lee Roy Mitchell and in the amount of $50,000 to each of Alan Stock, Tim Warner and Robert Copple. Set forth below is a summary of the new agreements.

     Lee Roy Mitchell

     Cinemark, Inc. entered into an employment agreement with Lee Roy Mitchell pursuant to which Mr. Mitchell serves as its and our Chief Executive Officer. The employment agreement became effective upon the consummation of the Recapitalization. The initial term of the employment agreement is three years, subject to an automatic extension for a one-year period, unless the employment agreement is terminated. Mr. Mitchell receives a base salary of $716,625 per year, which is subject to annual review for increase (but not decrease) each year by Cinemark, Inc.’s Board of Directors or committee or delegate thereof. In addition, Mr. Mitchell is eligible to receive an annual cash incentive bonus upon our meeting certain performance targets established by the Cinemark, Inc. board or the compensation committee for the fiscal year. Mr. Mitchell is also entitled to additional fringe benefits including life insurance benefits of not less than $5 million, disability benefits of not less than 66% of base salary, a luxury automobile and a membership at a country club. The employment agreement provides for severance payments upon termination of employment, the amount and nature of which depends upon the reason for the termination of employment. If Mr. Mitchell resigns for good reason or is terminated by Cinemark, Inc. without cause (as defined in the agreement), Mr. Mitchell will receive: accrued compensation (which includes base salary and a pro rata bonus) through the date of termination; any previously vested stock options and accrued benefits, such as retirement benefits, in accordance with the terms of the plan or agreement pursuant to which such options or benefits were granted; his annual base salary as in effect at the time of termination for a period of twelve months following such termination; and an amount equal to the most recent annual bonus he received prior to the date of termination. Mr. Mitchell’s equity-based or performance-based awards will become fully vested and exercisable upon such termination or resignation. Mr. Mitchell may choose to continue to participate in our benefit plans and insurance programs on the same terms as other actively employed senior executives for a one-year period. Furthermore, so long as Mr. Mitchell remains Chief Executive Officer, he will possess approval rights over certain significant transactions that may be pursued by us.

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     In the event Mr. Mitchell’s employment is terminated due to his death or disability, Mr. Mitchell or his estate will receive: accrued compensation (which includes base salary and a pro rata bonus) through the date of termination; any previously vested stock options and accrued benefits, such as retirement benefits, in accordance with the terms of the plan or agreement pursuant to which such options or benefits were granted; his annual base salary as in effect at the time of termination for a period of six months following such termination; a lump sum payment equal to an additional six months of base salary payable six months after the date of termination; and any benefits payable to Mr. Mitchell and or his beneficiaries in accordance with the terms of any applicable benefit plan.

     In the event Mr. Mitchell’s employment is terminated by Cinemark, Inc. for cause or under a voluntary termination (as defined in the agreement), Mr. Mitchell will receive: accrued base salary through the date of termination; and any previously vested rights under a stock option or similar incentive compensation plan in accordance with the terms of such plan.

     Mr. Mitchell will also be entitled, for a period of five years, to tax preparation assistance upon termination of his employment for any reason other than for cause or under a voluntary termination. The employment agreement contains various covenants, including covenants related to confidentiality, non-competition (other than certain permitted activities as defined therein) and non-solicitation.

Tandy Mitchell, Alan Stock, Robert Copple, Timothy Warner, Robert Carmony, John Lundin and Michael Cavalier

     Cinemark, Inc. entered into executive employment agreements with each of Tandy Mitchell, Alan Stock, Robert Copple, Timothy Warner, Robert Carmony, John Lundin and Michael Cavalier pursuant to which Mrs. Mitchell and Messrs. Stock, Copple, Warner, Carmony, Lundin and Cavalier serve, respectively, as its and our Executive Vice President, President and Chief Operating Officer, Senior Vice President and Chief Financial Officer, Senior Vice President, Senior Vice President of Operations, Vice President of Film Licensing and Vice President and General Counsel. The employment agreements became effective upon the consummation of the Recapitalization. The initial term of each employment agreement is three years, subject to automatic extensions for a one-year period at the end of each year of the term, unless the agreement is terminated. Pursuant to the employment agreements, each of these individuals receives a base salary, which is subject to annual review for increase (but not decrease) each year by Cinemark, Inc.’s Board of Directors or committee or delegate thereof. In addition, each of these executives is eligible to receive an annual cash incentive bonus upon our meeting certain performance targets established by the Cinemark, Inc. Board of Directors or the compensation committee for the fiscal year.

     Cinemark, Inc.’s Board of Directors has adopted a stock option plan and granted each executive stock options to acquire such number of shares as set forth in that executive’s employment agreement. The executive’s stock options vest and become exercisable twenty percent per year on a daily pro rata basis and shall be fully vested and exercisable five years after the date of the grant, as long as the executive remains continuously employed by Cinemark, Inc. Upon consummation of a sale of Cinemark, Inc. or our company, the executive’s stock options will accelerate and become fully vested.

     The employment agreement with each executive provides for severance payments on substantially the same terms as the employment agreement for Mr. Mitchell, except that if the executive resigns for good reason or is terminated by Cinemark, Inc. without cause (as defined in the agreements) prior to the first anniversary of the effectiveness of the employment agreement, the executive will receive his or her annual base salary in effect at the time of termination for a period commencing on the date of termination and ending on the second anniversary of the effective date (rather than for twelve months); and an amount equal to the most recent annual bonus he or she received prior to the date of termination pro rated for the number of days between such termination and the second anniversary of the effective date (rather than a single annual bonus).

     Each executive will also be entitled to office space and support services for a period of not more than three months following the date of any termination except for termination for cause. The employment agreements contain various covenants, including covenants related to confidentiality, non-competition and non-solicitation.

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Non-Competition, Non-Solicitation and Non-Disclosure Agreement

     Each of Lee Roy Mitchell, Tandy Mitchell, Alan Stock, Robert Copple, Timothy Warner, Robert Carmony, John Lundin, Michael Cavalier and certain trusts, in his, her or its capacity as a seller of Cinemark, Inc.’s common stock, have entered into non-competition, non-solicitation and non-disclosure agreements with Cinemark, Inc. These agreements became effective upon the consummation of the Recapitalization. Pursuant to the agreements, each executive agreed not to compete with Cinemark, Inc. for a period of two years, and each executive agreed not to solicit its customers or hire its employees, or disparage Cinemark, Inc., for a period of three years. The obligation not to compete will terminate prior to the two year period if we effect a sale of Cinemark, Inc. (as defined in the agreements). In addition, each executive agreed not to disclose confidential information for a period of three years.

401(k) Plan

     We sponsor a defined contribution savings plan, or 401(k) Plan, whereby certain employees may elect to contribute, in whole percentages between 1% and 50% of such employee’s compensation, provided no employee’s elective contribution shall exceed the amount permitted under Section 402(g) of the Internal Revenue Code of 1986, as amended ($13,000 in 2004). We may make an annual discretionary matching contribution. For plan years prior to 2002, our discretionary matching contribution is subject to vesting and forfeiture. For these plan years, our discretionary matching contributions vest to individual accounts at the rate of 20% per year beginning two years from the date of employment, and employees are fully vested in the discretionary matching contributions after six years of employment. For plan years beginning in 2002, our discretionary matching contributions immediately vest.

Stock Option Plan

     Upon consummation of the Recapitalization on April 2, 2004, all stock options of Cinemark, Inc. outstanding prior to the Recapitalization immediately vested and the majority were repurchased, resulting in compensation expense of $16,245,270 recorded by us. See Note 3 to the consolidated financial statements for further discussion of the Recapitalization.

     On September 30, 2004, the Board of Directors and the majority of stockholders of Cinemark, Inc. approved the 2004 Long Term Incentive Plan (the “Plan”) under which 3,074,991 shares of Class A common stock are available for issuance to selected employees, directors and consultants of ours. The Plan provides for restricted share grants, incentive option grants and nonqualified option grants. On September 30, 2004, Cinemark, Inc. granted options to purchase 2,361,590 shares of Cinemark, Inc. Class A common stock under the Plan at an exercise price of $22.58 per option. The exercise price was equal to the fair market value of the Cinemark, Inc. Class A common stock on the date of grant. Options to purchase 234,219 shares vested immediately and the remaining options granted in 2004 vest daily over the period ending April 1, 2009. The options expire ten years from the grant date. There were options to purchase 2,361,590 shares of Cinemark, Inc. Class A common stock outstanding under the Plan as of December 31, 2004.

     A participant’s options under the Plan are forfeited if the participant’s service to Cinemark, Inc. or any of its subsidiaries is terminated for cause. At any time before the Class A common stock becomes listed or admitted to unlisted trading privileges or a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers or if sale or bid and other offer quotations are reported for that class of common stock on the NASDAQ National Market, Cinemark, Inc. or a designee shall have the right to purchase any shares of Class A common stock acquired on exercise of an option, any restricted shares issued under the Plan and any exercisable options granted under the Plan. The purchase price in such event shall be determined as provided in the Plan.

Compensation Committee Interlocks and Insider Participation

     In April 2004, the Board of Directors of Cinemark, Inc. established a Compensation Committee to study senior management compensation and make recommendations to the Board of Directors as a whole relating to said compensation. Mr. Chereskin currently serves as the chairman of the Compensation Committee. Mr. Chereskin is not and has never been an officer of the Company.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder's Matters

Equity Compensation Plan Information

     The following table provides information about the securities authorized for issuance under our equity compensation plans as of December 31, 2004:

Beneficial Ownership

     All of our outstanding common stock is beneficially owned by Cinemark, Inc., through its wholly owned subsidiary CNMK Holding, Inc. The following table presents information regarding beneficial ownership of Cinemark, Inc.’s common stock as of February 28, 2005 by:

	•	each person known by us to beneficially hold five percent or more of Cinemark, Inc.’s common stock;
	•	each of Cinemark, Inc.’s and Cinemark USA, Inc.’s directors;
	•	each of Cinemark, Inc.’s named executive officers; and
	•	all of Cinemark, Inc.’s executive officers and directors as a group.

          Beneficial ownership has been determined in accordance with the applicable rules and regulations, promulgated under the Securities Exchange Act of 1934, as amended. Unless indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of common stock of Cinemark, Inc. subject to options that are currently exercisable or exercisable within 60 days of February 28, 2005 are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Percentage ownership is based on 27,674,916 shares of Class A common stock of Cinemark, Inc. issued and outstanding as of February 28, 2005. As of February 28, 2005, there were 13 holders of record of Cinemark, Inc.’s Class A common stock.

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Item 13. Certain Relationships and Related Transactions

Certain Agreements

     We manage one theatre with 12 screens for Laredo Theatre, Ltd. (“Laredo”). We are the sole general partner and own 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Under the agreement, management fees are paid by Laredo to us at a rate of 5% of annual theatre revenues up to $50,000,000 and 3% of annual theatre revenues in excess of $50,000,000. We recorded $190,834 of management fee revenues and received dividends of $562,500 from Laredo during 2004. Laredo distributed dividends of $187,500 to Lone Star Theatres in accordance with the terms of the limited partnership agreement. All such amounts are included in our consolidated financial statements with the intercompany amounts eliminated in consolidation.

     We lease one theatre from Plitt Plaza Joint Venture (“Plitt Plaza”) on a month-to-month basis. Plitt Plaza is indirectly owned by Lee Roy Mitchell. Annual rent is approximately $118,000 plus certain taxes, maintenance expenses and insurance. The Company recorded $137,723 of facility expenses payable to Plitt Plaza joint venture during 2004.

     We paid approximately $72,000 to Addison Jet Management, Inc. for use of an airplane during 2004. Lee Roy Mitchell owns 50% of the airplane and leases the plane to Addison Jet Management, Inc.

     Madison Dearborn Partners, LLC or an affiliate received a fee of approximately $12.5 million plus out-of-pocket expenses incurred at the closing of the Recapitalization.

     In conjunction with the Recapitalization, Cinemark, Inc. paid fees of approximately $6 million to Allen & Company LLC. Mr. Enrique Senior is a Managing Director of Allen & Company LLC and is a member of the Board of Directors of Cinemark, Inc.

Profit Participation

     We entered into an amended and restated profit participation agreement on March 12, 2004 with our President, Alan Stock, which became effective upon consummation of the Recapitalization and amends a profit participation agreement with Mr. Stock in effect since May 2002. Under the agreement, Mr. Stock receives a profit interest in two theatres once we have recovered our capital investment in these theatres plus our borrowing costs. During 2004, we recorded $599,818 in profit participation expense payable to Mr. Stock, which is included in general and administrative expense in our consolidated statements of income. We paid $364,699 of this amount to Mr. Stock during 2004. In the event that Mr. Stock’s employment is terminated without cause, profits will be distributed according to a formula set forth in the profit participation agreement.

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Indemnification of Directors

     We have adopted provisions in our Articles of Incorporation and Bylaws which provide for indemnification of our officers and directors to the maximum extent permitted under the Texas Business Corporation Act. We have obtained an insurance policy providing for indemnification of our officers and directors and certain other persons against liabilities and expenses incurred by any of them in certain stated proceedings and under certain stated conditions.

Item 14. Principal Accounting Fees and Services

     For the years ended December 31, 2004 and 2003, Deloitte & Touche LLP, our independent auditor, billed the aggregate fees listed in the table below:

     Under Cinemark, Inc.’s Audit Committee’s charter, the Audit Committee is required to give advance approval of any nonaudit services, other than those of a de minimus nature, to be performed by our auditors, provided that such services are not otherwise prohibited by law. In recognition of this responsibility, the Audit Committee has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent auditor. The policy provides for the general pre-approval of specific types of services, gives detailed guidance to management as to the specific services that are eligible for general pre-approval and provides specific cost limits for each such service on an annual basis. The policy also requires specific pre-approval of all other permitted services.

     Cinemark, Inc.’s Audit Committee has considered and concluded that the provision of the non-audit services is compatible with maintaining auditor independence.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents Filed as Part of this Report

	1.	The financial statement schedules and related data listed in the accompanying Index beginning on page F-1 are filed as a part of this report.
	2.	The financial statement schedules beginning on page S-1 are filed as a part of this report.
	3.	The exhibits listed in the accompanying Index beginning on page E-1 are filed as a part of this report, which exhibits are bound separately.

(b) Exhibits

See the accompanying Index beginning on page E-1, which exhibits are bound separately.

(c) Financial Statement Schedules

See the accompanying Index beginning on page F-1.

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SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 29, 2005	CINEMARK USA, INC.
	BY:	/s/ Alan W. Stock
	Alan W. Stock, President

          Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

          No annual report or proxy material has been sent to our shareholders. An annual report and proxy material may be sent to our shareholders subsequent to the filing of this Form 10-K. We shall furnish to the Securities and Exchange Commission copies of any annual report or proxy material that is sent to our shareholders.

CINEMARK USA, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
(ITEMS 8 AND 15 OF FORM 10-K) AND SUPPLEMENTAL SCHEDULES

F - 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Cinemark USA, Inc. and Subsidiaries
Plano, TX

We have audited the accompanying consolidated balance sheets of Cinemark USA, Inc. and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholder’s equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cinemark USA, Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” which changed its method of accounting for goodwill and indefinite-lived intangible assets in 2002.

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental schedules of certain consolidating information listed in the index on page F-1 are presented for the purpose of additional analysis of the basic consolidated financial statements rather than to present the financial position, results of operations, and cash flows of the individual companies, and are not a required part of the basic consolidated financial statements. These schedules are the responsibility of the Company’s management. Such schedules have been subjected to the auditing procedures applied in our audits of the basic 2004 consolidated financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic 2004 consolidated financial statements taken as a whole.

/s/ Deloitte & Touche LLP

Dallas, Texas
March 24, 2005

F - 2

CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS