UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20172021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-33401

CINEMARK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

20-5490327

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

3900 Dallas Parkway

Suite 500Plano, Texas

75093

Plano, Texas

75093

(Address of principal executive offices)

(Zip Code)

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

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

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $.001 per share

CNK

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

 

Smaller reporting company

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 31, 2017, 116,466,90429, 2021, 119,626,449 shares of common stock were issued and outstanding.


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

4

Condensed Consolidated Balance Sheets as of September 30, 20172021 and December 31, 20162020 (unaudited)

4

Condensed Consolidated Statements of IncomeLoss for the three and nine months ended September 30, 20172021 and 20162020 (unaudited)

5

Condensed Consolidated Statements of Comprehensive IncomeLoss for the three and nine months ended September 30, 20172021 and 20162020 (unaudited)

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 20172021 and 20162020 (unaudited)

7

Notes to Condensed Consolidated Financial Statements (unaudited)

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

2432

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3445

Item 4.

Controls and Procedures

3445

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

3546

Item 1A.

Risk Factors

3546

Item 6.

Exhibits

3647

SIGNATURES

3748


2


Cautionary Statement Regarding Forward-Looking Statements

Certain matters within this Quarterly Report on Form 10Q include “forward–looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The “forward-looking statements” may include our current expectations, assumptions, estimates and projections about our business and our industry. They may include statements relating to future revenues, expenses and profitability, the future development and expected growth of our business, projected capital expenditures, attendance at movies generally or in any of the markets in which we operate, the number or diversity of popular movies released and our ability to successfully license and exhibit popular films, national and international growth in our industry, competition from other exhibitors and alternative forms of entertainment and determinations in lawsuits in which we are defendants. Forward-looking statements can be identified by the use of words such as “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the 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, including, among others, the impacts of COVID-19. Such risks and uncertainties could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. For a description of the risk factors, please review the “Risk Factors” section or other sections in, or incorporated by reference to, the Company’s Annual Report on Form 10-K filed February 23, 201726, 2021 and quarterly reportsthe Current Report on Form 10-Q,8-K filed with the Securities and Exchange Commission.March 4, 2021. All forward-looking statements are expressly qualified in their entirety by such risk factors. We undertake no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


3


PART I - FINANCIALFINANCIAL INFORMATION

Item 1.Financial Financial Statements

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

469,446

 

 

$

561,235

 

 

$

543,013

 

 

$

655,338

 

Inventories

 

 

16,844

 

 

 

16,961

 

 

 

15,244

 

 

 

12,593

 

Accounts receivable

 

 

82,650

 

 

 

74,993

 

 

 

36,753

 

 

 

25,265

 

Current income tax receivable

 

 

4,381

 

 

 

7,367

 

 

 

38,388

 

 

 

165,151

 

Prepaid expenses and other

 

 

17,010

 

 

 

15,761

 

 

 

35,850

 

 

 

34,400

 

Total current assets

 

 

590,331

 

 

 

676,317

 

 

 

669,248

 

 

 

892,747

 

 

 

 

 

 

 

 

 

Theatre properties and equipment

 

 

3,268,653

 

 

 

3,059,754

 

 

 

3,365,455

 

 

 

3,403,103

 

Less: accumulated depreciation and amortization

 

 

1,477,047

 

 

 

1,355,218

 

 

 

1,929,981

 

 

 

1,788,041

 

Theatre properties and equipment, net

 

 

1,791,606

 

 

 

1,704,536

 

 

 

1,435,474

 

 

 

1,615,062

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets, net

 

 

1,220,898

 

 

 

1,278,191

 

Other assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

1,294,342

 

 

 

1,262,963

 

 

 

1,250,135

 

 

 

1,253,840

 

Intangible assets - net

 

 

335,657

 

 

 

334,899

 

Intangible assets, net

 

 

312,025

 

 

 

314,195

 

Investment in NCM

 

 

204,347

 

 

 

189,995

 

 

 

139,997

 

 

 

151,962

 

Investments in and advances to affiliates

 

 

112,878

 

 

 

98,317

 

Long-term deferred tax asset

 

 

2,098

 

 

 

2,051

 

Deferred charges and other assets - net

 

 

40,391

 

 

 

37,555

 

Investments in affiliates

 

 

23,755

 

 

 

23,726

 

Deferred charges and other assets, net

 

 

27,042

 

 

 

33,199

 

Total other assets

 

 

1,989,713

 

 

 

1,925,780

 

 

 

1,752,954

 

 

 

1,776,922

 

 

 

 

 

 

 

 

 

Total assets

 

$

4,371,650

 

 

$

4,306,633

 

 

$

5,078,574

 

 

$

5,562,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

7,099

 

 

$

5,671

 

 

$

20,288

 

 

$

18,056

 

Current portion of capital lease obligations

 

 

24,836

 

 

 

21,139

 

Current portion of operating lease obligations

 

 

215,119

 

 

 

208,593

 

Current portion of finance lease obligations

 

 

14,406

 

 

 

16,407

 

Current income tax payable

 

 

7,893

 

 

 

5,071

 

 

 

0

 

 

 

5,632

 

Current liability for uncertain tax positions

 

 

11,714

 

 

 

10,085

 

Accounts payable and accrued expenses

 

 

341,132

 

 

 

401,259

 

 

 

392,964

 

 

 

357,753

 

Total current liabilities

 

 

392,674

 

 

 

443,225

 

 

 

642,777

 

 

 

606,441

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

 

1,781,952

 

 

 

1,782,441

 

 

 

2,477,257

 

 

 

2,377,162

 

Capital lease obligations, less current portion

 

 

252,047

 

 

 

234,281

 

Operating lease obligations, less current portion

 

 

1,070,432

 

 

 

1,138,142

 

Finance lease obligations, less current portion

 

 

105,688

 

 

 

124,609

 

Long-term deferred tax liability

 

 

144,740

 

 

 

135,014

 

 

 

38,059

 

 

 

79,525

 

Long-term liability for uncertain tax positions

 

 

7,801

 

 

 

8,105

 

 

 

40,379

 

 

 

19,225

 

Deferred lease expenses

 

 

41,291

 

 

 

42,378

 

Deferred revenue - NCM

 

 

354,419

 

 

 

343,928

 

NCM screen advertising advances

 

 

348,212

 

 

 

344,255

 

Other long-term liabilities

 

 

44,906

 

 

 

44,301

 

 

 

40,813

 

 

 

74,594

 

Total long-term liabilities

 

 

2,627,156

 

 

 

2,590,448

 

 

 

4,120,840

 

 

 

4,157,512

 

 

 

 

 

 

 

 

 

Commitments and contingencies (see Note 16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Cinemark Holdings, Inc.'s stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value: 300,000,000 shares

authorized, 120,992,302 shares issued and 116,467,227 shares outstanding

at September 30, 2017 and 120,657,254 shares issued and 116,210,252 shares

outstanding at December 31, 2016

 

 

121

 

 

 

121

 

Common stock, $0.001 par value: 300,000,000 shares authorized, 124,720,207 shares issued and 119,626,627 shares outstanding at September 30, 2021 and 123,627,080 shares issued and 118,576,099 shares outstanding at December 31, 2020

 

 

125

 

 

 

124

 

Additional paid-in-capital

 

 

1,137,897

 

 

 

1,128,442

 

 

 

1,188,554

 

 

 

1,245,569

 

Treasury stock, 4,525,075 and 4,447,002 shares, at cost, at September 30, 2017

and December 31, 2016, respectively

 

 

(76,354

)

 

 

(73,411

)

Retained earnings

 

 

521,058

 

 

 

453,679

 

Treasury stock, 5,093,580 and 5,050,981 shares, at cost, at September 30, 2021 and December 31, 2020, respectively

 

 

(87,020

)

 

 

(87,004

)

Retained earnings (deficit)

 

 

(395,143

)

 

 

27,937

 

Accumulated other comprehensive loss

 

 

(242,894

)

 

 

(247,013

)

 

 

(402,380

)

 

 

(398,653

)

Total Cinemark Holdings, Inc.'s stockholders' equity

 

 

1,339,828

 

 

 

1,261,818

 

 

 

304,136

 

 

 

787,973

 

Noncontrolling interests

 

 

11,992

 

 

 

11,142

 

 

 

10,821

 

 

 

10,996

 

Total equity

 

 

1,351,820

 

 

 

1,272,960

 

 

 

314,957

 

 

 

798,969

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

$

4,371,650

 

 

$

4,306,633

 

 

$

5,078,574

 

 

$

5,562,922

 

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


4


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOMELOSS

(in thousands, except per share data, unaudited)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

2021

 

 

2020

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

425,128

 

 

$

472,842

 

 

$

1,351,477

 

 

$

1,364,737

 

 

$

225,464

 

$

14,901

 

 

$

435,064

 

$

307,400

 

Concession

 

 

247,027

 

 

 

261,391

 

 

 

777,573

 

 

 

752,798

 

 

 

164,258

 

9,116

 

 

 

313,560

 

199,596

 

Other

 

 

38,593

 

 

 

34,341

 

 

 

112,503

 

 

 

100,312

 

 

 

45,099

 

 

11,461

 

 

 

95,210

 

 

81,072

 

Total revenues

 

 

710,748

 

 

 

768,574

 

 

 

2,241,553

 

 

 

2,217,847

 

 

 

434,821

 

35,478

 

 

 

843,834

 

588,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Film rentals and advertising

 

 

226,229

 

 

 

249,766

 

 

 

725,603

 

 

 

733,101

 

 

 

117,047

 

8,257

 

 

 

216,839

 

165,262

 

Concession supplies

 

 

40,178

 

 

 

41,888

 

 

 

124,117

 

 

 

116,999

 

 

 

28,208

 

2,688

 

 

 

54,195

 

39,879

 

Salaries and wages

 

 

87,305

 

 

 

84,460

 

 

 

261,318

 

 

 

243,833

 

 

 

67,630

 

20,181

 

 

 

149,203

 

116,589

 

Facility lease expense

 

 

81,919

 

 

 

82,848

 

 

 

248,569

 

 

 

241,904

 

 

 

68,767

 

67,047

 

 

 

200,809

 

214,490

 

Utilities and other

 

 

92,341

 

 

 

94,999

 

 

 

271,751

 

 

 

265,506

 

 

 

81,723

 

43,412

 

 

 

192,052

 

178,806

 

General and administrative expenses

 

 

36,947

 

 

 

35,290

 

 

 

112,997

 

 

 

109,143

 

 

 

38,584

 

30,342

 

 

 

111,774

 

99,361

 

Depreciation and amortization

 

 

58,052

 

 

 

54,187

 

 

 

174,545

 

 

 

155,874

 

 

 

67,208

 

62,543

 

 

 

202,288

 

191,380

 

Impairment of long-lived assets

 

 

5,026

 

 

 

406

 

 

 

9,600

 

 

 

2,323

 

 

 

7,480

 

24,595

 

 

 

7,480

 

41,214

 

Loss on sale of assets and other

 

 

8,576

 

 

 

6,940

 

 

 

9,464

 

 

 

10,985

 

Restructuring costs

 

 

(340

)

 

524

 

 

 

(1,288

)

 

20,062

 

(Gain) loss on disposal of assets and other

 

 

1,020

 

 

(13,327

)

 

 

7,883

 

 

(10,997

)

Total cost of operations

 

 

636,573

 

 

 

650,784

 

 

 

1,937,964

 

 

 

1,879,668

 

 

 

477,327

 

 

246,262

 

 

 

1,141,235

 

 

1,056,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

74,175

 

 

 

117,790

 

 

 

303,589

 

 

 

338,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(42,506

)

 

(210,784

)

 

 

(297,401

)

 

(467,978

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(26,317

)

 

 

(26,659

)

 

 

(79,208

)

 

 

(81,980

)

 

 

(37,993

)

 

(36,577

)

 

 

(111,580

)

 

(92,284

)

Loss on debt amendments and refinancing

 

 

 

 

 

 

 

 

(246

)

 

 

(13,284

)

Interest income

 

 

1,682

 

 

 

1,665

 

 

 

4,395

 

 

 

5,030

 

 

 

861

 

1,348

 

 

 

5,335

 

4,235

 

Foreign currency exchange gain

 

 

584

 

 

 

485

 

 

 

2,018

 

 

 

2,883

 

Loss on extinguishment of debt

 

 

0

 

 

 

 

(6,527

)

 

 

Foreign currency exchange loss

 

 

(273

)

 

(2,251

)

 

 

(920

)

 

(6,183

)

Distributions from NCM

 

 

2,144

 

 

 

1,381

 

 

 

11,704

 

 

 

10,117

 

 

 

0

 

1,061

 

 

 

77

 

6,975

 

Equity in income of affiliates

 

 

10,902

 

 

 

12,390

 

 

 

26,767

 

 

 

24,597

 

Distributions from DCIP

 

 

6,534

 

 

 

 

6,534

 

 

Interest expense - NCM

 

 

(5,926

)

 

(5,901

)

 

 

(17,723

)

 

(17,726

)

Equity in loss of affiliates

 

 

(7,146

)

 

 

(16,077

)

 

 

(22,061

)

 

 

(27,711

)

Total other expense

 

 

(11,005

)

 

 

(10,738

)

 

 

(34,570

)

 

 

(52,637

)

 

 

(43,943

)

 

 

(58,397

)

 

 

(146,865

)

 

 

(132,694

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

63,170

 

 

 

107,052

 

 

 

269,019

 

 

 

285,542

 

Loss before income taxes

 

 

(86,449

)

 

(269,181

)

 

 

(444,266

)

 

(600,672

)

Income taxes

 

 

24,630

 

 

 

40,926

 

 

 

98,475

 

 

 

106,002

 

 

 

(8,876

)

 

 

(121,145

)

 

 

(15,569

)

 

 

(222,398

)

Net income

 

$

38,540

 

 

$

66,126

 

 

$

170,544

 

 

$

179,540

 

Less: Net income attributable to noncontrolling interests

 

 

401

 

 

 

471

 

 

 

1,438

 

 

 

1,454

 

Net income attributable to Cinemark Holdings, Inc.

 

$

38,139

 

 

$

65,655

 

 

$

169,106

 

 

$

178,086

 

Net loss

 

$

(77,573

)

 

$

(148,036

)

 

$

(428,697

)

 

$

(378,274

)

Less: Net income (loss) attributable to noncontrolling interests

 

 

241

 

 

(444

)

 

 

(175

)

 

 

(702

)

Net loss attributable to Cinemark Holdings, Inc.

 

$

(77,814

)

 

$

(147,592

)

 

$

(428,522

)

 

$

(377,572

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

115,823

 

 

 

115,601

 

 

 

115,746

 

 

 

115,475

 

 

 

117,274

 

 

116,707

 

 

 

117,226

 

 

116,552

 

Diluted

 

 

116,104

 

 

 

115,793

 

 

 

116,063

 

 

 

115,706

 

 

 

117,274

 

 

116,707

 

 

 

117,226

 

 

116,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Cinemark Holdings, Inc.'s

common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share attributable to Cinemark Holdings, Inc.'s common stockholders

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.33

 

 

$

0.56

 

 

$

1.45

 

 

$

1.53

 

 

$

(0.65

)

 

$

(1.25

)

 

$

(3.59

)

 

$

(3.22

)

Diluted

 

$

0.33

 

 

$

0.56

 

 

$

1.45

 

 

$

1.53

 

 

$

(0.65

)

 

$

(1.25

)

 

$

(3.59

)

 

$

(3.22

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.29

 

 

$

0.27

 

 

$

0.87

 

 

$

0.81

 

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


5


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMELOSS

(In thousands, unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

 

$

38,540

 

 

$

66,126

 

 

$

170,544

 

 

$

179,540

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain due to fair value adjustments on interest rate

   swap agreements, net of settlements, net of taxes of $0, $0,

   $0 and $138

 

 

 

 

 

 

 

 

 

 

 

234

 

Other comprehensive income (loss) in equity method

   investments

 

 

(11

)

 

 

(7

)

 

 

92

 

 

 

(183

)

Foreign currency translation adjustments

 

 

9,085

 

 

 

(3,669

)

 

 

5,578

 

 

 

34,998

 

Total other comprehensive income (loss), net of tax

 

 

9,074

 

 

 

(3,676

)

 

 

5,670

 

 

 

35,049

 

Total comprehensive income, net of tax

 

 

47,614

 

 

 

62,450

 

 

 

176,214

 

 

 

214,589

 

Comprehensive income attributable to noncontrolling interests

 

 

(401

)

 

 

(475

)

 

 

(1,438

)

 

 

(1,478

)

Comprehensive income attributable to Cinemark

   Holdings, Inc.

 

$

47,213

 

 

$

61,975

 

 

$

174,776

 

 

$

213,111

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(77,573

)

 

$

(148,036

)

 

$

(428,697

)

 

$

(378,274

)

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $835, $5,677, $3,682 and $3,696, net of settlements

 

 

1,462

 

 

 

6,528

 

 

 

7,912

 

 

 

(16,794

)

Foreign currency translation adjustments

 

 

(13,804

)

 

 

(1,503

)

 

 

(15,010

)

 

 

(62,830

)

Total other comprehensive income (loss), net of tax

 

 

(12,342

)

 

 

5,025

 

 

 

(7,098

)

 

 

(79,624

)

Total comprehensive loss, net of tax

 

 

(89,915

)

 

 

(143,011

)

 

 

(435,795

)

 

 

(457,898

)

Comprehensive (income) loss attributable to noncontrolling interests

 

 

(241

)

 

 

444

 

 

 

175

 

 

 

702

 

Comprehensive loss attributable to Cinemark Holdings, Inc.

 

$

(90,156

)

 

$

(142,567

)

 

$

(435,620

)

 

$

(457,196

)

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


6


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

170,544

 

 

$

179,540

 

Adjustments to reconcile net income to cash provided by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

173,378

 

 

 

154,308

 

Amortization of intangible and other assets and

   favorable/unfavorable leases

 

 

1,167

 

 

 

1,566

 

Amortization of long-term prepaid rents

 

 

1,540

 

 

 

1,357

 

Amortization of debt issue costs

 

 

4,619

 

 

 

4,068

 

Amortization of deferred revenues, deferred lease incentives

   and other

 

 

(12,037

)

 

 

(13,017

)

Impairment of long-lived assets

 

 

9,600

 

 

 

2,323

 

Share based awards compensation expense

 

 

9,487

 

 

 

10,247

 

Loss on sale of assets and other

 

 

9,464

 

 

 

10,985

 

Write-off of unamortized debt issue costs associated with early

   retirement of debt

 

 

 

 

 

2,369

 

Deferred lease expenses

 

 

(1,019

)

 

 

(809

)

Equity in income of affiliates

 

 

(26,767

)

 

 

(24,597

)

Deferred income tax expenses

 

 

9,541

 

 

 

16,382

 

Distributions from equity investees

 

 

17,321

 

 

 

9,660

 

Changes in assets and liabilities and other

 

 

(55,433

)

 

 

(76,102

)

Net cash provided by operating activities

 

 

311,405

 

 

 

278,280

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Additions to theatre properties and equipment and other

 

 

(262,730

)

 

 

(230,346

)

Acquisitions of theatres in the U.S. and international markets

 

 

(41,000

)

 

 

(15,300

)

Proceeds from sale of theatre properties and equipment and other

 

 

14,816

 

 

 

3,398

 

Proceeds from sale of marketable securities

 

 

 

 

 

13,451

 

Investment in joint ventures and other

 

 

(1,178

)

 

 

(1,703

)

Net cash used for investing activities

 

 

(290,092

)

 

 

(230,500

)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Dividends paid to stockholders

 

 

(101,304

)

 

 

(94,117

)

Payroll taxes paid as a result of restricted stock withholdings

 

 

(2,943

)

 

 

(6,828

)

Proceeds from issuance of Senior Notes, net of discount

 

 

 

 

 

222,750

 

Retirement of Senior Subordinated Notes

 

 

 

 

 

(200,000

)

Repayments of long-term debt

 

 

(2,855

)

 

 

(15,217

)

Payment of debt issue costs

 

 

(817

)

 

 

(4,504

)

Payments on capital leases

 

 

(15,814

)

 

 

(14,655

)

Proceeds from financing lease

 

 

10,200

 

 

 

 

Other

 

 

(620

)

 

 

1,282

 

Net cash used for financing activities

 

 

(114,153

)

 

 

(111,289

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

1,051

 

 

 

2,081

 

 

 

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

 

(91,789

)

 

 

(61,428

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

 

561,235

 

 

 

588,539

 

End of period

 

$

469,446

 

 

$

527,111

 

 

 

 

 

 

 

 

 

 

Supplemental information (see Note 13)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(428,697

)

 

$

(378,274

)

Adjustments to reconcile net loss to cash used for operating activities:

 

 

 

 

 

 

Depreciation

 

 

200,262

 

 

 

187,748

 

Amortization of intangible and other assets

 

 

2,026

 

 

 

3,632

 

Amortization of debt issue costs

 

 

7,994

 

 

 

4,942

 

Non-cash accretion on convertible notes

 

 

0

 

 

 

1,739

 

Interest accrued on NCM screen advertising advances

 

 

17,723

 

 

 

17,726

 

Amortization of NCM screen advertising advances and other deferred revenues

 

 

(24,253

)

 

 

(23,647

)

Amortization of accumulated losses for amended swap agreements

 

 

3,371

 

 

 

5,338

 

Impairment of long-lived assets

 

 

7,480

 

 

 

41,214

 

Share based awards compensation expense

 

 

16,589

 

 

 

12,859

 

(Gain) loss on disposal of assets and other

 

 

7,883

 

 

 

(10,997

)

Loss on extinguishment of debt

 

 

6,527

 

 

 

 

Non-cash rent expense

 

 

(1,803

)

 

 

1,649

 

Equity in loss of affiliates

 

 

22,061

 

 

 

27,711

 

Deferred income tax expenses

 

 

(21,059

)

 

 

(29,941

)

Distributions from equity investees

 

 

156

 

 

 

25,430

 

Changes in assets and liabilities and other

 

 

141,537

 

 

 

(54,782

)

Net cash used for operating activities

 

 

(42,203

)

 

 

(167,653

)

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Additions to theatre properties and equipment

 

 

(57,244

)

 

 

(67,618

)

Proceeds from sale of theatre properties and equipment and other

 

 

2,192

 

 

 

212

 

Investment in joint ventures and other, net

 

 

0

 

 

 

(50

)

Net cash used for investing activities

 

 

(55,052

)

 

 

(67,456

)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Dividends paid to stockholders

 

 

0

 

 

 

(42,311

)

Payroll taxes paid as a result of stock withholdings

 

 

(16

)

 

 

(2,865

)

Proceeds from issuance of convertible notes

 

 

0

 

 

 

460,000

 

Proceeds from issuance of senior notes

 

 

1,170,000

 

 

 

250,000

 

Proceeds from other borrowings

 

 

9,706

 

 

 

7,167

 

Redemption of senior notes

 

 

(1,155,000

)

 

 

 

Repayments of long-term debt

 

 

(7,220

)

 

 

(4,947

)

Payment of debt issue costs

 

 

(17,272

)

 

 

(24,981

)

Fees paid related to debt refinancing

 

 

(2,058

)

 

 

 

Purchase of convertible note hedges

 

 

0

 

 

 

(142,094

)

Proceeds from warrants issued

 

 

0

 

 

 

89,424

 

Payments on finance leases

 

 

(11,045

)

 

 

(11,497

)

Other

 

 

0

 

 

 

(392

)

Net cash provided by (used for) financing activities

 

 

(12,905

)

 

 

577,504

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(2,165

)

 

 

(5,002

)

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

(112,325

)

 

 

337,393

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

Beginning of period

 

 

655,338

 

 

 

488,313

 

End of period

 

$

543,013

 

 

$

825,706

 

 

 

 

 

 

 

 

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

7



CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

1.

The Company and Basis of Presentation

1.
The Company and Basis of Presentation

Cinemark Holdings, Inc.The Company and its subsidiaries (the “Company”) operatesoperate in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay.

The accompanying condensed consolidated balance sheet as of December 31, 2016,2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates. Majority-owned subsidiaries thatof which the Company has control of are consolidated while those affiliates of which the Company owns between 20%20% and 50%50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 20%20% are generally accounted for under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate, in which case the Company would account for its investment under the equity method. TheThe results of these subsidiaries and affiliates are included in the condensed consolidated financial statements effective with their formation or from their dates of acquisition. Intercompany balances and transactions are eliminated in consolidation.

These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2016,2020, included in the Annual Report on Form 10-K filed February 23, 201726, 2021 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three and nine months ended September 30, 20172021 are not necessarily indicative of the results to be achieved for the full year.

2.
Impact of COVID-19 Pandemic

As the Company has previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread. As a movie exhibitor that operates spaces where patrons gather in close proximity, the Company continues to be impacted by the pandemic. To comply with government mandates at the initial outbreak of the COVID-19 pandemic, the Company temporarily closed all of its theatres in the U.S. and Latin America in March of 2020, implemented temporary personnel and salary reductions, halted non-essential operating and capital expenditures, and negotiated modified timing and/or abatement of contractual payments with landlords and other major suppliers until its theatres reopened. In addition, the Company suspended its quarterly dividend.

2.

New Accounting Pronouncements

In May 2014,As of September 30, 2021, all of the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, RevenueCompany's domestic and international theatres were open. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours in certain locations as well as the Company’s focus on initiatives to enhance productivity. The Company continues to limit capital expenditures to essential activities and projects. The Company worked with landlords and other vendors during the nine months ended September 30, 2021 to extend payment terms as it reopened theatres and continues to recover from Contracts with Customers (Topic 606), (“ASU 2014-09”the impacts of the COVID-19 pandemic.

Based on the Company’s current estimates of recovery, it believes it has, and will generate, sufficient cash to sustain operations. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on the Company’s business, results of operations, cash flows and financial condition.

Restructuring Charges

During June 2020, Company management approved and announced a restructuring plan to realign its operations to create a more efficient cost structure (referred to herein as the “Restructuring Plan”). The purposeRestructuring Plan primarily included a permanent headcount reduction at its domestic corporate office and the permanent closure of ASU 2014-09 is to clarify the principles for recognizing revenuecertain domestic and create a common revenue standard for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).  The following subsequent Accounting Standards Updates either clarified or revised guidance set forth in ASU 2014-09:international theatres.

In August 2015, the FASB issued Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, (“ASU 2015-14”).  ASU 2015-14 deferred the effective date of ASU 2014-09.  The guidance in ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.

In March 2016, the FASB issued Accounting Standards Update 2016-08, Revenue from Contracts with Customers (Topic 606):  Principal versus Agent Considerations (Reporting Revenues Gross versus Net), (“ASU 2016-08”). The purpose of ASU 2016-08 is to clarify the implementation of revenue recognition guidance for principal versus agent considerations.

In April 2016, the FASB issued Accounting Standards Update 2016-10, Revenue from Contracts with Customers (Topic 606):  Identifying Performance Obligations and Licensing, (“ASU 2016-10”). The purpose of ASU 2016-10 is to clarify certain aspects of identifying performance obligations and licensing implementation guidance.

In May 2016, the FASB issued Accounting Standards Update 2016-12, Revenue from Contracts with Customers (Topic 606):  Narrow-Scope Improvements and Practical Expedients, (“ASU 2016-12”). The purpose of ASU 2016-12 is to address certain narrow aspects of Accounting Standards Codification (“ASC”) Topic 606 including assessing collectability, presentation of sales taxes, noncash considerations, contract modifications and completed contracts at transition.

In December 2016, the FASB issued Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, (“ASU 2016-20”). The purpose of ASU 2016-20 is to amend certain narrow aspects of the guidance issued in ASU 2014-09 related to the disclosure of performance obligations, as well as

8


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

other amendments related to loan guarantee fees, contract costs, refund liabilities, advertising costs and the clarification of certain examples.

The following table summarizes activity recorded during the nine months ended September 30, 2021:

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

Employee-related Costs

 

Facility Closure Costs

 

Total Charges

 

 

Employee-related Costs

 

Facility Closure Costs

 

Total Charges

 

 

Employee-related Costs

 

Facility Closure Costs

 

Total Charges

 

Balance at December 31, 2020

 

$

840

 

$

5,740

 

$

6,580

 

 

$

 

$

161

 

$

161

 

 

$

840

 

$

5,901

 

$

6,741

 

Amounts paid

 

 

(350

)

 

 

 

(350

)

 

 

 

 

 

 

 

 

 

(350

)

 

 

 

(350

)

Reserve adjustments

 

 

 

 

(208

)

 

(208

)

 

 

 

 

 

 

 

 

 

 

 

(208

)

 

(208

)

Balance at March 31, 2021

 

$

490

 

$

5,532

 

$

6,022

 

 

$

 

$

161

 

$

161

 

 

$

490

 

$

5,693

 

$

6,183

 

Amounts paid

 

 

 

 

(200

)

 

(200

)

 

 

 

 

 

 

 

 

 

 

 

(200

)

 

(200

)

Reserve adjustments

 

 

(60

)

 

(680

)

 

(740

)

 

 

 

 

 

 

 

 

 

(60

)

 

(680

)

 

(740

)

Balance at June 30, 2021

 

$

430

 

$

4,652

 

$

5,082

 

 

$

 

$

161

 

$

161

 

 

$

430

 

$

4,813

 

$

5,243

 

Reserve adjustments

 

 

 

 

(305

)

 

(305

)

 

 

 

 

(35

)

 

(35

)

 

 

 

 

(340

)

 

(340

)

Balance at September 30, 2021

 

$

430

 

$

4,347

 

$

4,777

 

 

$

 

$

126

 

$

126

 

 

$

430

 

$

4,473

 

$

4,903

 

The amendmentsremaining accrued restructuring costs of $4,903 are reflected in these accounting standards updates may be applied either using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earningsaccounts payable and accrued expenses on the condensed consolidated balance sheet as of the beginning of the fiscal year in which the guidance is effective or retrospectively to each period presented. Early adoption is permitted.September 30, 2021.

3.
New Accounting Pronouncements

The Company will adopt the amendments within these accounting standards updates in the first quarter of 2018 using the modified retrospective transition method. The Company is continuing to evaluate the impact of these accounting standards updates on its condensed consolidated financial statements, specifically with respect to the Company’s Exhibitor Services Agreement (“ESA”) with NCM, loyalty program accounting, breakage income for stored value cards as well as other ancillary and contractual revenues.  The Company believes its ESA with NCM includes a significant financing component and, as a result, other revenues will increase with a similar offsetting increase in interest expense each year until the ESA term expires.  In addition, the amortization method used to amortize the deferred revenue associated with the ESA will change to straight-line under the new accounting standards due to the nature of the Company’s performance obligation under the ESA. The change in amortization method will result in a cumulative effect adjustment upon adoption, the value of which the Company is currently evaluating.  

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases(“ASU”) 2020-04, Reference Rate Reform (Topic 842)848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2016-02”2020-04”)and ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”). The purpose of ASU 2016-022020-04 is to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial statement users a better understanding ofreporting. More specifically, the amount, timing,amendments in ASU 2020-04 provide optional expedients and uncertainty of cash flows arising from leases.exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The adoption ofamendments in ASU 2016-02 will result2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the recognition of a right-of-use assetdiscounting transition. The amendments in ASU 2020-04 and a lease liability for most operating leases.  New disclosure requirements include qualitative and quantitative information about the amounts recorded in the financial statements. ASU 2016-02 is2021-01 are effective for fiscal years beginning after December 15, 2018. ASU 2016-02 requires a modified retrospective transition by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective with the option to elect certain practical expedients. Early adoption is permitted.March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of ASU 2016-02 on its condensed consolidated financial statements.  The most significant impact of the amendments in2020-04 and ASU 2016-02 will be the recognition of new right-of-use assets2021-01 and lease liabilities for assets currently subject to operating leases.  The Company will adopt the amendments in ASU 2016-02 in the first quarter of 2019.  

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation – Stock Compensation (Topic 718):  Improvements to Employee Share-Based Payment Accounting, (“ASU 2016-09”). The purpose of ASU 2016-09 is to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of such activity on the statement of cash flows.  ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within that year.  Prospective, retrospective, or modified retrospective application may be used dependent on the specific requirements of the amendments within ASU 2016-09. Effective January 1, 2017, the Company adopted ASU 2016-09 on a prospective basis (see Note 3).  As such, prior periods have not been adjusted.

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments – a consensus of the FASB Emerging Issues Task Force, (“ASU 2016-15”). The purpose of ASU 2016-15 is to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year.  A retrospective transition method should be used in the application of the amendments within ASU 2016-15.  Early adoption is permitted. The Company does not expect ASU 2016-15 to have a materialtheir impact on its condensed consolidated financial statements.

4.
Lease Accounting

Lease Deferrals and Abatements

Upon the temporary closure of theatres in March 2020, the Company initiated discussions with landlords to negotiate the deferral of rent and other lease-related payments with certain of its landlords. The amendments signed with the landlords involved varying concessions, including the abatement of rent payments during closure, alternative rent terms during closure, deferral of all or a portion of rent payments to later periods and deferrals of rent payments to later periods combined with an early exercise of an existing renewal option or extension of the lease term. In January 2017,some cases, the Company was entitled to rent-free periods while theatres were closed due to local regulations in certain locations.

In April 2020, the FASB issued Accounting Standards Update 2017-04, Intangibles – Goodwillstaff released guidance indicating that in response to the COVID-19 crisis, an entity would not have to analyze each contract to determine whether enforceable rights and Other (Topic 350):  Simplifyingobligations for concessions exist in the Testcontract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. The election is available for Goodwill Impairment, (“ASU 2017-04”). The purpose of ASU 2017-04 isconcessions related to simplify the subsequent measurement of goodwill by removing the second stepeffects of the two-step impairment test. The amendments should be applied onCOVID-19 pandemic that do not result in a prospective basis. ASU 2017-04substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is effectiveavailable for fiscal years beginning after December 15, 2019, including interim periods withinconcessions that year. Early adoption is permitted for interimresult in the total payments required by the modified contract being substantially the same as or annual goodwill impairment tests performed on testing dates after January 1, 2017.  less than total payments required by the original contract.

The Company adoptedelected to not remeasure the amendmentsrelated lease liabilities and right-of-use assets for those leases where the concessions and deferrals did not result in ASU 2017-04 duringa significant change in total payments under the second quarterlease and where the remaining lease term did not change as a result of 2017the negotiation. For those leases that were renewed or extended as a result of the negotiation to defer rent payments, the Company recalculated the related lease liability and right-of-use asset based on the new terms. Total remaining deferred payments as of September 30, 2021 were $42,954, of which $37,587 were included in order to reduce the complexity of performing its goodwill impairment tests.  As discussedaccounts payable and accrued expenses and $5,367 were included in Note 9, these tests are generally performedother long-term liabilities in the fourth quarter of each year.  The Company does not expect ASU 2017-04 to have a material impact on its condensed consolidated financial statements.balance sheet.

In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation – Stock Compensation (Topic 718):  Scope Modification Accounting, (“ASU 2017-09”). The amendments in ASU 2017-09 provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting as described in ASC Topic

9


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

718.  The amendments should be appliedfollowing table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30

 

 

September 30

 

Lease Cost

Classification

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating lease costs

 

 

 

 

 

 

 

 

 

 

 

 

Equipment (1)

Utilities and other

$

699

 

 

$

823

 

 

$

1,567

 

 

$

2,495

 

Real Estate (2)(3)

Facility lease expense

 

69,492

 

 

 

65,970

 

 

 

200,930

 

 

 

211,088

 

Total operating lease costs

 

$

70,191

 

 

$

66,793

 

 

$

202,497

 

 

$

213,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease costs

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of leased assets

Depreciation and amortization

$

3,142

 

 

$

3,665

 

 

$

9,533

 

 

$

11,052

 

Interest on lease liabilities

Interest expense

 

1,449

 

 

 

1,725

 

 

 

4,510

 

 

 

5,333

 

Total finance lease costs

 

$

4,591

 

 

$

5,390

 

 

$

14,043

 

 

$

16,385

 

(1)
Includes approximately $566 and $(267) of short-term lease payments for the three months ended September 30, 2021 and 2020, respectively. Includes approximately $1,194 and $(839) of short-term lease payments for the nine months ended September 30, 2021 and 2020, respectively.
(2)
Includes approximately $1,862 and $(191) of variable lease payments based on a prospective basis. ASU 2017-09change in index, such as CPI or inflation, variable payments based on revenues or attendance and variable common area maintenance costs for the three months ended September 30, 2021 and 2020, respectively. Includes approximately $(81) and $9,146 of variable lease payments based on a change in index, such as CPI or inflation, variable payments based on revenues or attendance and variable common area maintenance costs for the nine months ended September 30, 2021 and 2020, respectively.
(3)
Approximately $318 and $335 of lease payments are included in general and administrative expenses primarily related to office leases for the three months ended September 30, 2021 and 2020, respectively. Approximately $967 and $1,122 of lease payments are included in general and administrative expenses primarily related to office leases for the nine months ended September 30, 2021 and 2020, respectively.

The following table represents the minimum cash lease payments recorded as lease expense, interest expense and a reduction of lease liabilities, as well as the non-cash addition of lease assets for the periods indicated.

 

 

Nine Months Ended

 

 

 

September 30,

 

Other Information

 

2021

 

 

2020

 

Contractual cash payments included in the measurement of lease liabilities(1)

 

 

 

 

 

 

Cash outflows for operating leases

 

$

201,384

 

 

$

205,276

 

Cash outflows for finance leases - operating activities

 

$

4,504

 

 

$

5,304

 

Cash outflows for finance leases - financing activities

 

$

11,045

 

 

$

11,497

 

Non-cash amount of leased assets obtained in exchange for:

 

 

 

 

 

 

Operating lease liability additions, net

 

$

109,088

 

 

$

84,241

 

(1)
As discussed above at Lease Deferrals and Abatements, the Company negotiated certain lease amendments to defer and/or abate contractual payments as a result of the COVID-19 pandemic and temporary closure of theatres. In accordance with FASB Staff guidance, the Company did not recalculate lease liabilities and right of use assets for amendments that did not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Contractual payment amounts for the nine months ended September 30, 2021 above are prior to the impact of deferred or abated rent amounts.

As of September 30, 2021, the Company had signed lease agreements with total contractual minimum lease payments of approximately $144,845 related to theatre leases that had not yet commenced. The timing of lease commencement is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted.dependent on the completion of construction of the related theatre facility. Additionally, these amounts are often based on estimated square footage and costs to construct each facility and may be subject to adjustment upon final completion of each construction project. In accordance with ASC Topic 842, fixed minimum lease payments related to these theatre leases which have not yet commenced are excluded from the right-of-use assets and lease liabilities as of September 30, 2021.

10


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

5.
Revenue Recognition

The Company’s patrons have the option to purchase movie tickets well in advance of a movie showtime or right before the movie showtime, or at any point in between those two timeframes depending on seat availability. The Company does not expect ASU 2017-09recognizes such admissions revenues when the showtime for a purchased movie ticket has passed. Concession revenues are recognized when products are sold to the consumer. Other revenues primarily consist of screen advertising and screen rental revenues, promotional income, studio trailer placements and transactional fees. Except for NCM screen advertising advances discussed below in Note 9, these revenues are generally recognized when the Company has performed the related services. The Company sells gift cards and discount ticket vouchers, the proceeds from which are recorded as deferred revenues. Deferred revenues for gift cards and discount ticket vouchers are recognized when they are redeemed for concession items or, if redeemed for movie tickets, when the showtime has passed. The Company offers a subscription program in the U.S. whereby patrons can pay a monthly fee to receive a monthly credit for use towards a future movie ticket purchase. The Company records the monthly subscription program fees as deferred revenues and records admissions revenues when the showtime for a movie ticket purchased with a credit has passed. The Company has loyalty programs in the U.S. and many of its international locations that either have a material impactprepaid annual membership fee or award points to customers as purchases are made. For those loyalty programs that have an annual membership fee, the Company recognizes the fee collected as other revenues on itsa straight-line basis over the term of the membership. For those loyalty programs that award points to customers based on their purchases, the Company records a portion of the original transaction proceeds as deferred revenues based on the number of reward points issued to customers and recognizes the deferred revenues when the customer redeems such points. The value of loyalty points issued is based on the estimated fair value of the rewards offered. The Company generally records breakage revenue on gift cards and discount ticket vouchers based on redemption activity and historical experience with unused balances. The Company also records breakage revenue generally upon the expiration of loyalty points and subscription credits. Advances collected on concession and other contracts are deferred and recognized during the period in which the Company satisfies the related performance obligations, which may differ from the period in which the advances are collected.

Accounts receivable as of September 30, 2021 and December 31, 2020 included approximately $11,151 and $6,232, respectively, of receivables related to contracts with customers. The Company did 0t record any assets related to the costs to obtain or fulfill a contract with customers during the nine months ended September 30, 2021.

Disaggregation of Revenue

The following tables present revenues for the three and nine months ended September 30, 2021 and 2020, disaggregated based on major type of good or service and by reportable operating segment and disaggregated based on timing of revenue recognition.

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30, 2021

 

 

September 30, 2021

 

 

U.S.

 

International

 

 

 

 

U.S.

 

International

 

 

 

 

Operating

 

Operating

 

 

 

 

Operating

 

Operating

 

 

 

Major Goods/Services

Segment (1)

 

Segment

 

Consolidated

 

 

Segment (1)

 

Segment

 

Consolidated

 

Admissions revenues

$

195,307

 

$

30,157

 

$

225,464

 

 

$

384,361

 

$

50,703

 

$

435,064

 

Concession revenues

 

142,634

 

 

21,624

 

 

164,258

 

 

 

275,032

 

 

38,528

 

 

313,560

 

Screen advertising, screen rental and promotional revenues (2)

 

18,054

 

 

4,845

 

 

22,899

 

 

 

44,543

 

 

7,628

 

 

52,171

 

Other revenues

 

19,532

 

 

2,668

 

 

22,200

 

 

 

37,941

 

 

5,098

 

 

43,039

 

Total revenues

$

375,527

 

$

59,294

 

$

434,821

 

 

$

741,877

 

$

101,957

 

$

843,834

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30, 2020

 

 

September 30, 2020

 

 

U.S.

 

International

 

 

 

 

U.S.

 

International

 

 

 

 

Operating

 

Operating

 

 

 

 

Operating

 

Operating

 

 

 

Major Goods/Services

Segment (1)

 

Segment

 

Consolidated

 

 

Segment (1)

 

Segment

 

Consolidated

 

Admissions revenues

$

14,794

 

$

107

 

$

14,901

 

 

$

247,157

 

$

60,243

 

$

307,400

 

Concession revenues

 

8,861

 

 

255

 

 

9,116

 

 

 

161,674

 

 

37,922

 

 

199,596

 

Screen advertising, screen rental and promotional revenues (2)

 

9,227

 

 

513

 

 

9,740

 

 

 

35,319

 

 

13,437

 

 

48,756

 

Other revenues

 

1,527

 

 

194

 

 

1,721

 

 

 

25,857

 

 

6,459

 

 

32,316

 

Total revenues

$

34,409

 

$

1,069

 

$

35,478

 

 

$

470,007

 

$

118,061

 

$

588,068

 

11


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2021

 

 

 

U.S.

 

International

 

 

 

 

U.S.

 

International

 

 

 

 

 

Operating

 

Operating

 

 

 

 

Operating

 

Operating

 

 

 

Timing of Recognition

 

Segment (1)

 

Segment

 

Consolidated

 

 

Segment (1)

 

Segment

 

Consolidated

 

Goods and services transferred at a point in time

 

$

348,484

 

$

53,306

 

$

401,790

 

 

$

678,445

 

$

91,519

 

$

769,964

 

Goods and services transferred over time (2)

 

 

27,043

 

 

5,988

 

 

33,031

 

 

 

63,432

 

 

10,438

 

 

73,870

 

Total

 

$

375,527

 

$

59,294

 

$

434,821

 

 

$

741,877

 

$

101,957

 

$

843,834

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2020

 

 

September 30, 2020

 

 

 

U.S.

 

International

 

 

 

 

U.S.

 

International

 

 

 

 

 

Operating

 

Operating

 

 

 

 

Operating

 

Operating

 

 

 

Timing of Recognition

 

Segment (1)

 

Segment

 

Consolidated

 

 

Segment (1)

 

Segment

 

Consolidated

 

Goods and services transferred at a point in time

 

$

24,945

 

$

352

 

$

25,297

 

 

$

426,476

 

$

101,681

 

$

528,157

 

Goods and services transferred over time (2)

 

 

9,464

 

 

717

 

 

10,181

 

 

 

43,531

 

 

16,380

 

 

59,911

 

Total

 

$

34,409

 

$

1,069

 

$

35,478

 

 

$

470,007

 

$

118,061

 

$

588,068

 

(1)
U.S. segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 17 for additional information on intercompany eliminations.
(2)
Amount includes amortization of NCM screen advertising advances. See Deferred Revenues below.

Deferred Revenues

The following table presents changes in the Company’s NCM screen advertising advances and deferred revenues for the nine months ended September 30, 2021.

 

 

NCM screen advertising advances (1)

 

 

Other
Deferred
Revenues
(2)

 

Balance at January 1, 2021

 

$

344,255

 

 

$

138,830

 

Amounts recognized as accounts receivable

 

 

 

 

 

3,409

 

Cash received from customers in advance

 

 

 

 

 

58,256

 

Common units received from NCM

 

 

10,237

 

 

 

 

Interest accrued related to significant financing component

 

 

17,723

 

 

 

 

Revenue recognized during period

 

 

(24,003

)

 

 

(64,625

)

Foreign currency translation adjustments

 

 

 

 

 

(1,253

)

Balance at September 30, 2021

 

$

348,212

 

 

$

134,617

 

(1)
See Note 9 for the maturity of NCM screen advertising advances as of September 30, 2021.
(2)
Includes liabilities associated with outstanding gift cards and discount ticket vouchers, points or rebates outstanding under the Company’s loyalty and membership programs and revenues not yet recognized for screen advertising, screen rental and other promotional activities. Classified as accounts payable and accrued expenses or other long-term liabilities on the condensed consolidated financial statements.  balance sheet.

The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of September 30, 2021 and when the Company expects to recognize this revenue.

 

 

Twelve Months Ended September 30,

 

 

 

 

 

 

 

Remaining Performance Obligations

 

2022

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

Thereafter

 

 

Total

 

Other deferred revenues

 

$

117,093

 

 

$

17,524

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

134,617

 

12


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In August 2017,thousands, except share and per share data

6.
Earnings Per Share

The following table presents computations of basic and diluted loss per share:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Cinemark Holdings, Inc.

 

$

(77,814

)

 

$

(147,592

)

 

$

(428,522

)

 

$

(377,572

)

Loss allocated to participating share-based awards (1)

 

 

1,525

 

 

 

1,472

 

 

 

7,583

 

 

 

2,832

 

Net loss attributable to common stockholders

 

$

(76,289

)

 

$

(146,120

)

 

$

(420,939

)

 

$

(374,740

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator (shares in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common stock outstanding

 

 

117,274

 

 

 

116,707

 

 

 

117,226

 

 

 

116,552

 

Common equivalent shares for restricted stock units (2)

 

 

 

 

 

 

 

 

 

 

 

 

Common equivalent shares for convertible notes and warrants (3)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted common equivalent shares

 

 

117,274

 

 

 

116,707

 

 

 

117,226

 

 

 

116,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per share attributable to common stockholders

 

$

(0.65

)

 

$

(1.25

)

 

$

(3.59

)

 

$

(3.22

)

Diluted loss per share attributable to common stockholders

 

$

(0.65

)

 

$

(1.25

)

 

$

(3.59

)

 

$

(3.22

)

(1)
For the FASB issued Accounting Standards Update 2017-12, Derivativesthree months ended September 30, 2021 and Hedging (Topic 815):  Targeted Improvements to Accounting2020, a weighted average of approximately 2,344 and 1,175 shares of restricted stock, respectively, were considered participating securities. For the nine months ended September 30, 2021 and 2020, a weighted average of approximately 2,112 and 880 shares of restricted stock, respectively, were considered participating securities.
(2)
For the three months ended September 30, 2021 and 2020, approximately 103 and 438, respectively, common equivalent shares for Hedging Activitiesrestricted stock units were excluded because they were anti-dilutive. For the nine months ended September 30, 2021 and 2020, approximately 90 and 689, (“ASU 2017-12”). The amendments in ASU 2017-12 improverespectively, common equivalent shares for restricted stock units were excluded because they were anti-dilutive.
(3)
For the financial reportingthree and nine months ended September 30, 2021 and 2020, diluted loss per share excludes the conversion of hedging relationships to better reflect the economic results4.50% Convertible Senior Notes into 32,051 shares of an entity’s risk management activities in its financial statements.  Additionally, the amendments in ASU 2017-12 simplify certain steps of applying hedge accounting guidance.  ASU 2017-04 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted.  The Company does not expect ASU 2017-12 to have a material impact on its condensed consolidated financial statements.

3.

Earnings Per Share

common stock, as well as outstanding warrants, as they would be anti-dilutive. See further discussion below.

The Company considers its unvested restricted stockshare-based payment awards, which contain non-forfeitable rights to dividends, participating securities, and includes such participating securities in its computation of earningsloss per share pursuant to the two-class method. Basic earningsloss per share for the two classes of stock (common stock and unvested restricted stock) is calculated by dividing net incomeloss by the weighted average number of shares of common stock and unvested restricted stock outstanding during the reporting period. Diluted earningsloss per share is calculated using the weighted average number of shares of common stock plus the potentially dilutive effect of common equivalent shares outstanding determined under both the two classtwo-class method and the treasury stock method.

Effective January 1, 2017,The impact of the Company adopted ASU 2016-094.50% Convertible Senior Notes on a prospective basis.  In accordance with the amendments in ASU 2016-09, the Company’s diluted earningsloss per share calculation foris calculated under the three and nine months ended September 30, 2017 excludes the estimated income tax benefits and deficiencies in the applicationif-converted method, which assumes conversion of the treasurynotes at the beginning of the period. The if-converted value of the 4.50% Convertible Senior Notes exceeded the aggregate outstanding principal value of the notes by $180,842. The closing price of the Company's common stock method.  Excess income tax benefits or deficiencies related todid not exceed the strike price of $18.65 per share based awards are recognized as discrete items in(130% of the income statementinitial exercise price of $14.35 per share) during at least 20 of the period in which they occur. See Note 8 for a discussionlast 30 trading days of share based awards and related income tax benefits recognized during the nine months ended September 30, 20172021 and, 2016.therefore, the 4.50% Convertible Senior Notes are not considered convertible during the fourth quarter of 2021.

As stated in Note 13 of the Company’s Annual Report on Form 10-K filed February 26, 2021, the Company entered into hedge transactions with, and sold warrants to, counterparties in connection with the issuance of the 4.50% Convertible Senior Notes. The following table presents computationshedge transactions are generally expected to reduce the potential dilution of basic and dilutedany conversion of the 4.50% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 4.50% Convertible Senior Notes, as the case may be. The warrants could have a dilutive effect on earnings per share to the extent that the price of the Company’s common stock during a given measurement period exceeds the strike price (initially $22.08 per share).

7.
Long Term Debt Activity

Senior Secured Credit Facility

Cinemark USA, Inc. has a senior secured credit facility that includes a $700,000 term loan and a $100,000 revolving credit line (the “Credit Agreement”). As of September 30, 2021, there was $634,785 outstanding under the two-class method:term loan and 0 borrowings were outstanding under the revolving credit line. As of September 30, 2021, $100,000 was available for borrowing under the revolving credit line. Quarterly principal payments of $1,649 are due on the term loan through December 31, 2024, with a final principal payment of $613,351 due on March 29, 2025. As a result of the June 15, 2021 amendment to the Credit Agreement discussed below, the revolving

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cinemark Holdings, Inc.

 

$

38,139

 

 

$

65,655

 

 

$

169,106

 

 

$

178,086

 

Earnings allocated to participating share-based awards (1)

 

 

(209

)

 

 

(336

)

 

 

(842

)

 

 

(805

)

Net income attributable to common stockholders

 

$

37,930

 

 

$

65,319

 

 

$

168,264

 

 

$

177,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator (shares in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common stock outstanding

 

 

115,823

 

 

 

115,601

 

 

 

115,746

 

 

 

115,475

 

Common equivalent shares for restricted stock units

 

 

281

 

 

 

192

 

 

 

317

 

 

 

231

 

Diluted

 

 

116,104

 

 

 

115,793

 

 

 

116,063

 

 

 

115,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to common

   stockholders

 

$

0.33

 

 

$

0.56

 

 

$

1.45

 

 

$

1.53

 

Diluted earnings per share attributable to common

   stockholders

 

$

0.33

 

 

$

0.56

 

 

$

1.45

 

 

$

1.53

 

(1)

For the three months ended September 30, 2017 and 2016, a weighted average of approximately 643 and 596 shares of unvested restricted stock, respectively, were considered participating securities. For the nine months ended September 30, 2017 and 2016, a weighted average of approximately 581 and 526 shares of unvested restricted stock, respectively, were considered participating securities.

1013


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

4.

Long Term Debt Activity

credit line matures on November 28, 2024. The average interest rate applicable to outstanding term loan borrowings under the Credit Agreement as of September 30, 2021 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed below.

On April 17, 2020, in conjunction with the issuance of the 8.750% Secured Notes discussed below, the Company obtained a waiver of the leverage covenant from the majority of revolving lenders under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020. The waiver is subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.

On August 21, 2020, the Company further amended the waiver of the leverage covenant to extend through the fiscal quarter ending September 30, 2021. The amendment also (i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, (ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits the Company to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver, and (iv) makes such other changes to permit the issuance of the 4.50% Convertible Senior Secured Credit FacilityNotes discussed below.

On June 16, 2017, Cinemark USA, Inc., our wholly-owned subsidiary,15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended its senior securedto, among other things, extend the maturity of the revolving credit facilityline from November 28, 2022 to reduce the rate at which the term loan bears interest by 0.25% and to modify certain covenant definitions within the agreement.November 28, 2024. The Company incurred debt issue costs of approximately $521$500 in connection with the amendment,extension of the revolving credit line, which are reflectedrecorded as a reduction of long termlong-term debt on the consolidated balance sheet.

5.875% Senior Notes

On March 16, 2021, Cinemark USA, Inc. issued $405,000 aggregate principal amount of 5.875% senior notes due 2026, at par value (the “5.875% Senior Notes”). Proceeds, after payment of fees, were used to fund a cash tender offer to purchase any and all of Cinemark USA’s 5.125% Senior Notes (the “5.125% Senior Notes”) and to redeem any of the 5.125% Senior Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on March 15, 2026. The Company incurred debt issue costs of approximately $5,980 in connection with the issuance, which are recorded as a reduction of long-term debt, less current on the consolidated balance sheet.

The 5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior debt and are senior in right of payment to all of Cinemark USA, Inc.’s and its guarantors’ existing and future senior subordinated debt. The 5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the collateral securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 5.875% Senior Notes.

The indenture to the 5.875% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. Upon a change of control, as defined in the indenture, the Company would be required to make an offer to repurchase the 5.875% Senior Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 5.875% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if we satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.

5.250% Senior Notes

On June 15, 2021, Cinemark USA, Inc. issued $765,000 aggregate principal amount of 5.25% senior notes due 2028, at par value (the “5.25% Senior Notes”). Proceeds, after payment of fees, were used to redeem all of Cinemark USA’s 4.875% $755,000 aggregate principal amount of Senior Notes due 2023 (the “4.875% Senior Notes”). Interest on the 5.25% Senior Notes is payable on January 15 and July 15 of each year, beginning January 15, 2022. The 5.25% Senior Notes mature on July 15, 2028. The Company incurred debt

14


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

issue costs of approximately $10,684 in connection with the issuance, which are recorded as a reduction of long-term debt on the consolidated balance sheet.

The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s 8.750% senior secured notes due 2025, in each case to the extent of the value of the collateral securing such debt, (iv) are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA’s non-guarantor subsidiaries, and (v) are structurally senior to the 4.50% convertible senior notes due 2025 issued by Cinemark Holdings.

The indenture to the 5.25% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. Upon a change of control, as defined in the indenture, the Company would be required to make an offer to repurchase the 5.25% Senior Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 5.25% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if we satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.

4.875% Senior Notes

On May 21, 2021, Cinemark USA, Inc. issued a conditional notice of optional redemption to redeem the $755,000 outstanding principal amount of the 4.875% Senior Notes. In connection therewith, Cinemark USA deposited with Wells Fargo Bank, N.A., as Trustee for the 4.875% Senior Notes (the “Trustee”), funds sufficient to redeem all 4.875% Senior Notes remaining outstanding on June 21, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included $755,000 of outstanding principal at the redemption price equal to 100.000% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on June 15, 2021, the indenture governing the 4.875% Senior Notes was fully satisfied and discharged.

The Company recorded a loss on extinguishment of debt of $3,919, which included the write-off of $3,301 unamortized debt issuance costs and the payment of $618 in related fees during the nine months ended September 30, 2021.

5.125% Senior Notes

On March 16, 2021, Cinemark USA, Inc. completed a tender offer to purchase its previously outstanding 5.125% Senior Notes, of which $333,990 was tendered at the expiration of the offer. On March 16, 2021, Cinemark USA, Inc. also issued a notice of optional redemption to redeem the remaining $66,010 principal amount of the 5.125% Senior Notes. In connection therewith, Cinemark USA deposited with Wells Fargo Bank, N.A., as Trustee for the 5.125% Senior Notes (the “Trustee”), funds sufficient to redeem all 5.125% Notes remaining outstanding on April 15, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included $66,010 of outstanding principal at the redemption price equal to 100.000% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on March 16, 2021, the indenture governing the 5.125% Senior Notes was fully satisfied and discharged.

The Company recorded a loss on extinguishment of debt of $2,603 during the nine months ended September 30, 2021, which included the write-off of $1,168 unamortized debt issuance costs and the payment of $1,435 in tender and legal fees.

15


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Additional Borrowings of International Subsidiaries

During the nine months ended September 30, 2021, certain of the Company’s international subsidiaries borrowed an aggregate of $9,706 under various local bank loans. Below is a summary of these loans:

 

 

Loan Amounts

 

 

 

 

 

 

 

Loan Description

 

(in USD)

 

 

Interest Rates

 

Covenants

 

Maturity

Peru bank loan

 

$

3,277

 

 

4.8%

 

Negative covenants

 

January 2024

Brazil bank loan

 

$

6,429

 

 

4.0%

 

Negative covenants

 

January 2029

Additionally, the Company deposited cash into a collateral account to support the issuance of bank letters of credit to the lenders for the international loans noted above. The total amount deposited during the nine months ended September 30, 2021 was $7,300. Total deposits made to support bank letters of credit for the Company’s outstanding international loans is $21,147 and is considered restricted cash as of September 30, 2021.

Interest Rate Swap Agreements

Below is a summary of the Company’s interest rate swap agreements designated as cash flow hedges as of September 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value at

 

Notional

 

 

 

 

 

 

 

 

 

 

September 30,

 

Amount

 

 

Effective Date

 

Pay Rate

 

Receive Rate

 

Expiration Date

 

2021 (1)

 

$

137,500

 

 

December 31, 2018

 

2.12%

 

1-Month LIBOR

 

December 31, 2024

 

$

6,562

 

$

175,000

 

 

December 31, 2018

 

2.12%

 

1-Month LIBOR

 

December 31, 2024

 

 

8,419

 

$

137,500

 

 

December 31, 2018

 

2.19%

 

1-Month LIBOR

 

December 31, 2024

 

 

6,918

 

$

150,000

 

 

March 31, 2020

 

0.57%

 

1-Month LIBOR

 

March 31, 2022

 

 

354

 

 

 

 

 

 

 

 

 

 

Total

 

$

22,253

 

(1)
Approximately $9,536 of the total is included in accounts payable and accrued expenses and $12,717 is included in other long-term liabilities on the condensed consolidated balance sheet as of September 30, 2017.  In addition,2021.

Upon amending the interest rate swap agreements effective March 31,2020, the Company incurred approximately $246determined that the interest payments hedged with the agreements are still probable to occur, therefore the loss that accumulated on the swaps prior to the amendments of $29,359 is being amortized to interest expense through December 31, 2022, the original maturity dates of the swaps. Approximately $1,124 and $3,372 was recorded in legal fees that are reflected as loss on debt amendments and refinancing oninterest expense in the condensed consolidated statements of income statement for the three and nine months ended September 30, 2017.  2021, respectively.

The fair values of the amended interest rate swaps and the new interest rate swap are recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. The changes in fair value are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged items affect earnings. The valuation technique used to determine fair value is the income approach. Under this approach, the Company uses projected future interest rates, which fall in Level 2 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35, as provided by counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under the agreements.

Adoption of ASU 2020-06

ASU 2020-06 simplifies the guidance on an issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature of such debt. Instead, they will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models reduces reported interest expense and increases reported net income for entities that have issued a convertible instrument within the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method is no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.

16


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The Company adopted ASU 2020-06 under the modified retrospective method effective January 1, 2021. As a result of the adoption, the entire $460,000 principal balance of the 4.50% Convertible Senior Notes are recorded in long-term debt and is no longer bifurcated between long-term debt and equity. The impact of the adoption is as follows:

Reclassified $101,123 previously allocated to the cash conversion feature and recorded in equity, from equity to long term debt on the condensed consolidated balance sheet.
Reversed the accretion of interest of $5,714 on the 4.50% Convertible Senior Notes recorded during the year ended December 31, 2020 with a credit to retained earnings.
Reclassified $3,764 of debt issue costs previously allocated to equity to long-term debt on the condensed consolidated balance sheet.
Recorded offsetting amortization of debt issue costs of $274 as an adjustment to retained earnings on the condensed consolidated balance sheet.

Fair Value of Long-Term Debt

The Company estimates the fair value of its long-term debt using the market approach, which utilizes quoted market prices that fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC 820, Fair Value Measurement (“ASC Topic 820.820”). The carrying value of the Company’s long-term debt, was $1,820,112 and $1,822,966 as of September 30, 2017 and December 31, 2016, respectively, excluding unamortized debt discounts and debt issue costs.costs, was $2,543,099 and $2,527,900 as of September 30, 2021 and December 31, 2020, respectively. The fair value of the Company’s long-term debt was $1,840,641$2,825,036 and $1,850,212$2,652,635 as of September 30, 20172021 and December 31, 2016,2020, respectively.

17


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

5.

8.
Equity

Below is a summary of changes in stockholders’ equity attributable to Cinemark Holdings, Inc., noncontrolling interests and total equity for the three and nine months ended September 30, 20172021 and 2016:2020:

 

 

Cinemark

 

 

 

 

 

 

 

 

 

 

 

Holdings, Inc.

 

 

 

 

 

 

 

 

 

 

 

Stockholders’

 

 

Noncontrolling

 

 

Total

 

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance at January 1, 2017

 

$

1,261,818

 

 

$

11,142

 

 

$

1,272,960

 

Share based awards compensation expense

 

 

9,487

 

 

 

 

 

 

9,487

 

Stock withholdings related to share based awards that

   vested during the nine months ended September 30, 2017

 

 

(2,943

)

 

 

 

 

 

(2,943

)

Tax expense related to share based awards vesting

 

 

(32

)

 

 

 

 

(32

)

Dividends paid to stockholders (1)

 

 

(101,304

)

 

 

 

 

 

(101,304

)

Dividends accrued on unvested restricted stock unit

   awards (1)

 

 

(423

)

 

 

 

 

 

(423

)

Dividends paid to noncontrolling interests

 

 

 

 

 

(588

)

 

 

(588

)

Net income

 

 

169,106

 

 

 

1,438

 

 

 

170,544

 

Other comprehensive income in equity method investees

 

 

92

 

 

 

 

 

 

92

 

Foreign currency translation adjustments (see Note 12)

 

 

4,027

 

 

 

 

 

 

4,027

 

Balance at September 30, 2017

 

$

1,339,828

 

 

$

11,992

 

 

$

1,351,820

 

 

 

  Common Stock

 

  Treasury Stock

 

  Additional Paid-In-Capital

 

  Retained Earnings (Deficit)

 

 Accumulated Other Comprehensive Loss

 

Total Cinemark Holdings, Inc. Stockholders’ Equity

 

  Noncontrolling Interests

 

  Total Equity

 

Balance at January 1, 2021

 

$

124

 

$

(87,004

)

$

1,245,569

 

$

27,937

 

$

(398,653

)

$

787,973

 

$

10,996

 

$

798,969

 

Impact of adoption of ASU 2020-06, net of deferred taxes of $23,756 (See Note 7)

 

 

 

 

 

 

(73,604

)

 

5,440

 

 

 

 

(68,164

)

 

 

 

(68,164

)

Issuance of share based awards and share based awards compensation expense

 

 

 

 

 

 

4,668

 

 

 

 

 

 

4,668

 

 

 

 

4,668

 

Stock withholdings related to share based awards that vested during the three months ended March 31, 2021

 

 

 

 

(8

)

 

 

 

 

 

 

 

(8

)

 

 

 

(8

)

Adjustment to accrued dividends on unvested restricted stock unit awards

 

 

 

 

 

 

 

 

(2

)

 

 

 

(2

)

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

(208,241

)

 

 

 

(208,241

)

 

(602

)

 

(208,843

)

Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements

 

 

 

 

 

 

 

 

 

 

5,704

 

 

5,704

 

 

 

 

5,704

 

Amortization of accumulated losses for amended swap agreements

 

 

 

 

 

 

 

 

 

 

1,124

 

 

1,124

 

 

 

 

1,124

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

(9,465

)

 

(9,465

)

 

 

 

(9,465

)

Balance at March 31, 2021

 

 

124

 

 

(87,012

)

 

1,176,633

 

 

(174,866

)

 

(401,290

)

 

513,589

 

 

10,394

 

 

523,983

 

Issuance of share based awards and share based awards compensation expense

 

 

1

 

 

 

 

5,907

 

 

 

 

 

 

5,908

 

 

 

 

5,908

 

Stock withholdings related to share based awards that vested during the three months ended June 30, 2021

 

 

 

 

(4

)

 

 

 

 

 

 

 

(4

)

 

 

 

(4

)

Adjustment to accrued dividends on unvested restricted stock unit awards related to forfeitures

 

 

 

 

 

 

 

 

4

 

 

 

 

4

 

 

 

 

4

 

Net loss

 

 

 

 

 

 

 

 

(142,467

)

 

 

 

(142,467

)

 

186

 

 

(142,281

)

Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements

 

 

 

 

 

 

 

 

 

 

746

 

 

746

 

 

 

 

746

 

Amortization of accumulated losses for amended swap agreements

 

 

 

 

 

 

 

 

 

 

1,123

 

 

1,123

 

 

 

 

1,123

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

8,259

 

 

8,259

 

 

 

 

8,259

 

Balance at June 30, 2021

 

 

125

 

 

(87,016

)

 

1,182,540

 

 

(317,329

)

 

(391,162

)

 

387,158

 

 

10,580

 

 

397,738

 

Share based awards and share based awards compensation expense

 

 

 

 

 

 

6,014

 

 

 

 

 

 

6,014

 

 

 

 

6,014

 

Stock withholdings related to share based awards that vested during the three months ended September 30, 2021

 

 

 

 

(4

)

 

 

 

 

 

 

 

(4

)

 

 

 

(4

)

Net loss

 

 

 

 

 

 

 

 

(77,814

)

 

 

 

(77,814

)

 

241

 

 

(77,573

)

Unrealized gain to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements

 

 

 

 

 

 

 

 

 

 

1,462

 

 

1,462

 

 

 

 

1,462

 

Amortization of accumulated losses for amended swap agreements

 

 

 

 

 

 

 

 

 

 

1,124

 

 

1,124

 

 

 

 

1,124

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

(13,804

)

 

(13,804

)

 

 

 

(13,804

)

Balance at September 30, 2021

 

$

125

 

$

(87,020

)

$

1,188,554

 

$

(395,143

)

$

(402,380

)

$

304,136

 

$

10,821

 

$

314,957

 

(1)

Below is a summary of dividends paid to stockholders and accrued on unvested restricted stock unit awards during the nine months ended September 30, 2017:  

 

 

 

 

 

 

Amount per Share

 

 

 

 

Declaration Date

 

Record Date

 

Payable Date

 

of Common Stock

 

 

Total

 

2/23/2017

 

3/8/2017

 

3/20/2017

 

$

0.29

 

 

$

33,912

 

5/25/2017

 

6/8/2017

 

6/22/2017

 

 

0.29

 

 

 

33,904

 

8/10/2017

 

8/31/2017

 

9/13/2017

 

 

0.29

 

 

 

33,911

 

 

 

 

 

Total

 

$

0.87

 

 

$

101,727

 

11

18


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

 

  Common Stock

 

  Treasury Stock

 

  Additional Paid-In-Capital

 

  Retained Earnings

 

 Accumulated Other Comprehensive Loss

 

Total Cinemark Holdings, Inc. Stockholders’ Equity

 

  Noncontrolling Interests

 

  Total Equity

 

Balance at January 1, 2020

 

$

122

 

$

(81,567

)

$

1,170,039

 

$

687,332

 

$

(340,112

)

$

1,435,814

 

$

12,508

 

$

1,448,322

 

Issuance of share based awards and share based awards compensation expense

 

 

 

 

 

 

4,111

 

 

 

 

 

 

4,111

 

 

 

 

4,111

 

Stock withholdings related to share based awards that vested during the three months ended March 31, 2020

 

 

 

 

(2,691

)

 

 

 

 

 

 

 

(2,691

)

 

 

 

(2,691

)

Dividends paid to stockholders, $0.36 per common share (1)

 

 

 

 

 

 

 

 

(42,311

)

 

 

 

(42,311

)

 

 

 

(42,311

)

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(392

)

 

(392

)

Dividends accrued on unvested restricted stock unit awards (1)

 

 

 

 

 

 

 

 

(256

)

 

 

 

(256

)

 

 

 

(256

)

Net loss

 

 

 

 

 

 

 

 

(59,591

)

 

 

 

(59,591

)

 

169

 

 

(59,422

)

Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements

 

 

 

 

 

 

 

 

 

 

(24,171

)

 

(24,171

)

 

 

 

(24,171

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

(57,625

)

 

(57,625

)

 

 

 

(57,625

)

Balance at March 31, 2020

 

 

122

 

 

(84,258

)

 

1,174,150

 

 

585,174

 

 

(421,908

)

 

1,253,280

 

 

12,285

 

 

1,265,565

 

Issuance of share based awards and share based awards compensation expense

 

 

 

 

 

 

4,321

 

 

 

 

 

 

4,321

 

 

 

 

4,321

 

Stock withholdings related to share based awards that vested during the three months ended June 30, 2020

 

 

 

 

(107

)

 

 

 

 

 

 

 

(107

)

 

 

 

(107

)

Net loss

 

 

 

 

 

 

 

 

(170,389

)

 

 

 

(170,389

)

 

(427

)

 

(170,816

)

Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements

 

 

 

 

 

 

 

 

 

 

849

 

 

849

 

 

 

 

849

 

Amortization of accumulated losses for amended swap agreements

 

 

 

 

 

 

 

 

 

 

2,669

 

 

2,669

 

 

 

 

2,669

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

(3,702

)

 

(3,702

)

 

 

 

(3,702

)

Balance at June 30, 2020

 

$

122

 

$

(84,365

)

$

1,178,471

 

$

414,785

 

$

(422,092

)

$

1,086,921

 

$

11,859

 

$

1,098,780

 

Issuance of share based awards and share based awards compensation expense

 

 

1

 

 

 

 

4,427

 

 

 

 

 

 

4,428

 

 

 

 

4,428

 

Stock withholdings related to share based awards that vested during the three months ended September 30, 2020

 

 

 

 

(67

)

 

 

 

 

 

 

 

(67

)

 

 

 

(67

)

Net loss

 

 

 

 

 

 

 

 

(147,592

)

 

 

 

(147,592

)

 

(444

)

 

(148,036

)

Issuance of convertible senior notes, net of allocated debt issue costs

 

 

 

 

 

 

97,359

 

 

 

 

 

 

97,359

 

 

 

 

97,359

 

Tax impact of convertible notes issued

 

 

 

 

 

 

10,960

 

 

 

 

 

 

10,960

 

 

 

 

10,960

 

Call options purchased

 

 

 

 

 

 

(142,094

)

 

 

 

 

 

(142,094

)

 

 

 

(142,094

)

Proceeds from issuance of warrants

 

 

 

 

 

 

89,424

 

 

 

 

 

 

89,424

 

 

 

 

89,424

 

Unrealized gain to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements

 

 

 

 

 

 

 

 

 

 

6,528

 

 

6,528

 

 

 

 

6,528

 

Amortization of accumulated losses for amended swap agreements

 

 

 

 

 

 

 

 

 

 

2,669

 

 

2,669

 

 

 

 

2,669

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

(1,503

)

 

(1,503

)

 

 

 

(1,503

)

Balance at September 30, 2020

 

$

123

 

$

(84,432

)

$

1,238,547

 

$

267,193

 

$

(414,398

)

$

1,007,033

 

$

11,415

 

$

1,018,448

 

(1)
On March 20, 2020 the Company paid a $0.36 dividend per common share to stockholders of record on March 6, 2020. Additionally, the Company accrued dividends on outstanding unvested restricted stock units.

19


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

 

Cinemark

 

 

 

 

 

 

 

 

 

 

 

Holdings, Inc.

 

 

 

 

 

 

 

 

 

 

 

Stockholders’

 

 

Noncontrolling

 

 

Total

 

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance at January 1, 2016

 

$

1,099,708

 

 

$

11,105

 

 

$

1,110,813

 

Share based awards compensation expense

 

 

10,247

 

 

 

 

 

10,247

 

Stock withholdings related to share based awards that

   vested during the nine months ended September 30, 2016

 

 

(6,828

)

 

 

 

 

(6,828

)

Issuance of common stock related to restricted stock units

   that vested during the nine months ended September 30, 2016

 

 

1

 

 

 

 

 

1

 

Tax benefit related to share based awards vesting

 

 

1,797

 

 

 

 

 

1,797

 

Dividends paid to stockholders (2)

 

 

(94,117

)

 

 

 

 

(94,117

)

Dividends accrued on unvested restricted stock unit

   awards (2)

 

 

(360

)

 

 

 

 

(360

)

Dividends paid to noncontrolling interests

 

 

 

 

(515

)

 

 

(515

)

Net income

 

 

178,086

 

 

 

1,454

 

 

 

179,540

 

Fair value adjustments on interest rate swap agreements

   designated as hedges, net of settlements, net of

   taxes of  $138

 

 

234

 

 

 

 

 

234

 

Gain realized on available-for-sale securities, net of

   taxes of $1,180

 

 

(2,011

)

 

 

 

 

(2,011

)

Other comprehensive loss in equity method investees

 

 

(183

)

 

 

 

 

(183

)

Foreign currency translation adjustments

 

 

34,974

 

 

 

24

 

 

 

34,998

 

Balance at September 30, 2016

 

$

1,221,548

 

 

$

12,068

 

 

$

1,233,616

 

(2)

Below is a summary of dividends paid to stockholders and accrued on unvested restricted stock unit awards during the nine months ended September 30, 2016:  

9.

 

 

 

 

 

 

Amount per Share

 

 

 

 

Declaration Date

 

Record Date

 

Payable Date

 

of Common Stock

 

 

Total

 

2/24/2016

 

3/7/2016

 

3/18/2016

 

$

0.27

 

 

$

31,367

 

5/26/2016

 

6/8/2016

 

6/22/2016

 

 

0.27

 

 

 

31,373

 

8/18/2016

 

8/31/2016

 

9/13/2016

 

 

0.27

 

 

 

31,737

 

 

 

 

 

Total

 

$

0.81

 

 

$

94,477

 

6.

Investment in National CineMedia

The Company has an investment in National CineMedia LLC (“NCM”)

Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:

 

 

Investment
in NCM

 

NCM Screen Advertising Advances

 

Distributions
from NCM

 

Equity in
Loss

 

Other
Revenue

 

Interest
Expense - NCM

 

Cash
Received

 

Balance as of January 1, 2021

 

$

151,962

 

$

(344,255

)

 

 

 

 

 

 

 

 

 

 

Receipt of common units due to annual common unit adjustment ("CUA")

 

 

10,237

 

 

(10,237

)

 

 

 

 

 

 

 

 

 

 

Screen rental revenues earned under ESA (1)

 

 

 

 

 

 

 

 

 

 

(7,516

)

 

 

 

7,516

 

Interest accrued related to significant financing component

 

 

 

 

(17,723

)

 

 

 

 

 

 

 

17,723

 

 

 

Receipt under tax receivable agreement

 

 

(156

)

 

 

 

(77

)

 

 

 

 

 

 

 

233

 

Equity in loss

 

 

(22,046

)

 

 

 

 

 

22,046

 

 

 

 

 

 

 

Amortization of screen advertising advances

 

 

 

 

24,003

 

 

 

 

 

 

(24,003

)

 

 

 

 

Balance as of and for the nine months ended September 30, 2021

 

$

139,997

 

$

(348,212

)

$

(77

)

$

22,046

 

$

(31,519

)

$

17,723

 

$

7,749

 

(1)
Amounts include the per patron and per digital screen theatre access fees due to the Company, net of amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire of approximately $2,850.

Investment in National CineMedia

NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. Upon joining NCM, theThe Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising and promotions to our theatres. As described further in Note 5 to the Company’s financial statements as included in its 2016 Annual Report on Form 10-K, on February 13, 2007, National CineMedia, Inc. (“NCM, Inc.”), an entity that serves as the sole manager of NCM, completed an initial public offering (“IPO”) of its common stock. In connection with the NCM, Inc. initial public offering, the Company amended its operating agreement and the ESA. Following the NCM, Inc. IPO, the The Company does not recognize undistributed equity in the earnings on its original NCM membership units (referred to herein as the Company’s Tranche 1 Investment) until NCM’s future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company recognizes cash distributions it receives from NCM on its Tranche 1 Investment as a component of earnings as Distributions from NCM. The Company believes that the accounting model provided by ASC Topic 323-10-35-22 for recognition of equity investee losses in excess of an investor’s basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.

12


CINEMARK HOLDINGS, INC. AND SUBSIDIARIESCommon Unit Adjustments

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Below is a summary of activity with NCM includedThe Company also periodically receives consideration in the Company’s condensed consolidated financial statements:

 

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment

 

 

Deferred

 

 

from

 

 

Equity in

 

 

Other

 

 

Cash

 

 

 

in NCM

 

 

Revenue

 

 

NCM

 

 

Income

 

 

Revenue

 

 

Received

 

Balance as of January 1, 2017

 

$

189,995

 

 

$

(343,928

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receipt of common units due to annual common

   unit adjustment

 

 

18,363

 

 

 

(18,363

)

 

$

 

 

$

 

 

$

 

 

$

 

Revenues earned under ESA (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,446

)

 

 

8,446

 

Receipt of excess cash distributions

 

 

(10,020

)

 

 

 

 

 

(9,630

)

 

 

 

 

 

 

 

 

19,650

 

Receipt under tax receivable agreement

 

 

(2,089

)

 

 

 

 

 

(2,074

)

 

 

 

 

 

 

 

 

4,163

 

Equity in earnings

 

 

8,098

 

 

 

 

 

 

 

 

 

(8,098

)

 

 

 

 

 

 

Amortization of deferred revenue

 

 

 

 

 

7,872

 

 

 

 

 

 

 

 

 

(7,872

)

 

 

 

Balance as of and for the nine months ended September 30, 2017

 

$

204,347

 

 

$

(354,419

)

 

$

(11,704

)

 

$

(8,098

)

 

$

(16,318

)

 

$

32,259

 

(1)

Amount includes the per patron and per digital screen theatre access fees due to the Company, net of amounts paid to NCM for on-screen advertising time provided to the Company’s beverage concessionaire of approximately $8,382.

During the three months ended September 30, 2017 and 2016, the Company recorded equity in earningsform of approximately $5,032 and $5,815, respectively. During the nine months ended September 30, 2017 and 2016, the Company recorded equity in earnings of approximately $8,098 and $7,660, respectively.

The Company made payments to NCM of approximately $75 and $41 during the nine months ended September 30, 2017 and 2016, respectively, related to installation of certain equipment used for digital advertising, which is included in theatre properties and equipment on the condensed consolidated balance sheets.  

Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and the Company, AMC Entertainment, Inc. (“AMC”) and Regal Entertainment Group (“Regal”) (collectively, “Founding Members”), annualcommon units from NCM. Annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated by each Founding Member. As further discussed in Note 5 to the Company’s financial statements as included in its 2016 Annual Report on Form 10-K, thegenerated. The common units received are recorded at estimated fair value as an increase in the Company’s investment in NCM with an offset to deferred revenue. The deferred revenue is amortized over the remaining term of the ESA. NCM screen advertising advances.

During March 2017,2021, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, on March 30, 2017, the Company received an additional 1,487,2182,311,482 common units of NCM, each of which is convertible into one share of NCM, Inc. common stock.on April 14, 2021. The Company recorded thethese additional common units received at an estimated fair value of $10,237 with a corresponding adjustment to deferred revenue of approximately $18,363.NCM screen advertising advances. The fair value of the common units received was estimated based on the market price of NCM, Inc.NCMI common stock (Level 1 input as defined in FASB ASC Topic 820) at the time the common units were determined, adjusted for volatility associated with the estimated time period it would take to convert the common units and register the respective shares.  The deferred revenue will be recognized over the remaining term of the ESA, which is approximately 19 years.

As of September 30, 2017,2021, the Company owned a total of 27,871,86243,161,550 common units of NCM representing an ownership interest of approximately 18%26%. TheEach of the Company’s common units in NCM is convertible into 1 share of NCM, Inc. common stock. As of September 30, 2021, the estimated fair value of the Company’s investment in NCM was approximately $194,546$153,655 based on NCM, Inc.’s stock price as of September 30, 20172021 of $6.98$3.56 per share (Level 1 input as defined in FASB ASC Topic 820), which was less than.

20


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Exhibitor Services Agreement

As discussed above, the Company’s carrying valuedomestic theatres are part of $204,347.the in-theatre digital network operated by NCM under the ESA. NCM provides advertising to the Company’s theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres. The Company does not believereceives monthly theatre access fees for participation in the NCM network for participation in the NCM network generally on a per patron and per screen basis. These fees earned under the ESA are reflected in other revenue on the condensed consolidated income statement.

Prior to September 17, 2019, the ESA was accounted for under ASC Topic 606, Revenue from Contracts with Customers. Effective September 17, 2019, the Company signed an amendment to the ESA, under which the Company will provide incremental advertising time to NCM and has extended the term through February 2041. Since the agreement was amended, the Company was required to evaluate the revised contract under ASC Topic 842, Leases, and as a result, determined that the declineESA met the definition of a lease. The Company leases nonconsecutive periods of use of its domestic theatre screens to NCM for purposes of showing third party advertising content. The lease, which is classified as an operating lease, generally requires variable lease payments based on the number of patrons attending the showtimes during which such advertising is shown. The lease agreement is considered short-term due to the fact that the nonconsecutive periods of use, or advertising time slots, are set on a weekly basis. The revenues earned under the ESA, both before and after the amendment, are reflected in other revenue on the consolidated income statement.

The recognition of revenue related to the NCM Inc.’s stock price is other than temporary and therefore, no impairmentscreen advertising advances are recorded through February 2041.

 

 

Twelve Months Ended September 30,

 

 

 

 

 

 

 

Remaining Maturity

 

2022

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

Thereafter

 

 

Total

 

NCM screen advertising advances (1)

 

$

8,968

 

 

$

9,587

 

 

$

10,251

 

 

$

10,962

 

 

$

11,724

 

 

$

296,720

 

 

$

348,212

 

(1)
Amounts are net of the estimated interest to be accrued for the periods presented. See discussion of significant financing component below.

Significant Financing Component

In connection with the completion of the NCMI initial public offering, the Company amended and restated its ESA with NCM and received approximately $174,000 in cash consideration from NCM. The proceeds were recorded as deferred revenue and are being amortized over the term of the modified ESA, or through February 2041. In addition to the consideration received upon the ESA modification during 2007, the Company also receives consideration in the form of common units from NCM, at each annual common unit adjustment settlement, in exchange for exclusive access to the Company’s investmentnewly opened domestic screens under the ESA. Due to the significant length of time between receiving the consideration from NCM and fulfillment of the related performance obligation, the ESA includes an implied significant financing component, as per the guidance in NCM was recordedASC Topic 606. As a result of the significant financing component, the Company recognized incremental screen rental revenue and interest expense of $24,003 and $17,723, respectively, during the nine months ended September 30, 2017.2021 and incremental screen rental revenue and interest expense of $23,464 and $17,726, respectively, during the nine months ended September 30, 2020. The market valueinterest expense was calculated using the Company’s incremental borrowing rates at the time when the cash was received from the NCMI IPO and each tranche of common units was received from NCM, Inc.’s stock price may change duewhich ranged from 4.4% to 8.3%.

Effective September 17, 2019, upon the Company’s evaluation and determination that ASC Topic 842 applies to the performanceamended ESA, the Company determined it acceptable to apply the significant financing component guidance from ASC Topic 606 by analogy as the economic substance of the business, industry trends, general and economic conditions and other factors.  agreement represents a financing arrangement.

13

21


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

NCM Financial Information

Below is summary financial information for NCM for the three and six months ended June 29, 2017 (the financial information for the three and nine months ended September 28, 2017 is not yet available) and the three and nine months ended September 29, 2016:periods indicated:

 

 

Three Months Ended

 

 

Three Months ended

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2021

 

 

September 24, 2020

 

 

September 30, 2021

 

 

September 24, 2020

 

Gross revenues

 

$

31,677

 

 

$

6,000

 

 

$

51,080

 

 

$

74,700

 

Operating income (loss)

 

$

(18,669

)

 

$

(20,073

)

 

$

(76,607

)

 

$

(38,973

)

Net loss

 

$

(35,335

)

 

$

(34,950

)

 

$

(125,699

)

 

$

(81,350

)

 

 

As of

 

 

As of

 

 

 

September 30, 2021

 

 

December 31, 2020

 

Current assets

 

$

97,064

 

 

$

142,566

 

Noncurrent assets

 

$

665,570

 

 

$

685,643

 

Current liabilities

 

$

48,761

 

 

$

46,872

 

Noncurrent liabilities

 

$

1,114,599

 

 

$

1,072,207

 

Members deficit

 

$

(400,726

)

 

$

(290,870

)

10.
Other Investments

 

 

Three Months

 

 

Six Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

Ended

June 29, 2017

 

 

June 29, 2017

 

 

September 29, 2016

 

 

September 29, 2016

 

Gross revenues

 

$

97,042

 

 

$

168,962

 

 

$

113,476

 

 

$

305,101

 

Operating income

 

$

28,430

 

 

$

33,500

 

 

$

48,481

 

 

$

100,911

 

Net income

 

$

15,377

 

 

$

7,465

 

 

$

23,909

 

 

$

49,619

 

7.

Other Investments

Below is a summary of activity for each of the Company’s other investments for the nine months ended September 30, 2017:

 

 

DCIP

 

 

AC JV,

LLC

 

 

DCDC

 

 

Other

 

 

Total

 

Balance at January 1, 2017

 

$

87,819

 

 

$

5,980

 

 

$

2,750

 

 

$

1,768

 

 

$

98,317

 

Cash contributions

 

 

1,109

 

 

 

 

 

 

 

 

 

68

 

 

 

1,177

 

Cash distributions

 

 

(5,212

)

 

 

 

 

 

 

 

 

 

 

 

(5,212

)

Equity in income

 

 

16,820

 

 

 

996

 

 

 

853

 

 

 

 

 

 

18,669

 

Equity in other comprehensive income

 

 

92

 

 

 

 

 

 

 

 

 

 

 

 

92

 

Other

 

 

 

 

 

 

 

 

 

 

 

(165

)

 

 

(165

)

Balance at September 30, 2017

 

$

100,628

 

 

$

6,976

 

 

$

3,603

 

 

$

1,671

 

 

$

112,878

 

Digital Cinema Implementation Partners LLC (“DCIP”)

On February 12, 2007, the Company, AMC and Regal (the “Exhibitors”) entered into a joint venture known as DCIP to facilitate the implementation of digital cinema in the Company’s theatres and to establish agreements with major motion picture studios for the financing of digital cinema. As of September 30, 2017,2021, the Company had a 33%33% voting interest in DCIP and a 24.3%24.3% economic interest in DCIP. The Company accounts for its investment in DCIP and its subsidiaries under the equity method of accounting.

Below is summary financial information for On March 10, 2010, DCIP forand its subsidiaries completed an initial financing transaction to enable the threepurchase, deployment and nine months ended September 30, 2017 and 2016.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2017

 

 

September 30, 2016

 

 

September 30, 2017

 

 

September 30, 2016

 

Gross revenues

 

$

39,961

 

 

$

48,274

 

 

$

132,535

 

 

$

133,675

 

Operating income

 

$

22,702

 

 

$

31,180

 

 

$

80,574

 

 

$

82,369

 

Net income

 

$

19,701

 

 

$

26,949

 

 

$

69,458

 

 

$

67,728

 

Asleasing of September 30, 2017, the Company had 3,796 digital projection systems beingto the Exhibitors under equipment lease and installation agreements. On March 31, 2011, DCIP obtained incremental financing necessary to complete the deployment of digital projection systems. DCIP also entered into long-term Digital Cinema Deployment Agreements (“DCDAs”) with 6 major motion picture studios pursuant to which Kasima LLC, one of DCIP’s subsidiaries, receives a virtual print fee ("VPF") each time the studio books a film or certain other content on the leased underdigital projection systems. Other content distributors entered into similar DCDAs that provide for the payment of VPFs for bookings of the distributor's content on a leased digital projection system. The DCDAs end on the earlier to occur of (i) the tenth anniversary of the "mean deployment date" for all digital projection systems scheduled to be deployed over a period of up to five years, or (ii) the date DCIP achieves "cost recoupment", each as defined in the DCDAs. Cost recoupment occurs when revenues attributable to the digital projection systems exceed the financing, deployment, administration and other costs associated with the purchase of the digital projection systems. DCIP expects cost recoupment to occur during October 2021. The timing of cost recoupment is dependent on VPF payments from studios. Pursuant to the operating agreement between the Exhibitors and DCIP, DCIP could distribute excess cash to the Exhibitors upon the payoff of its outstanding debt, which began during the year ended December 31, 2019.

Effective November 1, 2020, the Company amended the master equipment lease agreement (“MELA”) with Kasima LLC, which is an indirect subsidiary of DCIP, resulting in the termination of the MELA. Upon termination of the MELA, the Company received a distribution of the digital projection equipment that it previously leased. As the fair value of the distributed projectors was greater than the Company’s investment in DCIP at the time of the distribution, the investment in DCIP was reduced to zero at the time of the distribution. The Company does not recognize undistributed equity in the earnings or loss of its investment in DCIP until such time that future net earnings, less distributions received, surpass the amount of the excess distribution.

22


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and a related party toper share data

Below is summary financial information for DCIP for the Company. periods indicated:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

September 30, 2021

 

 

September 30, 2020

 

Gross revenues

 

$

27,639

 

 

$

1,084

 

 

$

47,361

 

 

$

20,809

 

Operating income (loss)

 

$

18,427

 

 

$

(29,878

)

 

$

41,868

 

 

$

(72,422

)

Net income (loss)

 

$

18,976

 

 

$

(30,554

)

 

$

42,933

 

 

$

(79,660

)

 

 

As of

 

 

 

September 30, 2021

 

 

December 31, 2020

 

Current assets

 

$

41,625

 

 

$

36,372

 

Noncurrent assets

 

$

63

 

 

$

205

 

Current liabilities

 

$

14,562

 

 

$

39,844

 

Noncurrent liabilities

 

$

 

 

$

687

 

Members' equity (deficit)

 

$

27,126

 

 

$

(3,954

)

The Company had the following transactions reflected in utilities and other costs on the condensed consolidated income statement, with DCIP during the three and nine months ended September 30, 20172021 and 2016:

2020:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2017

 

 

September 30, 2016

 

 

September 30, 2017

 

 

September 30, 2016

 

Equipment lease payments

 

$

1,452

 

 

$

1,333

 

 

$

4,333

 

 

$

3,864

 

Warranty reimbursements from DCIP

 

$

(2,234

)

 

$

(1,608

)

 

$

(6,141

)

 

$

(4,367

)

Management service fees

 

$

207

 

 

$

207

 

 

$

619

 

 

$

619

 

14


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

AC JV, LLC

During December 2013,

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

September 30, 2021

 

 

September 30, 2020

 

Equipment lease payments (1)(2)

 

$

0

 

 

$

346

 

 

$

0

 

 

$

1,384

 

Warranty reimbursements from DCIP (2)

 

$

(84

)

 

$

 

 

$

(784

)

 

$

(3,123

)

Management service fees (2)

 

$

21

 

 

$

 

 

$

36

 

 

$

84

 

Distributions from DCIP (3)

 

$

6,534

 

 

$

 

 

$

6,534

 

 

$

 

(1)
As a result of the MELA amendment noted above, the Company Regal, AMC (the “AC Founding Members”) and NCM entered intorecorded a serieslease termination liability during 2020. The lease termination payments made during the nine months ended September 30, 2021 reduced the liability outstanding. The remaining termination liability of agreements that resulted$174 as of September 30, 2021 is reflected in the formation of AC JV, LLC (“AC”), a joint venture that owns “Fathom Events” (consisting of Fathom Events and Fathom Consumer Events) formerly operated by NCM.  The Fathom Events business focusesaccrued other current liabilities on the marketing and distribution of live and pre-recorded entertainment programming to various theatre operators to provide additional programs that augment their feature film schedule. The Fathom Consumer Events business includes live and pre-recorded concerts featuring contemporary music, opera and symphony, DVD product releases and marketing events, theatrical premieres, Broadway plays, live sporting eventscondensed consolidated balance sheet.
(2)
Amounts reflected in utilities and other special events. The Company paid event fees to ACcosts on the condensed consolidated statements of $9,448 and $7,808loss.
(3)
Cash distributions received from DCIP are not treated as a reduction of the investment balance because, as discussed above, the Company's equity investment in DCIP is zero. Reflected as distributions from DCIP on the condensed consolidated statements of loss.

Other Investment Activity

Below is a summary of activity for each of the Company’s other investments for the nine months ended September 30, 2017 and 2016, respectively, which are included2021:

 

 

AC JV,
LLC

 

DCDC

 

FE Concepts

 

Other

 

Total

 

Balance at January 1, 2021

 

$

3,745

 

$

1,255

 

$

18,273

 

$

453

 

$

23,726

 

Equity income (loss)

 

 

(1,099

)

 

296

 

 

788

 

 

 

 

(15

)

Other

 

 

 

 

 

 

 

 

44

 

 

44

 

Balance at September 30, 2021

 

$

2,646

 

$

1,551

 

$

19,061

 

$

497

 

$

23,755

 

Below is a summary of transactions with each of the Company’s other investees for the nine months ended September 30, 2021:

 

 

 

Nine Months Ended

 

Investee

Transactions

 

September 30, 2021

 

 

September 30, 2020

 

AC JV, LLC

Event fees paid (1)

 

$

1,386

 

 

$

2,258

 

DCDC

Content delivery fees paid (1)

 

$

377

 

 

$

208

 

FE Concepts

Theatre service fees received (2)

 

$

(47

)

 

$

(19

)

(1)
Included in film rentals and advertising costs on the condensed consolidated statements of income.

AC was formed by the AC Founding Members and NCM. NCM, under a contribution agreement, contributed the assets associated with its Fathom Events division to AC

(2)
Included in exchange for 97% ownership of the Class A Units of AC. Under a separate contribution agreement, the Founding Members each contributed cash of approximately $268 to AC in exchange for 1% of the Class A Units of AC. Subsequently,  NCM and the Founding Members entered into a Membership Interest Purchase Agreement, under which NCM sold each of the Founding Members 31% of its Class A Units in AC, the aggregate value of which was determined to be $25,000, in exchange for a six-year promissory note.  Each of the Founding Members’ promissory notes were originally for $8,333, bear interest at 5% per annum and require annual principal and interest payments. The remaining outstanding balance of the note payable from the Company to NCM as of September 30, 2017 was $4,167.

Digital Cinema Distribution Coalition

Digital Cinema Distribution Coalition (“DCDC”) is a joint venture among the Company, Universal, Warner Bros., AMC and Regal.  DCDC operates a satellite distribution network that distributes all digital content to U.S. theatres via satellite. The Company has an approximate 14.6% ownership in DCDC. The Company paid approximately $637 and $707 to DCDC during the nine months ended September 30, 2017 and 2016, respectively, related to content delivery services provided by DCDC.  These fees are included in film rentals and advertising costsother revenues on the condensed consolidated statements of income.

23


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

8.

Treasury Stock and Share Based Awards

11.
Treasury Stock and Share Based Awards

Treasury Stock

Treasury stock represents shares of common stock repurchased or withheld by the Company and not yet retired. The Company has applied the cost method in recording its treasury shares. Below is a summary of the Company’s treasury stock activity for the nine months ended September 30, 2017:

2021:

 

 

Number of

 

 

 

 

 

 

 

Treasury

 

 

 

 

 

 

 

Shares

 

 

Cost

 

Balance at January 1, 2017

 

 

4,447,002

 

 

$

73,411

 

Restricted stock withholdings (1)

 

 

68,523

 

 

 

2,943

 

Restricted stock forfeitures

 

 

9,550

 

 

 

 

Balance at September 30, 2017

 

 

4,525,075

 

 

$

76,354

 

 

 

Number of

 

 

 

 

 

 

Treasury

 

 

 

 

 

 

Shares

 

 

Cost

 

Balance at January 1, 2021

 

 

5,050,981

 

 

$

87,004

 

Restricted stock withholdings (1)

 

 

565

 

 

 

16

 

Restricted stock forfeitures

 

 

42,034

 

 

 

0

 

Balance at September 30, 2021

 

 

5,093,580

 

 

$

87,020

 

(1)
The Company withheld restricted shares as a result of the election by certain employees to satisfy their tax liabilities upon vesting in restricted stock and restricted stock units. The Company determined the number of shares to be withheld based upon market values ranging from $17.41 to $24.14 per share.

(1)

The Company withheld restricted shares as a result of the election by certain employees to satisfy their tax liabilities upon vesting in restricted stock and restricted stock units.  The Company determined the number of shares to be withheld based upon market values ranging from $33.36 to $44.44 per share.

As of September 30, 2017,2021, the Company had no plans to retire any shares of treasury stock.

Restricted Stock

During the nine months ended September 30, 2017,2021, the Company granted 237,9331,077,926 shares of its restricted stock to directorsits employees and employees.directors. The fair value of the restricted stock granted was determined based on the market valueclosing price of the Company’s common stock on the dates ofday preceding the grant date, which ranged from $38.65$16.09 to $42.37$23.98 per share. The Company assumed forfeiture rates that ranged from 0% to 10% for the restricted stock awards. Theawards that ranged from 0% to 10%. Certain of the restricted stock grantedawards vested immediately on the grant date while others vest over periods ranging from one to directors vests over a one year service period. The restricted stock granted to employees vests over a four year service period.s. The recipients of restricted stock are entitled to receive non-forfeitable dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.

15


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Below is a summary of restricted stock activity for the nine months ended September 30, 2017:2021:

 

 

Shares of

 

 

Weighted
Average

 

 

 

Restricted

 

 

Grant Date

 

 

 

Stock

 

 

Fair Value

 

Outstanding at January 1, 2021

 

 

1,431,975

 

 

$

21.11

 

Granted

 

 

1,077,926

 

 

$

21.24

 

Vested

 

 

(115,712

)

 

$

23.79

 

Forfeited

 

 

(42,034

)

 

$

18.13

 

Outstanding at September 30, 2021

 

 

2,352,155

 

 

$

21.00

 

Unvested restricted stock at September 30, 2021

 

 

2,352,155

 

 

$

21.00

 

 

 

Shares of

 

 

Weighted

Average

 

 

 

Restricted

 

 

Grant Date

 

 

 

Stock

 

 

Fair Value

 

Outstanding at January 1, 2017

 

 

606,618

 

 

$

33.51

 

Granted

 

 

237,933

 

 

$

41.94

 

Vested

 

 

(192,152

)

 

$

36.26

 

Forfeited

 

 

(9,550

)

 

$

33.00

 

Outstanding at September 30, 2017

 

 

642,849

 

 

$

35.82

 

Unvested restricted stock at September 30, 2017

 

 

642,849

 

 

$

35.82

 

 

 

Nine Months Ended
September 30,

 

 

 

2021

 

 

2020

 

Compensation expense recognized during the period

 

$

13,757

 

 

$

8,235

 

Fair value of restricted shares that vested during the period

 

$

2,491

 

 

$

8,944

 

Income tax benefit (cost) related to restricted stock awards

 

$

(105

)

 

$

2,678

 

 

 

Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

Compensation expense recognized during the period

 

$

6,298

 

 

$

6,551

 

Fair value of restricted shares that vested during the period

 

$

8,169

 

 

$

14,662

 

Income tax benefit recognized upon vesting of restricted stock     awards

 

$

2,665

 

 

$

5,555

 

As of September 30, 2017,2021, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $15,335$28,541 and the weighted average period over which this remaining compensation expense will be recognized is approximately two years.years.

Restricted Stock Units – During the nine months ended September 30, 2017, the Company granted restricted stock units representing 175,634 hypothetical shares of common stock to employees. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on an implied equity value concept that determines an internal rate of return (“IRR”) during the two fiscal year periods ending December 31, 2018 based on a formula utilizing a multiple of Adjusted EBITDA subject to certain specified adjustments as specified by the Compensation Committee prior to the grant date. The financial performance factors for the restricted stock units have a threshold, target and maximum level of payment opportunity and vest on a prorata basis according to the IRR achieved by the Company during the performance period. If the IRR for the two-year period is at least 7%, which is the threshold, one-third of the maximum restricted stock units vest. If the IRR for the two-year period is at least 9.5%, which is the target, two-thirds of the maximum restricted stock units vest. If the IRR for the two-year period is at least 13%, which is the maximum, 100% of the maximum restricted stock units vest. Grantees are eligible to receive a ratable portion of the common stock issuable if the IRR is within the targets previously noted. Further, as an example, if the Company achieves an IRR equal to 11%, the number of restricted stock units that shall vest will be greater than the target but less than the maximum number that would have vested had the Company achieved the highest IRR.  All restricted stock units granted during 2017 will vest subject to an additional two-year service requirement and will be paid in the form of common stock if the participant continues to provide services through February 2021, which is the fourth anniversary of the grant date. Restricted stock unit award participants are eligible to receive dividend equivalent payments from the grant date if, and at the time that, the restricted stock unit awards vest.  

Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the nine months ended September 30, 2017 at each of the three target levels of financial performance (excluding forfeiture assumptions):

 

 

Number of

 

 

 

 

 

 

 

Shares

 

 

Value at

 

 

 

Vesting

 

 

Grant

 

at IRR of at least 7%

 

 

58,545

 

 

$

2,481

 

at IRR of at least 9.5%

 

 

117,089

 

 

$

4,961

 

at IRR of at least 13%

 

 

175,634

 

 

$

7,442

 

Due to the fact that the IRR for the two-year performance period could not be determined at the time of the 2017 grant, the Company estimated that the most likely outcome is the achievement of the target IRR level. The fair value of the restricted stock unit

1624


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

awards was determined based onRestricted Stock Units

The Company did not grant any restricted stock units during the closing pricenine months ended September 30, 2021.

During the nine months ended September 30, 2021, the Compensation Committee of the Company’s common stockBoard of Directors evaluated the impact of the COVID-19 pandemic on the date of grant, which was $42.37 per share. The Company assumed a forfeiture rate of 5%performance metric used for the restricted stock unit awards. Ifawards granted during February 2019 and February 2020 and determined that the COVID-19 pandemic significantly impacted the Company’s ability to meet the performance metric. The Compensation Committee made a discretionary decision to certify the vest of the 2019 and 2020 restricted stock unit awards at target based upon the unforeseen, external circumstances beyond management’s control, the projected macroeconomic conditions through 2021 and beyond, and the uncertain timing as to the recovery of the Company’s industry. The requirement to satisfy the applicable service period additional information becomes available to leadunder the Company to believerestricted stock unit awards was not changed.

Below is a different IRR level will be achievedsummary of restricted stock unit activity for the two-year performance period, the Company will reassess the number of units that will vest for the grant and adjust its compensation expense accordingly on a prospective basis over the remaining service period.nine months ended September 30, 2021:

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Number of restricted stock unit awards that vested during

   the period

 

 

97,115

 

 

 

213,984

 

Fair value of restricted stock unit awards that vested during

   the period

 

$

4,155

 

 

$

7,260

 

Accumulated dividends paid upon vesting of restricted stock

   unit awards

 

$

313

 

 

$

662

 

Compensation expense recognized during the period

 

$

3,189

 

 

$

3,696

 

Income tax benefit recognized upon vesting of restricted stock

   unit awards

 

$

1,745

 

 

$

3,049

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Number of restricted stock unit awards that vested during the period

 

 

15,230

 

 

 

120,293

 

Fair value of restricted stock unit awards that vested during the period

 

$

314

 

 

$

3,669

 

Accumulated dividends paid upon vesting of restricted stock unit awards

 

$

62

 

 

$

576

 

Compensation expense recognized during the period

 

$

2,832

 

 

$

4,624

 

Income tax benefit (cost) related to stock unit awards

 

$

(467

)

 

$

215

 

As of September 30, 2017,2021, the estimated remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $8,314.$7,185. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.2 years. As of September 30, 2017,2021, the Company had restricted stock units outstanding that represented a total of 628,189561,041 hypothetical shares of common stock, net of forfeitures, reflecting actual cumulative forfeitures of 7,407 units, assuming the maximum IRR level is achievedcertified performance levels for all grants outstanding.

9.

12.
Goodwill and Other Intangible Assets

TheA summary of the Company’s goodwill wasis as follows:

 

 

U.S.

Operating

Segment

 

 

International

Operating

Segment

 

 

Total

 

Balance at January 1, 2017 (1)

 

$

1,164,163

 

 

$

98,800

 

 

$

1,262,963

 

Acquisitions of theatres (2)

 

 

9,878

 

 

 

20,401

 

 

 

30,279

 

Foreign currency translation adjustments

 

 

 

 

 

1,100

 

 

 

1,100

 

Balance at September 30, 2017 (1)

 

$

1,174,041

 

 

$

120,301

 

 

$

1,294,342

 

(1)

Balances are presented net of accumulated impairment losses of $214,031 for the U.S. operating segment and $27,622 for the international operating segment.

 

 

U.S.
Operating
Segment

 

 

International
Operating
Segment

 

 


 
Total

 

Balance at January 1, 2021 (1)

 

$

1,182,853

 

 

$

70,987

 

 

$

1,253,840

 

Foreign currency translation adjustments

 

 

 

 

 

(3,705

)

 

 

(3,705

)

Balance at September 30, 2021 (1)

 

$

1,182,853

 

 

$

67,282

 

 

$

1,250,135

 

(2)

Represents preliminary purchase price allocations associated with the acquisitions of theatres.

The Company evaluates goodwill(1)

Balances are presented net of accumulated impairment losses of $214,031 for impairment annually during the fourth quarter or whenever events or changes in circumstances indicateU.S. operating segment and $43,750 for the carrying valueinternational operating segment. See discussion of the goodwill may not be fully recoverable.  The Company evaluates goodwill forqualitative impairment at the reporting unit level and has allocated goodwill to the reporting unit based on an estimate of its relative fair value. Management considers the reporting unit to be each of its nineteen regions in the U.S. and seven countries internationally with Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala considered one reporting unit (the Company does not have goodwill recorded for all of its international locations).  For the year ended December 31, 2016,analysis performed by the Company performed a qualitative goodwill impairment assessment on all reporting units, in accordance with ASC Topic 350-20-35.  No events or changes in circumstances occurred during the nine months endedas of September 30, 2017 that indicated2021 at Note 13.

A summary of the carrying value of goodwill might exceed its estimated fair value.Company’s intangible assets is as follows:

1725


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Intangible assets consisted of the following:

 

 

Balance at
January 1, 2021

 

Additions (1)

 

Amortization

 

Foreign Currency Translation Adjustments

 

Balance at September 30, 2021

 

Intangible assets with finite lives:

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

$

82,432

 

$

 

$

 

$

(132

)

$

82,300

 

Accumulated amortization

 

 

(68,416

)

 

 

(1,994

)

 

 

 

(70,410

)

Total net intangible assets with finite lives

 

$

14,016

 

$

 

$

(1,994

)

$

(132

)

$

11,890

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets with indefinite lives:

 

 

 

 

 

 

 

 

 

 

 

Tradename and other

 

 

300,179

 

 

146

 

 

 

 

(190

)

 

300,135

 

Total intangible assets, net

 

$

314,195

 

$

146

 

$

(1,994

)

$

(322

)

$

312,025

 

 

 

Balance at

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

 

 

 

January 1,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

2017

 

 

Additions (1)

 

 

Amortization

 

 

Other (2)

 

 

2017

 

Intangible assets with finite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

$

99,796

 

 

$

4,453

 

 

$

 

 

$

(1,332

)

 

$

102,917

 

Accumulated amortization

 

 

(64,606

)

 

 

 

 

(3,606

)

 

 

1,162

 

 

 

(67,050

)

Total net intangible assets with finite     lives

 

$

35,190

 

 

$

4,453

 

 

$

(3,606

)

 

$

(170

)

 

$

35,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets with indefinite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradename

 

 

299,709

 

 

 

 

 

 

 

81

 

 

 

299,790

 

Total intangible assets — net

 

$

334,899

 

 

$

4,453

 

 

$

(3,606

)

 

$

(89

)

 

$

335,657

 

(1)
Amount represents alcoholic beverage licenses acquired.

(1)

Amount represents preliminary fair values allocated to intangible assets acquired as part of the acquisitions of theatres.  

(2)

Amounts represent foreign currency translation adjustments and the write-off of a favorable lease associated with a closed domestic theatre.

For the year ended December 31, 2016, the Company performed a qualitative assessment for all indefinite-lived tradename assets other than its tradename in Ecuador, for which the Company performed a quantitative assessment.  For the year ended December 31, 2016, the Company also performed a quantitative test on its definite-lived tradename associated with certain of its Rave-branded theatres acquired in 2013.  No events or changes in circumstances occurred during the nine months ended September 30, 2017 that indicated the carrying value of its tradename assets might exceed theirThe estimated fair values.

Estimated aggregate future amortization expense for intangible assets is as follows:

For the three months ended December 31, 2021

 

$

680

 

For the twelve months ended December 31, 2022

 

 

2,519

 

For the twelve months ended December 31, 2023

 

 

2,429

 

For the twelve months ended December 31, 2024

 

 

2,429

 

For the twelve months ended December 31, 2025

 

 

2,316

 

Thereafter

 

 

1,517

 

Total

 

$

11,890

 

For the three months ended December 31, 2017

 

$

1,668

 

For the twelve months ended December 31, 2018

 

 

5,964

 

For the twelve months ended December 31, 2019

 

 

5,101

 

For the twelve months ended December 31, 2020

 

 

4,995

 

For the twelve months ended December 31, 2021

 

 

2,444

 

Thereafter

 

 

15,695

 

Total

 

$

35,867

 

13.
Impairment of Long-Lived Assets

The Company performed long-lived asset impairment evaluations at the end of each quarter during the nine months ended September 30, 2021. The following table is a summary of the evaluations performed by asset classification:

10.

Asset

Impairment of Long-Lived

Valuation

Valuation

Category

Test Type

Approach

Multiple

First and Second Quarters

Goodwill

Qualitative

N/A

N/A

Tradename Intangible Assets

Qualitative

N/A

N/A

Other Long-lived Assets

Qualitative

N/A

N/A

Third Quarter

Goodwill

Qualitative

N/A

N/A

Tradename Intangible Assets

Qualitative

N/A

N/A

Other Long-lived Assets

Quantitative (1)

Market

3.1 to 6 times

(1)
Quantitative test performed for certain theatre level assets where indicators existed under a qualitative test. For theatre level asset evaluations performed, the Company used the lesser of the remaining theatre lease term or the applicable market multiple to determine impairment exposure.

GoodwillThe Company reviewsevaluates goodwill for impairment as follows:

Qualitative approach The Company’s qualitative assessment of goodwill for each reporting unit considers economic and market conditions, industry trading multiples and the impact of recent developments and events on the estimated fair values as determined during its most recent quantitative assessment

Tradename Intangible assets – The Company evaluates tradename intangible assets for impairment as follows:

Qualitative approach The Company’s qualitative assessment considers industry and market conditions and recent developments that may impact the revenue forecasts and other estimates used in its most recent quantitative assessment.

Other Long-lived Assets– The Company evaluates other long-lived assets for impairment indicators onas follows:

Quantitative approach The Company performs a quarterly basis or whenever events or changes in circumstances indicatequantitative evaluation at the carrying amounttheatre level using estimated undiscounted cash flows from continuing use through the remainder of the assets may not be fully recoverable. See discussiontheatre’s useful life. Significant judgment, including

26


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

management’s estimate of the Company’s long-lived asset impairment evaluation processimpact of temporary theatre closures and other considerations as a result of COVID-19, was involved in “Critical Accounting Policies” in its Annual Report on Form 10-K for the year ended December 31, 2016, filed February 23, 2017.  As noted in the discussion,estimating cash flows and fair value. Fair value is determined based on a multiple of cash flows,flows. Management’s estimates, which was sixfall under Level 3 of the U.S. GAAP fair value hierarchy, as defined by FASB ASC Topic 820-10-35, are based on projected operating performance, market transactions and industry trading multiples.
Qualitative approach The Company performs a half timesqualitative evaluation for certain theatres based on the results of the quantitative evaluation noted above. The Company’s qualitative evaluation considers relevant market transactions, industry trading multiples and recent developments that would impact its estimates of future cash flows.

The following table is a summary of the impairment recorded as a result of the evaluations performed during the three and nine months ended September 30, 20172021 and 2016. As of September 30, 2017, the estimated aggregate fair value of the long-lived assets impaired during the nine months ended September 30, 2017 was approximately $5,367.2020:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

U.S. Segment

 

 

 

 

 

 

 

 

 

 

 

 

Theatre properties

 

$

4,801

 

 

$

2,075

 

 

$

4,801

 

 

$

5,718

 

Theatre operating lease right-of-use assets

 

 

2,638

 

 

 

1,123

 

 

 

2,638

 

 

 

7,075

 

Cost method investment

 

 

 

 

 

2,500

 

 

 

 

 

 

2,500

 

U.S. total

 

 

7,439

 

 

 

5,698

 

 

 

7,439

 

 

 

15,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International segment

 

 

 

 

 

 

 

 

 

 

 

 

Theatre properties

 

 

39

 

 

 

938

 

 

 

39

 

 

 

5,422

 

Theatre operating lease right-of-use assets

 

 

2

 

 

 

1,654

 

 

 

2

 

 

 

4,194

 

Goodwill

 

 

 

 

 

16,128

 

 

 

 

 

 

16,128

 

Intangible assets

 

 

 

 

 

177

 

 

 

 

 

 

177

 

International total

 

 

41

 

 

 

18,897

 

 

 

41

 

 

 

25,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Total Impairment

 

$

7,480

 

 

$

24,595

 

 

$

7,480

 

 

$

41,214

 

18


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The long-lived asset impairment charges recorded during each of the periods presented are specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre.

Below is a summary of impairment charges for the periods presented:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

U.S. theatre properties

 

$

1,054

 

 

$

406

 

 

$

1,411

 

 

$

1,500

 

International theatre properties

 

 

3,972

 

 

 

 

 

 

8,189

 

 

 

823

 

Impairment of long-lived assets

 

$

5,026

 

 

$

406

 

 

$

9,600

 

 

$

2,323

 

14.
Fair Value Measurements

11.

Fair Value Measurements

The Company determines fair value measurements in accordance with FASB ASC Topic 820: Fair Value Measurements (“ASC Topic 820”),820, which establishes a fair value hierarchy under which an asset or liability is categorized based on the lowest level of input significant to its fair value measurement. The levels of input defined by ASC Topic 820 are as follows:

Level 1 – quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date;

Level 2 – other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 – unobservable and should be used to measure fair value to the extent that observable inputs are not available.

The Company did not have any assets orBelow is a summary of liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of September 30, 2021 and December 31, 2016 or September 30, 2017.  2020:

Below is a reconciliation

 

 

 

 

Carrying

 

 

Fair Value Hierarchy

 

Description

 

As of,

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Interest rate swap liabilities (1)

 

 September 30, 2021

 

$

22,253

 

 

$

 

 

$

22,253

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap liabilities (1)

 

 December 31, 2020

 

$

33,847

 

 

$

 

 

$

33,847

 

 

$

 

(1)
See further discussion of the beginning and ending balance for liabilities measuredinterest rate swaps at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2016:

 

 

Liabilities (1)

 

 

 

2016

 

Beginning balance - January 1

 

$

373

 

Total loss included in accumulated other comprehensive loss

 

 

71

 

Settlements included in interest expense

 

 

(444

)

Ending balance - September 30

 

$

 

Note 7.

(1)

The Company was previously party to an interest rate swap agreement, which expired in April 2016.  

The Company uses the market approach for fair value measurements on a nonrecurring basis in the impairment evaluations of its goodwill, intangible assets and long-lived assets (see Note 912 and Note 10)13). See additional explanation of fair value measurement techniques used for long-lived assets, goodwill and intangible assets in “Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2020, filed February 23, 2017.26, 2021. There were no changes in valuation techniquestechniques. The Company elected to perform its goodwill impairment evaluation using both the market approach and therethe income approach for the nine months ended September 30, 2021. There were no0 transfers in to or out of Level 1, Level 2 or Level 3 during the nine months ended September 30, 2017.  2021.

27


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

12.

Foreign Currency Translation

15.
Foreign Currency Translation

The accumulated other comprehensive loss account in stockholders’ equity of $242,894$402,380 and $247,013$398,653 as of September 30, 20172021 and December 31, 2016,2020, respectively, primarily includes cumulative foreign currency adjustmentsnet losses of $243,020$390,654 and $247,047,$375,644, respectively, from translating the financial statements of the Company’s international subsidiaries.subsidiaries and the cumulative changes in fair value of the Company’s interest rate swap agreements that are designated as hedges.

AllAs of September 30, 2021, all foreign countries where the Company has operations, other than Argentina, are non-highly inflationary, and the local currency is the same as the functional currency in all of the locations. Thus, any fluctuation in the currency results in a cumulative foreign currency translation adjustment recorded to accumulated other comprehensive loss.

19


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The Company deemed Argentina to be highly inflationary beginning July 1, 2018. A highly inflationary economy is defined as an economy with a cumulative inflation rate of approximately 100 percent or more over a three-year period. If a country’s economy is classified as highly inflationary, the financial statements of the foreign entity operating in that country must be remeasured to the functional currency of the reporting entity. There has been a steady devaluationThe financial information of the Argentine peso relative to theCompany’s Argentina subsidiaries was remeasured in U.S. dollardollars in recent years.  The official cumulative inflation rate for Argentina over the last three years has not definitively reached 100 percent and remeasurement is not required.  The Company will continue to monitor the inflation on a quarterly basis to determine whether remeasurement is necessary.  accordance with ASC Topic 830, Foreign Currency Matters, effective July 1, 2018.

Below is a summary of the impact of translating the September 30, 20172021 and 2020 financial statements of the Company’s international subsidiaries:

 

 

 

 

 

 

 

 

Other Comprehensive Loss for

 

 

 

Exchange Rate as of

 

 

Nine Months Ended

 

Country

 

September 30, 2021

 

 

December 31, 2020

 

 

September 30, 2021

 

September 30, 2020

 

Brazil

 

 

5.43

 

 

 

5.20

 

 

$

(3,368

)

$

(51,453

)

Chile

 

 

811.13

 

 

 

714.14

 

 

 

(7,967

)

 

(5,046

)

Colombia

 

 

3,834.68

 

 

 

3,432.50

 

 

 

(140

)

 

(2,584

)

Peru

 

 

4.16

 

 

 

3.65

 

 

 

(3,609

)

 

(3,187

)

All other

 

 

 

 

 

 

 

 

74

 

 

(560

)

 

 

 

 

 

 

 

 

$

(15,010

)

$

(62,830

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Comprehensive

 

 

 

Exchange Rate as of

 

 

Income (Loss) for The

 

Country

 

September 30, 2017

 

 

December 31, 2016

 

 

Nine Months Ended September 30, 2017

 

Brazil

 

 

3.17

 

 

 

3.26

 

 

$

6,700

 

Argentina

 

 

17.70

 

 

 

16.04

 

 

 

(5,918

)

Peru

 

 

3.35

 

 

 

3.45

 

 

 

1,133

 

Chile

 

 

640.60

 

 

 

679.09

 

 

 

3,136

 

All other

 

 

 

 

 

 

 

 

 

 

527

 

 

 

 

 

 

 

 

 

 

 

$

5,578

 

During(1)

Beginning July 1, 2018, Argentina was deemed highly inflationary. A gain of $345 and $1,053 for the nine months ended September 30, 2017, the Company reclassified $1,551 of cumulative foreign currency translation adjustments, related to a Canadian subsidiary that was liquidated, from accumulated other comprehensive loss to2021 and 2020, respectively, is reflected as foreign currency exchange gainloss on the Company’s condensed consolidated statement of income.income as a result of translating Argentina financial results to U.S. dollars.
16.
Supplemental Cash Flow Information

13.

Supplemental Cash Flow Information

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Cash paid for interest

 

$

89,834

 

 

$

53,364

 

Cash paid (refunds received) for income taxes, net

 

$

(136,937

)

 

$

(108,776

)

Cash deposited in restricted accounts (1)

 

$

7,300

 

 

$

 

Noncash investing and financing activities:

 

 

 

 

 

 

Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment (2)

 

$

(2,409

)

 

$

(7,933

)

Interest expense - NCM (see Note 9)

 

$

(17,723

)

 

$

(17,726

)

Investment in NCM – receipt of common units (see Note 9)

 

$

10,237

 

 

$

3,620

 

Dividends accrued on unvested restricted stock unit awards

 

$

2

 

 

$

(257

)

(1)
Represents cash deposited in a collateral account during the period to support the issuance of letters of credit to lenders. See further discussion at Note 7.
(2)
Additions to theatre properties and equipment included in accounts payable as of September 30, 2021 and December 31, 2020 were $25,841 and $28,250, respectively.

28


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Cash paid for interest

 

$

58,334

 

 

$

68,552

 

Cash paid for income taxes, net of refunds received

 

$

81,271

 

 

$

66,757

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Change in accounts payable and accrued expenses for the

   acquisition of theatre properties and equipment (1)

 

$

(5,947

)

 

$

132

 

Theatre properties acquired under capital lease

 

$

30,517

 

 

$

11,292

 

Investment in NCM – receipt of common units (see

   Note 6)

 

$

18,363

 

 

$

11,111

 

Dividends accrued on unvested restricted stock unit awards

 

$

(423

)

 

$

(360

)

17.
Segments

(1)

Additions to theatre properties and equipment included in accounts payable as of September 30, 2017 and December 31, 2016 were $34,678 and $40,625, respectively.

14.

Segments

The Company manages its international market and its U.S. market as separate reportable operating segments, with the international segment consisting of operations in Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues. The Company uses Adjusted EBITDA, as shown in the reconciliation table below, as the primary measure of segment profit and loss to evaluate performance and allocate its resources. The Company does not report total assets by segment because that information is not used to evaluate the performance of or allocate resources between segments.

20


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

376,278

 

 

$

34,639

 

 

$

742,982

 

 

$

472,096

 

International

 

 

59,294

 

 

 

1,069

 

 

 

101,957

 

 

 

118,061

 

Eliminations

 

 

(751

)

 

 

(230

)

 

 

(1,105

)

 

 

(2,089

)

Total revenues

 

$

434,821

 

 

$

35,478

 

 

$

843,834

 

 

$

588,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

44,781

 

 

$

(105,767

)

 

$

(31,697

)

 

$

(145,947

)

International

 

 

(495

)

 

 

(22,232

)

 

 

(27,788

)

 

 

(33,459

)

Total Adjusted EBITDA

 

$

44,286

 

 

$

(127,999

)

 

$

(59,485

)

 

$

(179,406

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

22,423

 

 

$

17,903

 

 

$

47,547

 

 

$

54,604

 

International

 

 

2,002

 

 

 

2,756

 

 

 

9,697

 

 

 

13,014

 

Total capital expenditures

 

$

24,425

 

 

$

20,659

 

 

$

57,244

 

 

$

67,618

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

514,376

 

 

$

572,916

 

 

$

1,650,514

 

 

$

1,677,365

 

International

 

 

200,122

 

 

 

199,476

 

 

 

602,116

 

 

 

551,212

 

Eliminations

 

 

(3,750

)

 

 

(3,818

)

 

 

(11,077

)

 

 

(10,730

)

Total revenues

 

$

710,748

 

 

$

768,574

 

 

$

2,241,553

 

 

$

2,217,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

108,854

 

 

$

137,540

 

 

$

402,902

 

 

$

409,018

 

International

 

 

44,818

 

 

 

47,351

 

 

 

133,329

 

 

 

128,915

 

Total Adjusted EBITDA

 

$

153,672

 

 

$

184,891

 

 

$

536,231

 

 

$

537,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

65,612

 

 

$

75,839

 

 

$

221,604

 

 

$

175,218

 

International

 

 

14,318

 

 

 

22,984

 

 

 

41,126

 

 

 

55,128

 

Total capital expenditures

 

$

79,930

 

 

$

98,823

 

 

$

262,730

 

 

$

230,346

 

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

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(77,573

)

 

$

(148,036

)

 

$

(428,697

)

 

$

(378,274

)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

(8,876

)

 

 

(121,145

)

 

 

(15,569

)

 

 

(222,398

)

Interest expense (1)

 

 

37,993

 

 

 

36,577

 

 

 

111,580

 

 

 

92,284

 

Other expense, net (2)

 

 

12,484

 

 

 

22,881

 

 

 

35,369

 

 

 

47,385

 

Cash distributions from DCIP (3)

 

 

 

 

 

 

 

 

 

 

 

10,383

 

Cash distributions from other equity investees (4)

 

 

 

 

 

2,146

 

 

 

156

 

 

 

15,047

 

Depreciation and amortization

 

 

67,208

 

 

 

62,543

 

 

 

202,288

 

 

 

191,380

 

Impairment of long-lived assets

 

 

7,480

 

 

 

24,595

 

 

 

7,480

 

 

 

41,214

 

Restructuring costs

 

 

(340

)

 

 

524

 

 

 

(1,288

)

 

 

20,062

 

Loss on disposal of assets and other

 

 

1,020

 

 

 

(13,327

)

 

 

7,883

 

 

 

(10,997

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

6,527

 

 

 

 

Non-cash rent expense

 

 

(1,124

)

 

 

816

 

 

 

(1,803

)

 

 

1,649

 

Share based awards compensation expense

 

 

6,014

 

 

 

4,427

 

 

 

16,589

 

 

 

12,859

 

Adjusted EBITDA

 

$

44,286

 

 

$

(127,999

)

 

$

(59,485

)

 

$

(179,406

)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

 

$

38,540

 

 

$

66,126

 

 

$

170,544

 

 

$

179,540

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

24,630

 

 

 

40,926

 

 

 

98,475

 

 

 

106,002

 

Interest expense (1)

 

 

26,317

 

 

 

26,659

 

 

 

79,208

 

 

 

81,980

 

Other income (2)

 

 

(13,168

)

 

 

(14,540

)

 

 

(33,180

)

 

 

(32,510

)

Loss on debt amendments and refinancing

 

 

 

 

 

 

 

 

246

 

 

 

13,284

 

Other cash distributions from equity investees (3)

 

 

2,402

 

 

 

1,391

 

 

 

17,321

 

 

 

9,660

 

Depreciation and amortization

 

 

58,052

 

 

 

54,187

 

 

 

174,545

 

 

 

155,874

 

Impairment of long-lived assets

 

 

5,026

 

 

 

406

 

 

 

9,600

 

 

 

2,323

 

Loss on sale of assets and other

 

 

8,576

 

 

 

6,940

 

 

 

9,464

 

 

 

10,985

 

Deferred lease expenses

 

 

(297

)

 

 

(162

)

 

 

(1,019

)

 

 

(809

)

Amortization of long-term prepaid rents

 

 

551

 

 

 

371

 

 

 

1,540

 

 

 

1,357

 

Share based awards compensation expense

 

 

3,043

 

 

 

2,587

 

 

 

9,487

 

 

 

10,247

 

Adjusted EBITDA

 

$

153,672

 

 

$

184,891

 

 

$

536,231

 

 

$

537,933

 

(1)
Includes amortization of debt issue costs and amortization of accumulated losses for amended swap agreements.

(1)

Includes amortization of debt issue costs.

(2)

Includes interest income, foreign currency exchange gain and equity in income of affiliates and excludes distributions from NCM.

(3)

Includes cash distributions received from equity investees that were recorded as a reduction of the respective investment balances (see Notes 6 and 7).  These distributions are reported entirely within the U.S. operating segment.

2129


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

(2)
Includes interest income, foreign currency exchange loss, equity in income (loss) of affiliates and interest expense - NCM and excludes distributions from NCM and distributions from DCIP.
(3)
Includes cash distributions from DCIP that were recorded as a reduction of the Company’s investment in DCIP. These distributions are reported entirely within the U.S. operating segment.
(4)
Includes cash distributions received from equity investees, other than those from DCIP noted above, that were recorded as a reduction of the respective investment balances (see Notes 9 and 10). These distributions are reported entirely within the U.S. operating segment.

Financial Information About Geographic Areas

Below is a breakdown of selected financial information by geographic area:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

Revenues

 

2021

 

 

2020

 

 

2021

 

 

2020

 

U.S.

 

$

376,278

 

 

$

34,639

 

 

$

742,982

 

 

$

472,096

 

Brazil

 

 

20,632

 

 

 

513

 

 

 

30,533

 

 

 

53,829

 

Other international countries

 

 

38,662

 

 

 

556

 

 

 

71,424

 

 

 

64,232

 

Eliminations

 

 

(751

)

 

 

(230

)

 

 

(1,105

)

 

 

(2,089

)

Total

 

$

434,821

 

 

$

35,478

 

 

$

843,834

 

 

$

588,068

 

 

 

As of

 

 

As of

 

Theatre Properties and Equipment-net

 

September 30, 2021

 

 

December 31, 2020

 

U.S.

 

$

1,249,490

 

 

$

1,392,780

 

Brazil

 

 

60,020

 

 

 

72,080

 

Other international countries

 

 

125,964

 

 

 

150,202

 

Total

 

$

1,435,474

 

 

$

1,615,062

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

Revenues

 

2017

 

 

2016

 

 

2017

 

 

2016

 

U.S.

 

$

514,376

 

 

$

572,916

 

 

$

1,650,514

 

 

$

1,677,365

 

Brazil

 

 

81,545

 

 

 

85,051

 

 

 

264,085

 

 

 

231,556

 

Other international countries

 

 

118,577

 

 

 

114,425

 

 

 

338,031

 

 

 

319,656

 

Eliminations

 

 

(3,750

)

 

 

(3,818

)

 

 

(11,077

)

 

 

(10,730

)

Total

 

$

710,748

 

 

$

768,574

 

 

$

2,241,553

 

 

$

2,217,847

 

18.
Related Party Transactions

Theatre Properties and Equipment-net

 

September 30, 2017

 

 

December 31, 2016

 

U.S.

 

$

1,392,429

 

 

$

1,306,643

 

Brazil

 

 

194,171

 

 

 

197,896

 

Other international countries

 

 

205,006

 

 

 

199,997

 

Total

 

$

1,791,606

 

 

$

1,704,536

 

15

Related Party Transactions

The Company manages theatresa theatre for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns 75%75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25%25% of the limited partnership interests in Laredo and is 100%100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Lee Roy Mitchell is the Company’s Chairman of the Board of Directors and directly and indirectly owns approximately 9%9% of the Company’s common stock. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5%5% of annual theatre revenues up to $50,000 and 3% of annual theatre revenues in excess of $50,000.revenues. The Company recorded $451$222 and $410$123 of management fee revenues during the nine months ended September 30, 20172021 and 2016,2020, respectively. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.

Walter Hebert, Mr. Mitchell’s brother-in-law, previously served as the Executive Vice President – Purchasing of the Company and retired in July 2021. Mr. Hebert now serves as a consultant to the Company until July 2022. During the nine months ended September 30, 2021, the Company has paid Mr. Hebert $62 related to consulting services.

The Company has an Aircraft Time Sharing Agreement with Copper Beech Capital, LLC (“Copper Beech”) to use, on occasion, a private aircraft owned by Copper Beech Capital, LLC.Beech. Copper Beech Capital, LLC is owned by Mr. Mitchell and his wife, Tandy Mitchell. The private aircraft is used by Mr. Mitchell and other executives who accompany Mr. Mitchell to business meetings for the Company. The Company reimburses Copper Beech Capital, LLC for the actual costs of fuel usage and the expenses of the pilots, landing fees, storage fees and similar expenses incurred during the trip. For the nine months ended September 30, 20172021 and 2016,2020, the aggregate amounts paid to Copper Beech Capital, LLC for the use of the aircraft was $89$0 and $94,$12, respectively.

The Company leases 14 theatres and one parking facility from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy. Raymond Syufy is one of the Company’s directors and is an officer of the general partner of Syufy. Of these 1514 leases, 1412 have fixed minimum annual rent. The one lease2 leases without minimum annual rent hashave rent based upon a specified percentage of gross sales as defined in the lease. For the nine months ended September 30, 20172021 and 2016,2020, the Company paid total rent of approximately $18,844$17,893 and $17,806,$17,271, respectively, to Syufy.

16.

Commitments and Contingencies

Joseph Amey, et al. v. Cinemark USA, Inc., Case No. 3:13cv05669, In the United States District Court for the Northern District of California, San Francisco Division. The case presents putative class action claims for damages and attorney’s fees arising from employee wage and hour claims under California law for alleged meal period, rest break, reporting time pay, unpaid wages, pay upon termination, and wage statements violations. The claims are also asserted as a representative action under the California Private Attorney General Act (“PAGA”). The Company denies the claims, denieshas a 50% voting interest in FE Concepts, a joint venture with AWSR, an entity owned by Lee Roy Mitchell and Tandy Mitchell. FE Concepts operates a family entertainment center that class certification is appropriateoffers bowling, gaming, movies and deniesother amenities that a PAGA representative action is appropriate, and is vigorously defending against the claims. The Company denies any violation of law and plans to vigorously defend against all claims. The Court recently determined that class certification is not appropriate and determined that a PAGA representative action is not appropriate. The plaintiff has appealed these rulings. The Company is unable to predict the outcome of this litigation or the range of potential loss.opened during December 2019. See Note 10 for further discussion.

2230


CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Flagship Theatres of Palm Desert, LLC d/b/a Cinemas Palme D’Or v. Century Theatres, Inc.,

19.
Commitments and Cinemark USA, Inc.; Superior Court of the State of California, County of Los Angeles.  Plaintiff in this case alleges that the Company violated California antitrust and unfair competition laws by engaging in “circuit dealing” with various motion picture distributors and tortuously interfered with Plaintiff’s business relationships.  Plaintiff seeks compensatory damages, trebling of those damages under California law, punitive damages, injunctive relief, attorneys’ fees, costs and interest.  Plaintiff also alleges that the Company’s conduct ultimately resulted in closure of its theatre in June 2016.  The Company denied the allegations.  In 2008, the Company moved for summary judgment on Plaintiff’s claims, arguing primarily that clearances between the theatres at issue were lawful and that Plaintiff lacked proof sufficient to support certain technical elements of its antitrust claims.  The trial court granted that motion and dismissed Plaintiff’s claims.  Plaintiff appealed and, in 2011, the Court of Appeal reversed, holding, among other things, that Plaintiff’s claims were not about the illegality of clearances but were focused, instead, on “circuit dealing.”  Having re-framed the claims in that manner, the Court of Appeal held that the trial court’s decision to limit discovery to the market where the theatres at issue operated was an error, as “circuit dealing” necessarily involves activities in different markets.  Upon return to the trial court, the parties engaged in additional, broadened discovery related to Plaintiff’s “circuit dealing” claim.  Thereafter, the Company moved again for summary judgment on all of Plaintiff’s claims.  That new motion for summary judgment was pending when, on or about April 11, 2014, the trial court granted the Company’s motion for terminating sanctions and entered a judgment dismissing the case with prejudice.  Plaintiff then appealed that second dismissal, seeking to have the judgment reversed and the case remanded to the trial court.  The Court of Appeal issued a ruling on May 24, 2016, reversing the granting of terminating sanctions and instead imposed a lesser evidentiary and damages preclusion sanction.  The case returned to the trial court on October 6, 2016.  The Company has denied Plaintiff’s allegations and is vigorously defending these claims.  The Company is unable to predict the outcome of this litigation or the range of potential loss.

Contingencies

The Company received a Civil Investigative Demand (“CID”) from the Antitrust Division of the United States Department of Justice. The CID relates to an investigation under Sections 1 and 2 of the Sherman Act. The Company also received CIDs from the Antitrust Section of the Office of the Attorney General of the State of Ohio and later from other states regarding similar inquiries under state antitrust laws. The CIDs request the Company to answer interrogatories, and produce documents, or both, related to the investigation of matters including film clearances, potential coordination and/or communication with other major theatre circuits and related joint ventures.  The Company intends to fully cooperate with all federal and state government agencies. Although the Company does not believe that it has violated any federal or state antitrust or competition laws, it cannot predict the ultimate scope, duration or outcome of these investigations.

From time to time, the Company is involved in various other legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, patent claims, landlord-tenant disputes, patent claimscontractual disputes with landlords over certain termination rights or the right to discontinue rent payments due to the COVID-19 pandemic and other contractual disputes, some of which are covered by insurance. The Company believes its potential liability with respect to proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.

Cinemark Holdings, Inc., et al vs Factory Mutual Insurance Company. The Company filed suit on November 18, 2020, in the District Court, 471st Judicial District, Collin County, Texas. On December 22, 2020, the case was moved to the US District Court for the Eastern District of Texas, Sherman Division. The Company submitted a claim under its property insurance policy issued by Factory Mutual Insurance Company (the “FM Policy”) for losses sustained as a result of the COVID-19 pandemic and the forced closure of the Company’s theatres pursuant to orders issued by various government agencies. Factory Mutual Insurance Company (“FM”) denied the Company’s claim. The Company is seeking damages resulting from FM’s breach of contract, FM’s bad faith conduct and a declaration of the parties’ rights under the FM Policy. The Company cannot predict the outcome of this litigation.

Intertrust Technologies Corporation (“Intertrust”) v. Cinemark Holdings, Inc., Regal, AMC, et al. This case was filed against the Company on August 7, 2019 in the Eastern District of Texas – Marshall Division alleging patent infringement. The Company firmly maintains that the contentions of the Plaintiff are without merit and will vigorously defend itself against the lawsuit. Although the Company does not believe that it has infringed on any of Intertrust’s patents, it cannot predict the outcome of this litigation.

 

31



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

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

Recent Developments

As we have previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread. As a movie exhibitor that operates spaces where patrons gather in close proximity, we continue to be impacted by the pandemic. To comply with government mandates at the initial outbreak of the COVID-19 pandemic, we temporarily closed all of our theatres in the U.S. and Latin America in March of 2020, implemented temporary personnel and salary reductions, halted non-essential operating and capital expenditures, and negotiated modified timing and/or abatement of contractual payments with landlords and other major suppliers until our theatres reopened. In addition, we suspended our quarterly dividend.

As of September 30, 2021, all of our domestic and international theatres were open. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours in certain locations as well as our focus on initiatives to enhance productivity. We continue to limit capital expenditures to essential activities and projects. We worked with landlords and other vendors during the nine months ended September 30, 2021 to extend payment terms as it reopened theatres and continues to recover from the impacts of the COVID-19 pandemic.

Based on our current estimates of recovery, we believe we have, and will generate, sufficient cash to sustain operations. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on our business, results of operations, cash flows and financial condition.

General Information

We are a leader in the motion picture exhibition industry, with theatres in the U.S., Brazil, Argentina, Chile, Colombia, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. As of September 30, 2017,2021, we managed our business under two reportable operating segments – U.S. markets and international markets. See Note 1417 to our condensed consolidated financial statements.

We generate revenues primarily from filmed entertainment box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as transactional fees, vendor marketing promotions, studio trailer placements, meeting rentals and electronic video games located in some of our theatres. NCM provides our domestic theatres with various forms of in-theatre advertising. We also offer alternative entertainment, such as live and pre-recorded sports programs, concert events, the Metropolitan Opera, in-theatre gaming and other special events in our theatres. In-theatre advertising for our domestic theatres throughis provided by National CineMedia. In our joint venture, AC JV, LLC.  Ourinternational locations, our Flix Media initiative has also allowed us to expand oursubsidiaries provide screen advertising and alternative content withinfor our international circuit and to other international exhibitors.

Films leading the box office during the nine months ended September 30, 20172021 included the carryover of Rogue One: A Star Wars Story and Hidden Figures and new releases such as BeautyShang-Chi and the Beast, Wonder Woman, GuardiansLegend of the Galaxy Vol. 2, Spider Man: Homecoming,Ten Rings,Black Widow, F9: The Fast Saga, A Quiet Place Part II, Jungle Cruise, Free Guy, Godzilla vs. Kong, Cruella, Space Jam: A New Legacy and The Conjuring: The Devil Made Me Do It Despicable Me 3, Logan, The Fate of the Furious, Dunkirk, The LEGO Batman Movie, Get Out, The Boss Baby, Pirates of the Caribbean: Dead Men Tell No Tales, Kong: Skull Island and other films. . Films currently scheduled for release during the remainder of 2017 2021 include Jumanji: WelcomeVenom: Let There Be Carnage, Eternals, Ghostbusters: Afterlife, The Matrix Resurrections, No Time to Die, Encanto, Sing 2, Halloween Kills, Dune, West Side Story and the Jungle and Coco and well-known franchise films such as Star Wars: The Last Jedi, Justice League, Pitch Perfect 3 and Thor: Ragnarok Marvel sequel Spider-man; No Way Home, among other films.films.

Film rental and advertising costs are variable in nature and fluctuate with our admissions revenues. Film rental costs as a percentage of revenues are generally higher for periods in which more blockbuster films are released. The Company also receives virtual print fees from studios for certain of its international locations, which are included as a contra-expense in film rentals and advertising costs. Promotional expenses are generally variable in nature and primarily include the placement of film-specific social and digital media spots promoting film content currently playing in our theatres. Advertising costs, which are expensed as incurred, are primarily related to campaigns for new and renovated theatres, loyalty and membership programs and brand advertising that vary depending on the timing of such campaigns.

Concession supplies expense isexpenses are variable in nature and fluctuatesfluctuate with our concession revenues.revenues and product mix. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates.

Although salariesSalaries and wages include a fixed cost component (i.e. the minimum staffing costs to operate a theatre facility during non-peak periods), salaries and wagesfor our theatres generally move in relation to revenues as theatre staffing is adjusted to respond to changes in attendance.attendance and also include a fixed cost component (i.e. the minimum staffing costs to operate a theatre during non-peak periods). In some international locations, staffing levels are also subject to local regulations.

Facility lease expense isexpenses are primarily a fixed costcosts at the theatre level as most of our facility leases require a fixed monthly minimum rent payment.payments. Certain 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 performance level is achieved. Facility lease expenseexpenses as a percentage of revenues isare also affected by the number of theatres under operating leases, the number of theatres under capitalfinance leases and the number of fee-ownedowned theatres.

32


Utilities and other costs include both fixed and variable costs and primarily consist of utilities, expenses for projection and sound equipment maintenance and monitoring, credit card fees, third party ticket sales commissions, property taxes, janitorial costs, repairs, maintenance and security services.


General and administrative expenses are primarily fixed in nature and consist of the costs to support the overall management of the Company, including base, incentive compensation and benefits for our corporate office personnel, facility expenses for our corporate offices, consulting fees, professional fees, cloud-based software licensing fees, travel expenses, supplies and other costs that are not specifically associated with the operations of our theatres.

Results of Operations

The following table sets forth, for the periods indicated, certain operating data and the percentage of revenues represented by certain items reflected in our condensed consolidated statements of income.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating data (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

225.5

 

 

$

14.9

 

 

$

435.1

 

 

$

307.4

 

Concession

 

 

164.2

 

 

 

9.1

 

 

 

313.5

 

 

 

199.6

 

Other

 

 

45.1

 

 

 

11.5

 

 

 

95.2

 

 

 

81.1

 

Total revenues

 

$

434.8

 

 

$

35.5

 

 

$

843.8

 

 

$

588.1

 

Cost of operations

 

 

 

 

 

 

 

 

 

 

 

 

Film rentals and advertising

 

 

117.0

 

 

 

8.2

 

 

 

216.8

 

 

 

165.2

 

Concession supplies

 

 

28.2

 

 

 

2.7

 

 

 

54.2

 

 

 

39.9

 

Salaries and wages

 

 

67.6

 

 

 

20.2

 

 

 

149.2

 

 

 

116.6

 

Facility lease expense

 

 

68.8

 

 

 

67.1

 

 

 

200.8

 

 

 

214.5

 

Utilities and other

 

 

81.7

 

 

 

43.3

 

 

 

192.0

 

 

 

178.7

 

General and administrative expenses

 

 

38.6

 

 

 

30.4

 

 

 

111.8

 

 

 

99.4

 

Depreciation and amortization

 

 

67.2

 

 

 

62.6

 

 

 

202.3

 

 

 

191.4

 

Impairment of long-lived assets

 

 

7.5

 

 

 

24.6

 

 

 

7.5

 

 

 

41.2

 

Restructuring costs

 

 

(0.3

)

 

 

0.6

 

 

 

(1.3

)

 

 

20.1

 

(Gain) loss on disposal of assets and other

 

 

1.0

 

 

 

(13.3

)

 

 

7.9

 

 

 

(11.0

)

Total cost of operations

 

 

477.3

 

 

 

246.4

 

 

 

1,141.2

 

 

 

1,056.0

 

Operating loss

 

$

(42.5

)

 

$

(210.9

)

 

$

(297.4

)

 

$

(467.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating data as a percentage of total revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

51.9

%

 

 

42.0

%

 

 

51.6

%

 

 

52.3

%

Concession

 

 

37.8

%

 

 

25.6

%

 

 

37.2

%

 

 

33.9

%

Other

 

 

10.3

%

 

 

32.4

%

 

 

11.2

%

 

 

13.8

%

Total revenues

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Cost of operations (1)

 

 

 

 

 

 

 

 

 

 

 

 

Film rentals and advertising

 

 

51.9

%

 

NM

 

 

 

49.8

%

 

 

53.7

%

Concession supplies

 

 

17.2

%

 

NM

 

 

 

17.3

%

 

 

20.0

%

Salaries and wages

 

 

15.5

%

 

NM

 

 

 

17.7

%

 

 

19.8

%

Facility lease expense

 

 

15.8

%

 

NM

 

 

 

23.8

%

 

 

36.5

%

Utilities and other

 

 

18.8

%

 

NM

 

 

 

22.8

%

 

 

30.4

%

General and administrative expenses

 

 

8.9

%

 

NM

 

 

 

13.2

%

 

 

16.9

%

Total cost of operations

 

 

109.8

%

 

NM

 

 

 

135.2

%

 

 

179.6

%

Operating income (loss)

 

 

(9.8

)%

 

NM

 

 

 

(35.2

)%

 

 

(79.6

)%

Average screen count (month end average)

 

 

5,876

 

 

 

5,975

 

 

 

5,890

 

 

 

6,068

 

(1)
All costs are expressed as a percentage of total revenues, except film rentals and advertising, which are expressed as a percentage of admissions revenues and concession supplies, which are expressed as a percentage of concession revenues. Certain values are considered not meaningful (“NM”) as they are not comparable due to the temporary theatre closures effective in March 2020.

33


 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Operating data (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

425.1

 

 

$

472.9

 

 

$

1,351.5

 

 

$

1,364.8

 

Concession

 

 

247.1

 

 

 

261.4

 

 

 

777.6

 

 

 

752.8

 

Other

 

 

38.6

 

 

 

34.3

 

 

 

112.5

 

 

 

100.3

 

Total revenues

 

$

710.8

 

 

$

768.6

 

 

$

2,241.6

 

 

$

2,217.9

 

Cost of operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Film rentals and advertising

 

 

226.2

 

 

 

249.8

 

 

 

725.6

 

 

 

733.1

 

Concession supplies

 

 

40.2

 

 

 

41.9

 

 

 

124.1

 

 

 

117.0

 

Salaries and wages

 

 

87.3

 

 

 

84.4

 

 

 

261.3

 

 

 

243.8

 

Facility lease expense

 

 

82.0

 

 

 

82.8

 

 

 

248.6

 

 

 

241.9

 

Utilities and other

 

 

92.4

 

 

 

95.0

 

 

 

271.8

 

 

 

265.5

 

General and administrative expenses

 

 

36.9

 

 

 

35.3

 

 

 

113.0

 

 

 

109.2

 

Depreciation and amortization

 

 

58.1

 

 

 

54.2

 

 

 

174.5

 

 

 

155.9

 

Impairment of long-lived assets

 

 

5.0

 

 

 

0.4

 

 

 

9.6

 

 

 

2.3

 

Loss on sale of assets and other

 

 

8.6

 

 

 

7.0

 

 

 

9.5

 

 

 

11.0

 

Total cost of operations

 

 

636.7

 

 

 

650.8

 

 

 

1,938.0

 

 

 

1,879.7

 

Operating income

 

$

74.1

 

 

$

117.8

 

 

$

303.6

 

 

$

338.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating data as a percentage of total revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

59.8

%

 

 

61.5

%

 

 

60.3

%

 

 

61.5

%

Concession

 

 

34.8

%

 

 

34.0

%

 

 

34.7

%

 

 

33.9

%

Other

 

 

5.4

%

 

 

4.5

%

 

 

5.0

%

 

 

4.6

%

Total revenues

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Cost of operations (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Film rentals and advertising

 

 

53.2

%

 

 

52.8

%

 

 

53.7

%

 

 

53.7

%

Concession supplies

 

 

16.3

%

 

 

16.0

%

 

 

16.0

%

 

 

15.5

%

Salaries and wages

 

 

12.3

%

 

 

11.0

%

 

 

11.7

%

 

 

11.0

%

Facility lease expense

 

 

11.5

%

 

 

10.8

%

 

 

11.1

%

 

 

10.9

%

Utilities and other

 

 

13.0

%

 

 

12.4

%

 

 

12.1

%

 

 

12.0

%

General and administrative expenses

 

 

5.2

%

 

 

4.6

%

 

 

5.0

%

 

 

4.9

%

Depreciation and amortization

 

 

8.2

%

 

 

7.1

%

 

 

7.8

%

 

 

7.0

%

Impairment of long-lived assets

 

 

0.7

%

 

 

0.1

%

 

 

0.4

%

 

 

0.1

%

Loss on sale of assets and other

 

 

1.2

%

 

 

0.9

%

 

 

0.4

%

 

 

0.5

%

Total cost of operations

 

 

89.6

%

 

 

84.7

%

 

 

86.5

%

 

 

84.8

%

Operating income

 

 

10.4

%

 

 

15.3

%

 

 

13.5

%

 

 

15.2

%

Average screen count (month end average)

 

 

5,939

 

 

 

5,880

 

 

 

5,914

 

 

 

5,846

 

Average operating screen count (month end average)

 

 

5,749

 

 

 

5,785

 

 

 

5,764

 

 

 

5,771

 

Revenues per average screen (dollars)

 

$

119,675

 

 

$

130,710

 

 

$

379,025

 

 

$

379,379

 

(1)

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


Three months ended September 30, 20172021 versus three months ended September 30, 20162020

Revenues. Total revenues decreased $57.8 millionThree months ended September 30, 2021 – All of our domestic and international theatres were open as of September 30, 2021.

Three months ended September 30, 2020 – All of our domestic and international theatres were temporarily closed effective March 17, 2020 and March 18, 2020, respectively, as a result of the COVID-19 pandemic. We began reopening our domestic theatres in June 2020 and operated under a test-and-learn strategy to $710.8 milliondefine training, communication, implementation and execution of enhanced health and safety protocols. These theatres opened to reduced operating hours with library content and “welcome back” pricing for tickets and concession products to encourage patrons to return to the movies. As of September 30, 2020, we had 252 domestic theatres and 15 international theatres reopened.

As a result of theatre closures during the three months ended September 30, 2017 (“third quarter of 2017”) from $768.6 million for2020, the three months ended September 30, 2016 (“third quarter of 2016”), representing a 7.5% decrease. The table below, presented by reportable operating segment, summarizes our revenue performance and certain key performance indicators for the three months ended September 30, 2017 and 2016.

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Constant

Currency (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

%

Change

 

 

2017

 

 

2016

 

 

%

Change

 

 

2017

 

 

%

Change

 

 

2017

 

 

2016

 

 

%

Change

 

Admissions revenues (1)

 

$

312.3

 

 

$

354.9

 

 

 

(12.0

)%

 

$

112.8

 

 

$

118.0

 

 

 

(4.4

)%

 

$

115.4

 

 

 

(2.2

)%

 

$

425.1

 

 

$

472.9

 

 

 

(10.1

)%

Concession revenues (1)

 

$

181.5

 

 

$

197.5

 

 

 

(8.1

)%

 

$

65.6

 

 

$

63.9

 

 

 

2.7

%

 

$

67.0

 

 

 

4.9

%

 

$

247.1

 

 

$

261.4

 

 

 

(5.5

)%

Other revenues (1)(2)

 

$

16.9

 

 

$

16.7

 

 

 

1.2

%

 

$

21.7

 

 

$

17.6

 

 

 

23.3

%

 

$

22.2

 

 

 

26.1

%

 

$

38.6

 

 

$

34.3

 

 

 

12.5

%

Total revenues (1)(2)

 

$

510.7

 

 

$

569.1

 

 

 

(10.3

)%

 

$

200.1

 

 

$

199.5

 

 

 

0.3

%

 

$

204.6

 

 

 

2.6

%

 

$

710.8

 

 

$

768.6

 

 

 

(7.5

)%

Attendance (1)

 

 

40.6

 

 

 

48.0

 

 

 

(15.4

)%

 

 

26.7

 

 

 

28.2

 

 

 

(5.3

)%

 

 

 

 

 

 

 

 

 

 

67.3

 

 

 

76.2

 

 

 

(11.7

)%

Average ticket price (1)

 

$

7.69

 

 

$

7.39

 

 

 

4.1

%

 

$

4.22

 

 

$

4.18

 

 

 

1.0

%

 

$

4.32

 

 

 

3.3

%

 

$

6.32

 

 

$

6.21

 

 

 

1.8

%

Concession revenues per patron (1)

 

$

4.47

 

 

$

4.11

 

 

 

8.8

%

 

$

2.46

 

 

$

2.27

 

 

 

8.4

%

 

$

2.51

 

 

 

10.6

%

 

$

3.67

 

 

$

3.43

 

 

 

7.0

%

(1)

Revenues and attendance amounts in millions.  Average ticket price is calculated as admissions revenues divided by attendance.  Concession revenues per patron is calculated as concession revenues divided by attendance.  

(2)

U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 14 to our condensed consolidated financial statements.

(3)

Constant currency revenue amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2016. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign exchange rates from one period to the next can result in meaningful variations in reported results.   We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.

U.S.Admissions revenues decreased $42.6 million primarily due to a 15.4% decrease in attendance, partially offset by a 4.1% increase in average ticket price. The decrease in concession revenues of $16.0 million was primarily due to the 15.4% decrease in attendance, partially offset by an 8.8% increase in concession revenues per patron. The decrease in attendance was due to a weaker slate of films in the third quarter of 2017 compared to the third quarter of 2016, partially offset by the favorable impact of luxury lounger conversions and new theatres. The increase in average ticket price was primarily due to price increases. The increase in concession revenues per patron was primarily due to incremental sales, price increases and new theatres.  

International.Admissions revenues decreased $5.2 million as reported primarily due to a 5.3% decrease in attendance, partially offset by a 1.0% increase in average ticket price.  Admissions revenues decreased $2.6 million in constant currency, primarily due to the 5.3% decrease in attendance, partially offset by a 3.3% increase in constant currency average ticket price. Concession revenues increased $1.7 million as reported primarily due to an 8.4% increase in concession revenues per patron, partially offset by the 5.3% decrease in attendance.  Concession revenues increased $3.1 million in constant currency, primarily due to a 10.6% increase in constant currency concession revenues per patron, partially offset by the 5.3% decrease in attendance. The decrease in attendance was driven by a weaker slate of films during the third quarter of 2017 compared to the third quarter of 2016, partially offset by the impact of new theatres.  Average ticket price and concession revenues per patron increased primarily duefor our international theatres are not meaningful ("NM") for comparison to the three months ended September 30, 2021.

 

 

U.S. Operating Segment

 

 

International Operating Segment

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Constant
Currency
(3)

 

 

 

 

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2021

 

 

2020

 

Admissions revenues (1)

 

$

195.3

 

 

$

14.9

 

 

$

30.2

 

 

$

0.1

 

 

$

32.2

 

 

$

225.5

 

 

$

15.0

 

Concession revenues (1)

 

$

142.6

 

 

$

8.9

 

 

$

21.6

 

 

$

0.3

 

 

$

23.0

 

 

$

164.2

 

 

$

9.2

 

Other revenues (1)(2)

 

$

37.6

 

 

$

10.8

 

 

$

7.5

 

 

$

0.7

 

 

$

7.9

 

 

$

45.1

 

 

$

11.5

 

Total revenues (1)(2)

 

$

375.5

 

 

$

34.6

 

 

$

59.3

 

 

$

1.1

 

 

$

63.1

 

 

$

434.8

 

 

$

35.7

 

Attendance (1)

 

 

21.5

 

 

 

1.9

 

 

 

9.2

 

 

 

 

 

 

 

 

 

30.7

 

 

 

1.9

 

Average ticket price (1)

 

$

9.08

 

 

$

8.01

 

 

$

3.28

 

 

 NM

 

 

$

3.50

 

 

$

7.35

 

 

$

7.96

 

Concession revenues per patron (1)

 

$

6.63

 

 

$

4.79

 

 

$

2.35

 

 

 NM

 

 

$

2.50

 

 

$

5.35

 

 

$

4.87

 

(1)
Revenues and attendance amounts in millions. Average ticket price increases,is calculated as admissions revenues divided by attendance. Concession revenues per patron is calculated as concession revenues divided by attendance.
(2)
U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 17 to our condensed consolidated financial statements.
(3)
Constant currency revenue amounts, which are non-GAAP measurements, were predominantly drivencalculated using the average exchange rate for the corresponding month for 2020. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.
U.S.The third quarter of 2021 includednew releases such as Shang-Chi and the Legend of the Ten Rings,Black Widow, Jungle Cruise, Free Guy, F9: The Fast Saga and Space Jam: A New Legacy. Average ticket price was $9.08, which was impacted by local inflation.ticket type mix and a reduced number of weekday and matinee showtimes. Concession revenues per patron was $6.63, which was impacted by core concession product sales, the reintroduction of enhanced food and beverage options and the recognition of previously deferred loyalty revenues. Other revenues increased primarily due to incrementalfor the third quarter of 2021 included the amortization of NCM screen advertising advances, screen rental revenue, promotional and trailer placement income related to new film releases and transactional fees. Other revenues generatedfor the third quarter of 2020 primarily included the amortization of NCM screen advertising advances.
International.We offered new releases and some library content in our international theatres during the third quarter of 2021, resulting in 9.2 million in attendance, $30.2 million of admissions revenue and $21.6 million of concessions revenue. Our average ticket price was $3.28 as reported and $3.50 in constant currency. Concession revenues per patron of $2.35 as reported, and $2.50 in constant currency, which was impacted by an expansionpurchase incidence of our Flix Media services to affiliates in various countriescore concession items, inflation, new premium combo offerings, and increased promotional income.

the volume of retail concession sales. Other revenues primarily included screen advertising and loyalty membership revenues.

Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the three months ended September 30, 20172021 and 2016.2020.

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

Constant
Currency
(1)
2021

 

 

2021

 

 

2020

 

Film rentals and advertising

 

$

101.9

 

 

$

8.1

 

 

$

15.1

 

 

$

0.1

 

 

$

16.2

 

 

$

117.0

 

 

$

8.2

 

Concession supplies

 

$

23.0

 

 

$

2.3

 

 

$

5.2

 

 

$

0.4

 

 

$

5.6

 

 

$

28.2

 

 

$

2.7

 

Salaries and wages

 

$

58.0

 

 

$

15.9

 

 

$

9.6

 

 

$

4.3

 

 

$

10.1

 

 

$

67.6

 

 

$

20.2

 

Facility lease expense

 

$

58.8

 

 

$

60.8

 

 

$

10.0

 

 

$

6.3

 

 

$

10.4

 

 

$

68.8

 

 

$

67.1

 

Utilities and other

 

$

68.1

 

 

$

36.5

 

 

$

13.6

 

 

$

6.8

 

 

$

14.4

 

 

$

81.7

 

 

$

43.3

 

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Constant

Currency

2017 (1)

 

 

2017

 

 

2016

 

Film rentals and advertising

 

$

171.5

 

 

$

193.6

 

 

$

54.7

 

 

$

56.2

 

 

$

56.2

 

 

$

226.2

 

 

$

249.8

 

Concession supplies

 

 

26.2

 

 

 

28.2

 

 

 

14.0

 

 

 

13.7

 

 

 

14.2

 

 

 

40.2

 

 

 

41.9

 

Salaries and wages

 

 

64.6

 

 

 

63.2

 

 

 

22.7

 

 

 

21.2

 

 

 

23.5

 

 

 

87.3

 

 

 

84.4

 

Facility lease expense

 

 

59.8

 

 

 

60.5

 

 

 

22.2

 

 

 

22.3

 

 

 

22.4

 

 

 

82.0

 

 

 

82.8

 

Utilities and other

 

 

64.0

 

 

 

66.9

 

 

 

28.4

 

 

 

28.1

 

 

 

29.0

 

 

 

92.4

 

 

 

95.0

 

(1)
Constant currency expense amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2020. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported

34


(1)

Constant currency expense amounts, which are non-GAAP measurements were calculated using the average exchange rate for the corresponding month for 2016. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.

results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.

U.S. Film rentals and advertising costs for third quarter of 2021 were 52.2% of admissions revenue. New films released during the third quarter of 2021 had lower performing box office as a result of the current environment, which skewed lower on our negotiated film rental scales. Concession supplies expenses for the third quarter of 2021 were 16.1% of concessions revenue. The concession supplies rate for the third quarter of 2021 reflected the impact of our retail price increases and favorable product mix, which offset certain supply chain cost pressures.

U.S. Film rentals and advertising costs were $171.5 million, or 54.9% of admissions revenues, for the third quarter of 2017 compared to $193.6 million, or 54.6% of admissions revenues, for the third quarter of 2016. The increase in the film rentals and advertising rate was primarily due to a higher box office concentration of top performing films during the third quarter of 2017. Concession supplies expense was $26.2 million, or 14.4% of concession revenues, for the third quarter of 2017 compared to $28.2 million, or 14.3% of concession revenues, for the third quarter of 2016.

Salaries and wages increased to $64.6$58.0 million for the third quarter of 20172021 as all of our theatres were open compared to only 252 theatres opened at the end of the third quarter of 2020. We also began extending operating hours to accommodate the release of new films while maintaining our focus on efficient staffing levels. Facility lease expense, which is primarily fixed in nature, reflects a slight increase in percentage rent expense and common area maintenance costs as volumes increased, partially offset by the impact of the permanent closure of certain theatres. Utilities and other costs increased to $68.1 million, as many of these costs, such as credit card fees, electricity costs, janitorial costs, repairs and maintenance and security expense are variable in nature and have increased with the improved attendance from $63.2new film content.

International. Film rentals and advertising costs for third quarter of 2021 were 50.0% of admissions revenue. Concession supplies expenses, which included a higher mix of retail and premium concession products, were 24.1% of concessions revenue.

Salaries and wages increased to $9.6 million as reported for the third quarter of 2021 as many of our theatres reopened during the quarter. Facility lease expense increased to $10.0 million for the third quarter of 2016 primarily due2021 reflecting payment of rent under alternative structures, such as percentage rents in place of minimum fixed rents, as theatres recover, partially offset by the impact of the permanent closure of certain theatres. Utilities and other costs increased to staffing at$13.6 million, as many of these costs are variable in nature and have increased with the improved attendance from new film content and recently remodeled theatres, increasestheatre reopenings. These expenses, as reported, were also impacted by exchange rates in minimum wageseach of the countries in which we operate.

General and staffing for foodAdministrative Expenses. General and beverage initiatives. Facility lease expense decreasedadministrative expenses increased to $59.8$38.6 million for the third quarter of 2017 from $60.52021 compared to $30.4 million for the third quarter of 20162020. The increase is primarily due to decreased percentage rent duetemporary salary reductions for corporate office staff during the third quarter of 2020 and increased incentive and share based award compensation expense as a result of certain retention measures during the third quarter of 2021.

Depreciation and Amortization. Depreciation and amortization expense increased to the decline in revenues. Utilities and other costs decreased to $64.0$67.2 million for the third quarter of 2017 from $66.92021 compared to $62.6 million for the third quarter of 20162020 primarily due to decreased equipment lease expensesthe digital projectors received in a non-cash distribution from DCIP during the fourth quarter of 2020. See Note 10 to the condensed consolidated financial statements for 3-D presentations.discussion of the non-cash distribution from DCIP.

International. Film rentals(Gain) Loss on Disposal of Assets and advertising costs were $54.7Other. We recorded a loss on disposal of assets and other of $1.0 million ($56.2during the third quarter of 2021 compared to a gain of $13.3 million in constant currency), or 48.5%during the third quarter of admissions revenues,2020. Activity for the third quarter of 2017 compared2021 was primarily related to $56.2 million, or 47.6%the removal and disposal of admissions revenues,assets at closed theatres. Activity for the third quarter of 2016. The increase in the film rental and advertising rate2020 was primarily duerelated to the mixa favorable litigation outcome for a case that was previously accrued.

Interest Expense. Interest expense, which includes amortization of film productdebt issue costs and amortization of accumulated losses for swap amendments, increased to $38.0 million during the third quarter of 20172021 compared to $36.6 million the third quarter of 2016 and increased advertising costs during the third quarter of 2017.  Concession supplies expense was $14.0 million ($14.2 million in constant currency), or 21.3% of concession revenues, for the third quarter of 2017 compared to $13.7 million, or 21.4% of concession revenues, for the third quarter of 2016.

Salaries and wages increased to $22.7 million ($23.5 million in constant currency) for the third quarter of 2017 compared to $21.2 for the third quarter of 2016.  The as reported increase was due to new theatres and growth in wages as a result of inflation.  Facility lease expense decreased to $22.2 million (increased to $22.4 million in constant currency) for the third quarter of 2017 compared to $22.3 million for the third quarter of 2016.  The as reported decrease was due to decreased percentage rent due to the decline in revenues.  Utilities and other costs increased to $28.4 million ($29.0 million in constant currency) for the third quarter of 2017 compared to $28.1 million for the third quarter of 2016.  The as reported increase was due to increases in utility expenses and the impact of new theatres.    

General and Administrative Expenses. General and administrative expenses increased to $36.9 million for the third quarter of 2017 from $35.3 million for the third quarter of 2016.2020. The increase was primarily due to increased salaries, professional fees and share based award compensation expense.the issuance of notes discussed at Note 7 to our condensed consolidated financial statements.

Depreciation and Amortization. Depreciation and amortization expense increased to $58.1Distributions from DCIP. We recorded distributions from DCIP of $6.5 million during the third quarter of 2017 compared to $54.2 million during the third quarter of 2016. The increase was primarily due to theatre remodels and new theatres.

Impairment of Long-Lived Assets.  We recorded asset impairment charges on assets held and used of $5.0 million during the third quarter of 2017 compared to $0.4 million during the third quarter of 2016. The long-lived asset impairment charges recorded during each2021. These distributions were in excess of the periods presented were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. Impairment charges for the third quarter of 2017 impacted ninecarrying value of our twenty-six reporting units.investment in DCIP, which was zero. See Note 10 to our condensed consolidated financial statements.statements for discussion of our investment in DCIP.

Equity in Loss on Sale of Assets and Other. Affiliates. We recorded aequity in loss on sale of assets and otheraffiliates of $8.6$7.1 million during the third quarter of 20172021 compared to $7.0$16.1 million during the third quarter of 2016. Activity2020. Our equity method investees are also recovering from the impacts of the COVID-19 pandemic. See Note 2 to our condensed consolidated financial statements for additional discussion of the COVID-19 pandemic. See Notes 9 and 10 to our condensed consolidated financial statements for information about our equity investments.

Income Taxes. An income tax benefit of $(8.9) million was recorded for the third quarter of 2017 and2021 compared to an income tax benefit of $(121.1) million for the third quarter of 20162020. The effective tax rate was approximately 10.3% for the third quarter of 2021 compared to 45.0% for the third quarter of 2020. The effective tax rate for the third quarter of 2021 was negatively impacted by valuation allowances related to deferred tax assets for which the ultimate realization is uncertain. The effective tax rate for third quarter of 2020 was favorably impacted by the carryback of 2020 losses to tax years that had a 35% federal tax rate under the provisions of the CARES Act. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the

35


effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

Nine months ended September 30, 2021 (the “2021 period”) versus the nine months ended September 30, 2020 (the “2020 period”)

All of our domestic and international theatres were open as of September 30, 2021. Certain of our international theatres were temporarily closed for portions of the 2021 period.

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Constant
Currency
(3)

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

%
Change

 

 

2021

 

 

2020

 

 

%
Change

 

 

2021

 

 

%
Change

 

 

2021

 

 

2020

 

 

%
Change

 

Admissions revenues (1)

 

$

384.4

 

 

$

247.2

 

 

 

55.5

%

 

$

50.7

 

 

$

60.2

 

 

 

(15.8

)%

 

$

54.1

 

 

 

(10.1

)%

 

$

435.1

 

 

$

307.4

 

 

 

41.5

%

Concession revenues (1)

 

$

275.0

 

 

$

161.7

 

 

 

70.1

%

 

$

38.5

 

 

$

37.9

 

 

 

1.6

%

 

$

40.8

 

 

 

7.7

%

 

$

313.5

 

 

$

199.6

 

 

 

57.1

%

Other revenues (1)(2)

 

$

82.5

 

 

$

61.2

 

 

 

34.8

%

 

$

12.7

 

 

$

19.9

 

 

 

(36.2

)%

 

$

13.9

 

 

 

(30.2

)%

 

$

95.2

 

 

$

81.1

 

 

 

17.4

%

Total revenues (1)(2)

 

$

741.9

 

 

$

470.1

 

 

 

57.8

%

 

$

101.9

 

 

$

118.0

 

 

 

(13.6

)%

 

$

108.8

 

 

 

(7.8

)%

 

$

843.8

 

 

$

588.1

 

 

 

43.5

%

Attendance (1)

 

 

41.8

 

 

 

29.8

 

 

 

40.3

%

 

 

15.7

 

 

 

17.9

 

 

 

(12.3

)%

 

 

 

 

 

 

 

 

57.5

 

 

 

47.7

 

 

 

20.5

%

Average ticket price (1)

 

$

9.20

 

 

$

8.30

 

 

 

10.8

%

 

$

3.23

 

 

$

3.36

 

 

 

(3.9

)%

 

$

3.45

 

 

 

2.7

%

 

$

7.57

 

 

$

6.44

 

 

 

17.5

%

Concession revenues per patron (1)

 

$

6.58

 

 

$

5.43

 

 

 

21.2

%

 

$

2.45

 

 

$

2.12

 

 

 

15.6

%

 

$

2.60

 

 

 

22.6

%

 

$

5.45

 

 

$

4.18

 

 

 

30.4

%

(1)
Revenues and attendance amounts in millions. Average ticket price is calculated as admissions revenues divided by attendance. Concession revenues per patron is calculated as concession revenues divided by attendance.
(2)
U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 17 to our condensed consolidated financial statements.
(3)
Constant currency revenue amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2020. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.
U.S.We showed many new releases during the 2021 period, including new releases Shang-Chi and the Legend of the Ten Rings,Black Widow, F9: The Fast Saga, A Quiet Place Part II, Jungle Cruise, Free Guy, Godzilla vs. Kong, Cruella, Space Jam: A New Legacy and The Conjuring: The Devil Made Me Do It andalso showed some library content. Additionally, we continued to offer Private Watch Parties to our patrons. Average ticket price increased 10.8% to $9.20 during the 2021 period compared to $8.30 during the 2020 period, primarily as a result of the mix of fewer matinee and weekday showtimes, the impact of Private Watch Parties and recognition of previously deferred loyalty revenues. Concession revenues per patron increased 21.2% to $6.58 during the 2021 compared to $5.43 during the 2020 period, driven by an increase in overall purchase incidence across core concession items, price increases and the recognition of previously deferred loyalty revenues. Other revenues for the 2021 and 2020 periods included the amortization of NCM screen advertising advances. Other revenues for the 2021 period also included screen rental revenue, promotional and trailer placement income related to the recent new film releases and transactional fees, which were lower in the 2020 period as a result of reduced attendance.
International.We showed new releases and some library content in our international theatres during the 2021 period, resulting in 15.7 million in attendance, $50.7 million of admissions revenues and $38.5 million of concession revenues. Our average ticket price was $3.23 as reported, $3.45 in constant currency, compared to the 2020 period of $3.36. Concession revenues per patron was $2.45 as reported, $2.60 in constant currency, for the 2021 period compared to $2.12 in the 2020 period. The increase in concession revenues per patron was a result of increased purchase incidence of our core concession items, the impact of inflation, new premium combo offerings, and increased retail concession sales. Other revenues primarily included screen advertising and loyalty membership revenues and were impacted by reduced attendance.

Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the nine months ended September 30, 2021 and 2020.

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

Constant
Currency
(1)
2021

 

 

2021

 

 

2020

 

Film rentals and advertising

 

$

191.5

 

 

$

136.3

 

 

$

25.3

 

 

$

28.9

 

 

$

27.2

 

 

$

216.8

 

 

$

165.2

 

Concession supplies

 

$

44.6

 

 

$

29.4

 

 

$

9.6

 

 

$

10.5

 

 

$

10.2

 

 

$

54.2

 

 

$

39.9

 

Salaries and wages

 

$

126.4

 

 

$

90.5

 

 

$

22.8

 

 

$

26.1

 

 

$

24.5

 

 

$

149.2

 

 

$

116.6

 

Facility lease expense

 

$

177.7

 

 

$

186.0

 

 

$

23.1

 

 

$

28.5

 

 

$

24.0

 

 

$

200.8

 

 

$

214.5

 

Utilities and other

 

$

161.0

 

 

$

140.3

 

 

$

31.0

 

 

$

38.4

 

 

$

33.4

 

 

$

192.0

 

 

$

178.7

 

(1)
Constant currency expense amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2020. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported

36


results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.
U.S. Film rentals and advertising costs for the 2021 period were 49.8% of admissions revenue compared to 55.1% for the 2020 period. The rate for the 2021 period reflected the release of new films which skewed lower on our negotiated film rental scales, and the impact of library content. Concession supplies expenses for the 2021 period was 16.2% of concessions revenue compared to 18.2% of concession revenues for the 2020 period. The concession supplies rate for the 2021 period reflected our retail price increases and the impact of a favorable product mix, partially offset by the disposal of perishable goods related to prior theatre closures.

Salaries and wages increased to $126.4 million for the 2021 period as theatre operating hours continue to expand to service growing attendance demand. Facility lease expense, which is primarily fixed in nature, decreased $8.3 million primarily due to a decline in percentage rent expense and common area maintenance costs, as well as the permanent closure of certain theatres. Utilities and other costs increased $20.7 million, as many of these costs, such as janitorial costs, electricity costs, credit card fees and repairs and maintenance, are variable in nature and were impacted by lower attendance as a result of the temporary closures during the 2020 period.

International. Film rentals and advertising costs for the 2021 period were 49.9% of admissions revenue compared to 48.0% for the 2020 period. The increase in the film rentals and advertising rate was a result of increased promotional and advertising costs as a percentage of revenue as well as a decrease in virtual print fees collected from studios as cost recoupment is attained on the digital equipment. Concession supplies expenses were 24.9% of concessions revenue compared to 27.7% of concession revenues for the 2020 period, driven by a higher mix of retail and premium concession products, partially offset by the disposal of perishable goods due to temporary theatre closures.

Salaries and wages decreased $3.3 million as reported for the 2021 period as compared to the 2020 period as a result of temporary theatre closures and limited operating hours for those theatres that were open. Facility lease expense decreased $5.4 million as reported due to our negotiations with certain landlords to shift from a minimum rent structure to percentage rent while we recover from the pandemic, as well as lower percentage rent at other locations. Utilities and other costs decreased $7.3 million as reported, as many of these costs are variable in nature, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, and were impacted by the limited operating hours of our theatres as well as periodic closures during the 2021 period. These expenses, as reported, were also impacted by exchange rates in each of the countries in which we operate.

General and Administrative Expenses. General and administrative expenses increased to $111.8 million for the 2021 period compared to $99.4 million for the 2020 period. The increase is primarily due to the temporary salary reductions and furloughs for our corporate workforce during the 2020 period and increased incentive and share based award compensation expense as a result of certain retention measures during the 2021 period.

Depreciation and Amortization. Depreciation and amortization expense increased to $202.3 million for the 2021 period compared to $191.4 million for the 2020 period primarily due to the digital projectors received in a non-cash distribution from DCIP during the fourth quarter of 2020. See Note 10 to the condensed consolidated financial statements for discussion of the non-cash distribution from DCIP.

Impairment of Long-Lived Assets. We recorded asset impairment charges of $7.5 million during the 2021 period. We recorded asset impairment charges of $41.2 million during the 2020 period. The asset impairment charges recorded during the 2021 and 2020 periods were primarily a result of the prolonged impact of the COVID pandemic on our operations, as some theatres remained closed and film content continued to shift into future periods, both of which impacted our estimated future cash flows for theatres. Impairment charges for the 2021 period impacted two countries. Impairment charges for the 2020 period impacted eight countries. See Note 13 to our condensed consolidated financial statements.

Restructuring Costs. Restructuring costs were $(1.3) million during the 2021 period compared to $20.1 million during the 2020 period. The credit recorded during the 2021 period was primarily the result of settlements of lease obligations below the original estimated amounts. Charges recorded during the 2020 period related to a restructuring plan implemented during the second quarter of 2020. See Note 2 to our condensed consolidated financial statements for further discussion.

(Gain) Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of $7.9 million during the 2021 period compared to a gain of $11.0 million during the 2020 period. Activity for the 2021 period was primarily related to the write-off of certain digital projectors recently received from DCIP in a non-cash distribution that were replaced with laser projectors, partially offset by gains on the sales of excess land parcels. See Note 10 for discussion of the distribution of digital projectors from DCIP. Activity for the 2020 period was primarily due to a favorable litigation outcome for a case that was previously accrued, partially offset by the retirement of assets related to theatre remodels.

37


Interest Expense. Interest costs incurred, includingexpense, which includes amortization of debt issue costs were $26.3and amortization of accumulated losses for swap amendments, increased to $111.6 million during the third quarter of 20172021 period compared to $26.7$92.3 million for the 2020 period. The increase was primarily due to the issuance of notes discussed at Note 7 to our condensed consolidated financial statements.

Loss on Extinguishment of Debt. We recorded a loss on extinguishment of debt of $6.5 million during the third quarter2021 period related to the early retirement of 2016.  The decrease was due to amendmentsour 5.125% Senior Notes and 4.875% Senior Notes, including the write-off of unamortized debt issuance costs and legal and other fees paid. See Note 7 to our senior secured credit facility completed during June and December of 2016 and June of 2017 which, in the aggregate, reduced the rate at which our term loan accrues interest by 100 basis points.  condensed consolidated financial statements.

Distributions from NCM. We recorded a distributiondistributions from NCM of $2.1$0.1 million during the third quarter of 20172021 period compared to $1.4$7.0 million recorded during the third quarter of 2016, which2020 period. These distributions were in excess of the carrying value of our Tranche 1 investment. The decrease in distributions from NCM is primarily due to the impact of theatres being temporarily closed as a result of the COVID-19 pandemic as discussed at Note 2. See Note 69 to our condensed consolidated financial statements.  statements for discussion of our investment in NCM.

Distributions from DCIP. We recorded distributions from DCIP of $6.5 million during the 2021 period. These distributions were in excess of the carrying value of our investment in DCIP, which was zero. See Note 10 to our condensed consolidated financial statements for discussion of our investment in DCIP.

Equity in IncomeLoss of Affiliates. We recorded equity in incomeloss of affiliates of $10.9$22.1 million during the third quarter of 20172021 period compared to $12.4$27.7 million during the third quarter2020 period. Our equity method investees are also recovering from the impacts of 2016.the COVID-19 pandemic. See Notes 69 and 710 to our condensed consolidated financial statements for information about our equity investments.

Income Taxes. IncomeAn income tax expensebenefit of $24.6$(15.6) million was recorded for the third quarter of 20172021 period compared to $40.9income tax benefit of $(222.4) million recorded for the third quarter of 2016.2020 period. The effective tax rate was approximately 39.0%3.5% for the third quarter of 20172021 period compared to


38.2% 37.0% for the third quarter2020 period. As a result of 2016.continued projected losses in 2021, the effective tax rate was negatively impacted by valuation allowances related to certain foreign tax credits and deferred tax assets for which the ultimate realization is uncertain. The effective tax rate for the 2020 period was favorably impacted by the carryback of 2020 losses to tax years that had a 35% federal tax rate under the provisions of the CARES Act. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

Nine months ended September 30, 2017 versus September 30, 2016

Revenues. Total revenues increased $23.7 million to $2,241.6 million for the nine months ended September 30, 2017 (“the 2017 period”) from $2,217.9 million for the nine months ended September 30, 2016 (“the 2016 period”), representing a 1.1% increase. The table below, presented by reportable operating segment, summarizes our revenue performance and certain key performance indicators or the nine months ended September 30, 2017 and 2016.

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Constant

Currency (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

%

Change

 

 

2017

 

 

2016

 

 

%

Change

 

 

2017

 

 

%

Change

 

 

2017

 

 

2016

 

 

%

Change

 

Admissions revenues (1)

 

$

1,003.5

 

 

$

1,037.7

 

 

 

(3.3

)%

 

$

348.0

 

 

$

327.1

 

 

 

6.4

%

 

$

336.4

 

 

 

2.8

%

 

$

1,351.5

 

 

$

1,364.8

 

 

 

(1.0

)%

Concession revenues (1)

 

$

582.2

 

 

$

575.3

 

 

 

1.2

%

 

$

195.4

 

 

$

177.5

 

 

 

10.1

%

 

$

190.0

 

 

 

7.0

%

 

$

777.6

 

 

$

752.8

 

 

 

3.3

%

Other revenues (1)(2)

 

$

53.8

 

 

$

53.6

 

 

 

0.4

%

 

$

58.7

 

 

$

46.7

 

 

 

25.7

%

 

$

57.2

 

 

 

22.5

%

 

$

112.5

 

 

$

100.3

 

 

 

12.2

%

Total revenues (1)(2)

 

$

1,639.5

 

 

$

1,666.6

 

 

 

(1.6

)%

 

$

602.1

 

 

$

551.3

 

 

 

9.2

%

 

$

583.6

 

 

 

5.9

%

 

$

2,241.6

 

 

$

2,217.9

 

 

 

1.1

%

Attendance (1)

 

 

130.1

 

 

 

138.0

 

 

 

(5.7

)%

 

 

80.9

 

 

 

83.7

 

 

 

(3.3

)%

 

 

 

 

 

 

 

 

 

 

211.0

 

 

 

221.7

 

 

 

(4.8

)%

Average ticket price (1)

 

$

7.71

 

 

$

7.52

 

 

 

2.5

%

 

$

4.30

 

 

$

3.91

 

 

 

10.0

%

 

$

4.16

 

 

 

6.4

%

 

$

6.41

 

 

$

6.16

 

 

 

4.1

%

Concession revenues per patron (1)

 

$

4.48

 

 

$

4.17

 

 

 

7.4

%

 

$

2.42

 

 

$

2.12

 

 

 

14.2

%

 

$

2.35

 

 

 

10.8

%

 

$

3.69

 

 

$

3.40

 

 

 

8.5

%

(1)

Revenues and attendance amounts in millions.  Average ticket price is calculated as admissions revenues divided by attendance.  Concession revenues per patron is calculated as concession revenues divided by attendance.  

(2)

U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 14 to our condensed consolidated financial statements.

(3)

Constant currency revenue amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2016. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign exchange rates from one period to the next can result in meaningful variations in reported results.   We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.

U.S.Admissions revenues decreased $34.2 million primarily due to a 5.7% decrease in attendance, partially offset by a 2.5% increase in average ticket price. Concession revenues increased $6.9 million primarily due to a 7.4% increase in concession revenues per patron, partially offset by the 5.7% decrease in attendance. The decrease in attendance was due to a weaker slate of films in the 2017 period compared to the 2016 period, partially offset by the favorable impact of luxury lounger conversions and new theatres. The increase in average ticket price was primarily due to price increases. The increase in concession revenues per patron was primarily due to incremental sales, price increases and new theatres.  

International.Admissions revenues increased $20.9 million as reported primarily due to a 10.0% increase in average ticket price, partially offset by a 3.3% decrease in attendance.  Admissions revenues increased $9.3 million in constant currency, primarily due to a 6.4% increase in constant currency average ticket price, partially offset by the 3.3% decrease in attendance. Concession revenues increased $17.9 million as reported primarily due to a 14.2% increase in concession revenues per patron, partially offset by the 3.3% decrease in attendance.  Concession revenues increased $12.5 million in constant currency, primarily due to a 10.8% increase in constant currency concession revenues per patron, partially offset by the 3.3% decrease in attendance. The decrease in attendance was driven by a weaker slate of films during the 2017 period compared to the 2016 period, partially offset by the impact of new theatres.  Average ticket price and concession revenues per patron increased primarily due to price increases, which were predominantly driven by local inflation.  Other revenues increased primarily due to incremental screen advertising revenues generated by an expansion of our Flix Media services to affiliates in various countries and increased promotional income.


Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the nine months ended September 30, 2017 and 2016.

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Constant

Currency

2017 (1)

 

 

2017

 

 

2016

 

Film rentals and advertising

 

$

558.3

 

 

$

578.2

 

 

$

167.3

 

 

$

154.9

 

 

$

162.2

 

 

$

725.6

 

 

$

733.1

 

Concession supplies

 

 

82.1

 

 

 

79.9

 

 

 

42.0

 

 

 

37.1

 

 

 

40.8

 

 

 

124.1

 

 

 

117.0

 

Salaries and wages

 

 

194.5

 

 

 

183.1

 

 

 

66.8

 

 

 

60.7

 

 

 

65.9

 

 

 

261.3

 

 

 

243.8

 

Facility lease expense

 

 

181.1

 

 

 

179.7

 

 

 

67.5

 

 

 

62.2

 

 

 

64.9

 

 

 

248.6

 

 

 

241.9

 

Utilities and other

 

 

185.1

 

 

 

188.0

 

 

 

86.7

 

 

 

77.5

 

 

 

84.4

 

 

 

271.8

 

 

 

265.5

 

(1)

Constant currency expense amounts, which are non-GAAP measurements were calculated using the average exchange rate for the corresponding month for 2016. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.

U.S. Film rentals and advertising costs were $558.3 million, or 55.6% of admissions revenues for the 2017 period compared to $578.2 million, or 55.7% of admissions revenues for the 2016 period. The decrease in the film rentals and advertising rate was primarily due to a higher concentration of blockbuster films during the 2016 period. Concession supplies expense was $82.1 million, or 14.1% of concession revenues, for the 2017 period compared to $79.9 million, or 13.9% of concession revenues, for the 2016 period. The increase in the concession supplies rate was primarily due to the impact of our expanded concession offerings.

Salaries and wages increased to $194.5 million for the 2017 period from $183.1 million for the 2016 period primarily due to staffing at new and recently remodeled theatres, increases in minimum wages and staffing for food and beverage initiatives. Facility lease expense increased to $181.1 million for the 2017 period from $179.7 million for the 2016 period due to the impact of new theatres. Utilities and other costs decreased to $185.1 million for the 2017 period from $188.0 million for the 2016 period primarily due to decreases in equipment lease expenses for 3-D presentations, partially offset by increased utilities, repairs and maintenance, and janitorial services expenses.  

International. Film rentals and advertising costs were $167.3 million ($162.2 million in constant currency), or 48.1% of admissions revenues, for the 2017 period compared to $154.9 million, or 47.4% of admissions revenues, for the 2016 period. The increase in the film rentals and advertising rate was primarily due to higher advertising costs during the 2017 period.  Concession supplies expense was $42.0 million ($40.8 million in constant currency), or 21.5% of concession revenues, for the 2017 period compared to $37.1 million, or 20.9% of concession revenues, for the 2016 period. The increase in the concession supplies rate was primarily due to the mix of concession products sold.

Salaries and wages increased to $66.8 million ($65.9 million in constant currency) for the 2017 period compared to $60.7 million for the 2016 period.  The as reported increase was due to new theatres, increased local currency wage rates, limited flexibility in scheduling staff caused by shifting government regulations and the impact of changes in foreign currency exchange rates in certain countries in which we operate.  Facility lease expense increased to $67.5 million ($64.9 million in constant currency) for the 2017 period compared to $62.2 million for the 2016 period.  The as reported increase was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate and new theatres.  Utilities and other costs increased to $86.7 million ($84.4 million in constant currency) for the 2017 period compared to $77.5 million for the 2016 period.  The as reported increase was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate, increases in repairs and maintenance expenses and utility expenses and the impact of new theatres.    

General and Administrative Expenses. General and administrative expenses increased to $113.0 million for the 2017 period from $109.2 million for the 2016 period. The increase was primarily due to increased salaries and wages, professional fees and the impact of changes in foreign currency exchange rates in certain countries in which we operate, partially offset by a decrease in share based award compensation expense.  

Depreciation and Amortization. Depreciation and amortization expense was $174.5 million for the 2017 period compared to $155.9 million for the 2016 period. The increase was primarily due to theatre remodels and new theatres.

Impairment of Long-Lived Assets.  We recorded asset impairment charges on assets held and used of $9.6 million for the 2017 period compared to $2.3 million for the 2016 period. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market


demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. Impairment charges for the 2017 period impacted thirteen of our twenty-six reporting units. See Note 10 to our condensed consolidated financial statements.

Loss on Sale of Assets and Other. We recorded a loss on sale of assets and other of $9.5 million during the 2017 period compared to $11.0 million during the 2016 period. The loss recorded during the 2017 period included the retirement of assets due to theatre remodels and closures, partially offset by gains related to the sale of excess land parcels and a gain on a landlord buyout of a theatre lease.  The loss recorded during the 2016 period was primarily related to the retirement of assets due to theatre remodels and closures, partially offset by a gain on the sale of our investment in RealD stock.

Interest Expense.  Interest costs incurred, including amortization of debt issue costs, were $79.2 million for the 2017 period compared to $82.0 million for the 2016 period.  The decrease was due to the redemption of our previously outstanding $200.0 million 7.375% senior subordinated notes (the “7.375% Senior Subordinated Notes”) funded by a $225.0 million add-on to our 4.875% senior notes (the “4.875% Senior Notes), which occurred on March 21, 2016, as well as amendments to our senior secured credit facility completed during June and December of 2016 and June of 2017, which, in the aggregate, reduced the rate at which our term loan accrues interest by 100 basis points.  

Loss On Debt Amendments and Refinancing.  We recorded a loss of $0.2 million during the 2017 period related to an amendment to our senior secured credit facility that included a reduction in the interest rate at which our term loan accrues interest and revisions to certain definitions within the agreement.  See Note 4 to our condensed consolidated financial statements.  We recorded a loss of $13.3 million during the 2016 period primarily related to the early redemption of our $200.0 million 7.375% Senior Subordinated Notes.  

Foreign Currency Exchange Gain.  We recorded a foreign currency exchange gain of $2.0 million during the 2017 period compared to a foreign currency exchange gain of $2.9 million during the 2016 period. These amounts primarily represent the impact of changes in foreign currency exchange rates on intercompany transactions between our domestic subsidiaries and our international subsidiaries.  See Note 12 to the condensed consolidated financial statements for further discussion.

Distributions from NCM.  We recorded distributions from NCM of $11.7 million during the 2017 period and $10.1 million during the 2016 period, which were in excess of the carrying value of our Tranche 1 investment. See Note 6 to our condensed consolidated financial statements.  

Equity in Income of Affiliates.  We recorded equity in income of affiliates of $26.8 million during the 2017 period compared to $24.6 million during the 2016 period. See Notes 6 and 7 for information about the equity investments to our condensed consolidated financial statements.

Income Taxes. Income tax expense of $98.5 million was recorded for the 2017 period compared to $106.0 million recorded for the 2016 period. The effective tax rate was 36.6% for the 2017 period compared to 37.1% for the 2016 period.  Tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

Liquidity and Capital Resources

Operating Activities

We primarily collect our revenues in cash, mainly through box office receipts and the sale of concessions. In addition, nearly all of our theatres provide the patron a choice of using a credit card, debit card or advanced-sale type certificates such as a gift card, in place of cash. Because ourOur revenues are received in cash prior to the payment of related expenses,expenses; therefore, we have an operating “float” and historically have not required traditional working capital financing. However, as we reopened our theatres that were temporarily closed during March 2020, we have funded operating expenses with cash on hand and recent additional financing discussed below under Financing Activities.

Cash provided byused for operating activities was $311.4$42.2 million for the nine months ended September 30, 20172021 compared to $278.3$167.7 million for the nine months ended September 30, 2016.2020. The decrease in cash used for operating activities was primarily a result of $136.8 million of tax refunds received during April 2021, the timing and level of revenues earned during each period and the timing of payments to vendors for expenses incurred during each period, partially offset by payments of previously deferred rent.

As discussed in Note 4 to our condensed consolidated financial statements, we negotiated the deferral of rent and other lease-related payments in 2020 and early 2021 with some of our landlords. Approximately $43.0 million in deferred lease payments remain as of September 30, 2021. Approximately $37.6 million will be repaid within one year and the remaining $5.4 million will be repaid in subsequent years.

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Investing Activities

Our investing activities have been principally related to the development, remodel and acquisition of theatres. New theatre openings and acquisitions historically have been financed with internally generated cash and by debt financing, including borrowings under our senior secured credit facility. Cash used for investing activities was $290.1 $55.1 million for the nine months ended September 30, 20172021 compared to $230.5 $67.5 million for the nine months ended September 30, 2016.2020. The increasedecrease in cash used for investing activities was primarily due to an increase inreduced capital expenditures for the remodel of certain of our existing domestic theatres and the acquisition of one theatre in the U.S. and two theatres in Brazil.  as we continue to limit spend to essential projects.


Capital expenditures for the nine months ended September 30, 20172021 and 20162020 were as follows (in millions):

Period

 

New

Theatres

 

 

Existing

Theatres (1)

 

 

Total

 

Nine Months Ended September 30, 2017

 

$

42.5

 

 

$

220.2

 

 

$

262.7

 

Nine Months Ended September 30, 2016

 

$

65.6

 

 

$

164.7

 

 

$

230.3

 

Period

 

New Theatres

 

 

Existing Theatres

 

 


Total

 

Nine Months Ended September 30, 2021

 

$

24.1

 

 

$

33.1

 

 

$

57.2

 

Nine Months Ended September 30, 2020

 

$

18.7

 

 

$

48.9

 

 

$

67.6

 

(1)

The amounts for the nine months ended September 30, 2017 and 2016 include $5.7 million and $3.6 million, respectively, related to the remodel of our corporate headquarters building in Plano, TX.

Capital expenditures for existing properties inWe operated 524 theatres with 5,897 screens worldwide as of September 30, 2021. Theatres and screens acquired, built and closed during the table above includes the costs of remodeling certain of our existing theatres to include Luxury Loungers and expanded concession offerings.  During the ninethree months ended September 30, 2017 and 2016,2021 were as follows:

 

 

January 1, 2021

 

 

Built

 

 

Closed

 

 

September 30, 2021

 

U.S (42 states)

 

 

 

 

 

 

 

 

 

 

 

 

Theatres

 

 

331

 

 

 

1

 

 

 

(8

)

 

 

324

 

Screens

 

 

4,507

 

 

 

14

 

 

 

(81

)

 

 

4,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International (15 countries)

 

 

 

 

 

 

 

 

 

 

 

 

Theatres

 

 

200

 

 

 

3

 

 

 

(3

)

 

 

200

 

Screens

 

 

1,451

 

 

 

25

 

 

 

(19

)

 

 

1,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Worldwide

 

 

 

 

 

 

 

 

 

 

 

 

Theatres

 

 

531

 

 

 

4

 

 

 

(11

)

 

 

524

 

Screens

 

 

5,958

 

 

 

39

 

 

 

(100

)

 

 

5,897

 

As of September 30, 2021, we had an average of 151 and 75 of our domestic screens, respectively, temporarily closed for such remodels.

Our U.S. theatre circuit consisted of 339 theatres with 4,562 screens at September 30, 2017. During the nine months ended September 30, 2017, we built two new theatres with 18 screens, acquired one new theatre with 12 screens and closed three theatres and 27 screens. At September 30, 2017, we hadfollowing signed commitments to open one new theatre and 10 screens(costs in domestic marketsmillions):

 

 

Theatres

 

Screens

 

Estimated
Cost
(1)

 

Remainder of 2021

 

 

 

 

 

 

 

U.S.

 

2

 

28

 

$

16.1

 

International

 

 

5

 

 

3.7

 

Total

 

2

 

33

 

$

19.8

 

 

 

 

 

 

 

 

 

Subsequent to 2021

 

 

 

 

 

 

 

U.S.

 

5

 

62

 

$

41.0

 

International

 

7

 

50

 

 

22.4

 

Total

 

12

 

112

 

$

63.4

 

 

 

 

 

 

 

 

 

Total commitments at September 30, 2021

 

14

 

145

 

$

83.2

 

(1)
We expect approximately $19.8 million during the remainder of 20172021 and open ten new theatres with 106 screens subsequent$26.0 million, $31.5 million and $5.9 million to 2017. We estimate the remaining capital expenditures for the developmentbe paid during 2022, 2023 and 2024, respectively. The timing of these 116 domestic screens will be approximately $85.0 million.

Our international theatre circuit consistedpayments is subject to change as a result of 194 theatres with 1,395 screens at September 30, 2017. During the nine months ended September 30, 2017, we built five new theatres with 37 screens and acquired two theatres with 14 screens. At September 30, 2017, we had signed commitments to open one new theatre and six screens in international markets during the remainder of 2017 and open seven new theatres and 34 screens subsequent to 2017. We estimate the remaining capital expenditures for the development of these 40 international screens will be approximately $20.0 million.

construction or other delays.

Actual expenditures for continued theatre development, remodels and acquisitions are subject to change based upon the availability of attractive opportunities. We plan tomay fund capital expenditures for our continued development with cash flow from operations, borrowings under our senior secured credit facility, and proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.

Financing Activities

Cash used for financing activities was $114.2$12.9 million for the nine months ended September 30, 20172021 compared to $111.3cash provided by financing activities of $577.5 million for the nine months ended September 30, 2016.  Financing activities for2020. During the nine months ended September 30, 2016 included2021, we issued 5.875% Senior Notes and 5.25% Senior Notes, the redemptionproceeds of Cinemark USA, Inc.’s $200.0 million 7.375%which were used to redeem the 5.125% Senior Subordinated Notes with proceeds fromand the issuance of a $225.0 million add-on to Cinemark USA, Inc.’s existing 4.875% Senior Notes.Notes, respectively, as discussed further below. We paid approximately $17.3 million in debt issuance costs and

39


$2.1 million in fees related to these transactions and an amendment to our Senior Secured Credit Facility during the nine months ended September 30, 2021. During the nine months ended September 30, 2020, we borrowed $98.8 million on our revolving line-of-credit, which was repaid during the third quarter of 2020, issued the 8.750% Secured Notes discussed below and paid dividends to stockholders of $42.3 million.

We, at the discretion of the board of directors and subject to applicable law, anticipate paying regular quarterlymay pay dividends on our common stock. The amount, if any, of the dividends to be paid in the future will depend upon our then available cash balance, anticipated cash needs, overall financial condition, loan agreement restrictions as discussed below, future prospects for earnings and cash flows, as well as other relevant factors. As a result of the impact of the COVID-19 pandemic, we have suspended our quarterly dividend.

We may from time to time, subject to compliance with our debt instruments, purchase our debt securities on the open market depending upon the availability and prices of such securities. Long-term debt consisted of the following as of September 30, 20172021 (in millions):

Cinemark USA, Inc. term loan

 

$

660.9

 

Cinemark USA, Inc. 5.125% senior notes due 2022

 

 

400.0

 

Cinemark USA, Inc. 4.875% senior notes due 2023

 

 

755.0

 

Other

 

4.2

 

Total long-term debt

 

$

1,820.1

 

Less current portion

 

 

7.1

 

Subtotal long-term debt, less current portion

 

$

1,813.0

 

Less:  Debt discounts and debt issuance costs, net of accumulated amortization

 

 

31.0

 

Long-term debt, less current portion, net of debt issuance costs

 

$

1,782.0

 

Cinemark Holdings, Inc. 4.500% convertible senior notes due 2025

 

 

460.0

 

Cinemark USA, Inc. term loan

 

$

634.8

 

Cinemark USA, Inc. 8.750% senior secured notes due 2025

 

 

250.0

 

Cinemark USA, Inc. 5.875% senior notes due 2026

 

 

405.0

 

Cinemark USA, Inc. 5.250% senior notes due 2028

 

 

765.0

 

Other debt

 

 

28.3

 

Total long-term debt

 

$

2,543.1

 

Less current portion

 

 

20.3

 

Subtotal long-term debt, less current portion

 

$

2,522.8

 

Less: Debt issuance costs, net of accumulated amortization

 

 

45.5

 

Long-term debt, less current portion, net of unamortized debt issuance costs

 

$

2,477.3

 


As of September 30, 2017,2021, $100 million was available for borrowing under the revolving line of credit.

Contractual Obligations

During the nine months ended September 30, 2021, Cinemark USA, Inc. had $100.0 millionissued the 5.875% Senior Notes and the 5.25% Senior Notes and redeemed the 5.125% Senior Notes and the 4.875% Senior Notes. Included below is an updated summary of long-term debt obligations and related estimated scheduled interest payment obligations as of September 30, 2021, reflecting these changes.

 

 

Payments Due by Period

 

 

 

(in millions)

 

 

 

 

 

 

Less Than

 

 

 

 

 

 

 

 

After

 

Contractual Obligations

 

Total

 

 

One Year

 

 

1 - 3 Years

 

 

3 - 5 Years

 

 

5 Years

 

Long-term debt (1)

 

$

2,543.1

 

 

$

20.3

 

 

$

21.1

 

 

$

1,730.2

 

 

$

771.5

 

Scheduled interest payments on long-term debt (2)

 

$

605.1

 

 

$

129.2

 

 

$

255.8

 

 

$

151.3

 

 

$

68.8

 

(1)
Amounts are presented before adjusting for unamortized debt issuance costs.
(2)
Amounts include scheduled interest payments on fixed rate and variable rate debt agreements. Estimates for the variable rate interest payments were based on interest rates in available borrowing capacityeffect on its revolving credit line.

September 30, 2021.

Contractual Obligations

There have been no other material changes in our contractual obligations previously disclosed in “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 20162020 filed February 23, 2017.26, 2021.

Off-Balance Sheet Arrangements

Other than the operating leases and purchase commitments disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016 filed February 23, 2017, weWe do not have any off-balance sheet arrangements.

Senior Secured Credit Facility

Cinemark USA, Inc. has a senior secured credit facility that includes a $700.0 million term loan with a maturity date of May 2022, and a $100.0 million revolving credit line with a maturity date of December 2017 (collectively referred to as the(the “Credit Agreement”).

On May 16, 2016, Cinemark USA, Inc. made a principal pre-payment of $13,451 using Under the proceeds received from the sale of shares of RealD.  In accordance with the terms of theamended Credit Agreement, the pre-payment was applied first to the next fourquarterly principal installments, and second, to the remaining installments pro-rata based on the remaining outstanding principal amount of such installments.  Therefore, quarterly payments of $1.4$1.6 million are due on the term loan through MarchDecember 31, 2022,2024, with the remaininga final principal payment of $635.3$613.4 million due on May 8, 2022.  The Company did not incur any fees as a result of the pre-payment.

On June 13, 2016 and December 15, 2016,March 29, 2025. Cinemark USA, Inc. amended its Credit Agreement to reducehad $100.0 million available borrowing capacity on the rate at which the term loan bears interest by 0.25% and then an additional 0.50%, respectively.  On June 16, 2017, Cinemark USA, Inc. amended its Credit Agreement to further reduce the rate at which the term loan bears interest by 0.25% and also to modify certain definitions and other provisions within the Credit Agreement.  revolving credit line as of September 30, 2021.

Interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or, if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin of 1.00%0.75% per

40


annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 2.00%1.75% per annum. Interest on the revolving credit line accrues, at our option, at: (A) a base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin that ranges from 1.00%0.50% to 1.75%1.25% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 2.00%1.50% to 2.75%2.25% per annum. The margin of the revolving credit line is determined by the consolidated net senior secured leverage ratio as defined in the Credit Agreement.

At September 30, 2017, there was $660.9 million outstanding under the term loan and no borrowings outstanding under the revolving credit line. Cinemark USA, Inc. had $100.0 million in available borrowing capacity on the revolving credit line. The average interest rate on outstanding term loan borrowings under the Credit Agreement at September 30, 2017 was approximately 3.3% per annum.

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

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on Cinemark USA, Inc.’s ability, and in certain instances, its subsidiaries’ and our ability, to consolidate or merge or liquidate, wind up or dissolve; substantially change the nature of its business; sell, transfer or dispose of assets; create or incur indebtedness; create liens; pay dividends or repurchase stock; and make capital expenditures and investments. If Cinemark USA, Inc. has borrowings outstanding on the revolving credit line, it is required to satisfy a consolidated net senior secured leverage ratio covenant as defined in the Credit Agreement.Agreement, not to exceed 4.25 to 1. See below for discussion of recent covenant waivers.

The dividend restriction contained in the Credit Agreement prevents the Company and any of its subsidiaries from paying a dividend or otherwise distributing cash to its stockholders unless (1) the Company is not in default, and the distribution would not cause Cinemark USA, Inc. to be in default, under the Credit Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the


board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Credit Agreement, and (c) certain other defined amounts. amounts (collectively the “Applicable Amount”).

On April 17, 2020, in conjunction with the issuance of the 8.750% Secured Notes discussed below, we obtained a waiver of the leverage covenant from the majority of revolving lenders under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020. The waiver is subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.

On August 21, 2020, in conjunction with the issuance of the 4.50% Convertible Senior Notes discussed below, we further amended the waiver of the leverage covenant through the fiscal quarter ending September 30, 2021. The amendment also i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits us to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver and (iv) makes such other changes to permit the issuance of the 4.50% Convertible Senior Notes discussed below.

On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from November 28, 2022 to November 28, 2024.

We have four interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with the variable interest rates on the term loan outstanding under the Credit Agreement. See Note 7 of our condensed consolidated financial statements for discussion of the interest rate swaps.

At September 30, 2021, there was $634.8 million outstanding under the term loan and no borrowings were outstanding under the $100.0 million revolving line of credit. The average interest rate on outstanding term loan borrowings under the Credit Agreement as of September 30, 2021 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed above.

5.875% Senior Notes

On March 16, 2021, Cinemark USA, Inc. issued $405 million aggregate principal amount of 5.875% senior notes due 2026, at par value (the “5.875% Senior Notes”). Proceeds, after payment of fees, were used to fund a cash tender offer to purchase any and all of Cinemark USA’s 5.125% Senior Notes (the “5.125% Senior Notes”) and to redeem any of the 5.125% Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on March 15, 2026. The Company incurred debt issue costs of approximately $6.0 million in connection with the issuance, which are recorded as a reduction of long-term debt, less current on the consolidated balance sheet.

41


The 5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantors’ existing and future senior subordinated debt. The 5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the collateral securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 5.875% Senior Notes.

Prior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of the 5.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.875% Senior Notes to the date of redemption. After March 15, 2023, Cinemark USA, Inc. may redeem the 5.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.

5.25% Senior Notes

On June 15, 2021, Cinemark USA, Inc. issued $765 million aggregate principal amount of 5.25% senior notes due 2028, at par value (the “5.25% Senior Notes”). Proceeds, after payment of fees, were used to redeem all of Cinemark USA’s 4.875% $755 million aggregate principal amount of Senior Notes due 2023 (the “4.875% Senior Notes”). Interest on the 5.25% Senior Notes is payable on January 15 and July 15 of each year, beginning January 15, 2022. The 5.25% Senior Notes mature on July 15, 2028.

The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s 8.750% senior secured notes due 2025, in each case to the extent of the value of the collateral securing such debt, (iv) are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA’s non-guarantor subsidiaries, and (v) are structurally senior to the 4.50% convertible senior notes due 2025 issued by Cinemark Holdings.

Prior to July 15, 2024, Cinemark USA, Inc. may redeem all or any part of the 5.25% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.25% Senior Notes to the date of redemption. On or after July 15, 2024, Cinemark USA, Inc. may redeem the 5.25% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to July 15, 2024, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.25% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture, so long as at least 60% of the principal amount of the 5.25% Senior Notes remains outstanding immediately after each such redemption.

8.750% Secured Notes

On April 20, 2020, Cinemark USA, Inc. issued $250 million 8.750% senior secured notes (the “8.750% Secured Notes”). The 8.750% Senior Notes will mature on May 1, 2025; provided, however, that if (i) on September 13, 2022, the aggregate outstanding principal amount of the 5.125% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds $50 million, the 8.750% Senior Notes will mature on September 14, 2022 and (ii) on February 27, 2023, the aggregate outstanding principal amount of the 4.875% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds $50 million, the 8.750% Senior Notes will mature on February 28, 2023. Interest on the 8.750% Senior Notes will be payable on May 1 and November 1 of each year, beginning on November 1, 2020.

The 8.750% Secured Notes are fully and unconditionally guaranteed on a joint and several senior basis by certain of the Company’s subsidiaries that guarantee, assume or in any other manner become liable with respect to any of the Company’s or its guarantors’ other debt. If the Company cannot make payments on the 8.750% Secured Notes when they are due, the Company’s guarantors must make them instead. Under certain circumstances, the guarantees may be released without action by, or the consent of, the holders of the 8.750% Secured Notes.

4.50% Convertible Senior Notes

On August 21, 2020, Cinemark Holdings, Inc. issued $460 million 4.50% convertible senior notes (the “4.50% Convertible Senior Notes”). The notes will mature on August 15, 2025, unless earlier repurchased or converted. Interest on the notes will be payable on February 15 and August 15 of each year, beginning on February 15, 2021.

42


Holders of the 4.50% Convertible Senior Notes may convert their 4.50% Convertible Senior Notes at their option at any time prior to the close of business on the business day immediately preceding May 15, 2025 only under the following circumstances: (1) during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (2) if we distribute to all or substantially all stockholders (i) rights options or warrants entitling them to purchase shares at a discount to the recent average trading price of our common stock (including due to a stockholder rights plan) or (ii) our assets or securities or rights, options or warrants to purchase the same with a per share value exceeding 10% of the trading price of our common stock, (3) upon the occurrence of specified corporate events as described further in the indenture. Beginning May 15, 2025, holders may convert their notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, or (4) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price (initially $14.35 per share), on each applicable trading day. Upon conversion of the notes, we will pay or deliver cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

The conversion rate will initially be 69.6767 shares of our common stock per one thousand dollars principal amount of the 4.50% Convertible Senior Notes. The conversion rate will be subject to adjustment upon the occurrence of certain events. If a make-whole fundamental change as defined in the indenture occurs prior to the maturity date, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with such make-whole fundamental change.

The 4.50% Convertible Notes will be effectively subordinated to any of our, or our subsidiaries’, existing and future secured debt to the extent of the value of the assets securing such indebtedness, including obligations under the Credit Agreement. The 4.50% Convertible Notes will be structurally subordinated to all existing and future debt and other liabilities, including trade payables, including Cinemark USA’s 5.125% senior notes due 2022, 4.875% senior notes due 2023 and the 8.750% Secured Notes due 2025, or, collectively, Cinemark USA’s senior notes (but excluding all obligations under the Credit Agreement which are guaranteed by Cinemark Holdings, inc.). The 4.50% Convertible Notes rank equally in right of payment with all of our existing and future unsubordinated debt, including all obligations under the Cinemark USA, Inc. Credit Agreement, which such Credit Agreement is guaranteed by Cinemark Holdings, Inc., and senior in right of payment to any future debt that is expressly subordinated in right of payment to the notes. The 4.50% Convertible Notes are not guaranteed by any of Cinemark Holdings, Inc.’s subsidiaries.

Additional Borrowings of International Subsidiaries

As of September 30, 2017,2021, certain of our international subsidiaries had an aggregate of $28.3 million outstanding under various local bank loans. Below is a summary of these loans:

USD Balance as of

Interest Rates as of

Loan Description

September 30, 2021

September 30, 2021

Covenants

Maturity

Peru loans

 $5.0 million

1.0% to 4.8%

Negative covenants

June 2023 and December 2023

Brazil loans

 $15.1 million

3.6% to 8.1%

Negative covenants

November 2021, October 2023 and January 2029

Colombia loans

 $3.2 million

3.3% to 5.9%

Negative and
maintenance covenants

May 2023, June 2023 and September 2025

Chile loans

 $5.0 million

3.5%

Negative and
maintenance covenants

November 2023

Additionally, we deposited cash into a collateral account to support the issuance of bank letters of credit to the lenders for the international loans noted above. The total amount deposited during the nine months ended September 30, 2021 was $7.3 million. Total deposits to support bank letters of credit for the outstanding loans of our international subsidiaries is $21.1 million and is considered restricted cash as of September 30, 2021. These restricted cash amounts do not impact the Applicable Amount as defined under the Credit Agreement or the restricted payments as defined in the indentures to the notes as described above.

5.125% Senior Notes

On March 16, 2021, Cinemark USA, Inc. completed a tender offer to purchase it’s previously outstanding 5.125% Senior Notes, of which $334 million was tendered at the expiration of the offer. On March 16, 2021, Cinemark USA, Inc. also issued a notice of optional redemption to redeem the remaining $66 million principal amount of the 5.125% Senior Notes. In connection therewith, on March 16, 2021, Cinemark USA deposited with Wells Fargo Bank, N.A., as trustee for the 5.125% Senior Notes (the “Trustee”), funds sufficient to redeem all 5.125% Notes remaining outstanding on April 15, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included approximately $66 million of outstanding principal at the redemption price equal to 100% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on March 16, 2021, the indenture governing the 5.125% Senior Notes was fully satisfied and discharged.

43


4.875% Senior Notes

On May 21, 2021, Cinemark USA, Inc. issued a conditional notice of optional redemption to redeem the $755 million outstanding principal amount of the 4.875% Senior Notes. In connection therewith, Cinemark USA deposited with Wells Fargo Bank, N.A., as Trustee for the 4.875% Senior Notes (the “Trustee”), funds sufficient to redeem all 4.875% Senior Notes remaining outstanding on June 21, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included $755 million of outstanding principal at the redemption price equal to 100.000% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on June 15, 2021, the indenture governing the 4.875% Senior Notes was fully satisfied and discharged.

Covenant Compliance

The indentures governing the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes ("the indentures") contain covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. As of September 30, 2021, Cinemark USA, Inc. could have distributed up to approximately $2,551.2 million$2.9 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the Credit Agreement,indentures, subject to its available cash and other borrowing restrictions outlined in the agreement.

indentures. Upon a change of control, as defined in the indentures, Cinemark USA, Inc. 5.125%would be required to make an offer to repurchase the 5.875% Senior Notes,

On December 18, 2012, Cinemark USA, Inc. issued $400.0 million the 5.25% Senior Notes and the 8.750% Secured Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of 5.125% senior notes due 2022, at par value (the “5.125% Senior Notes”). Interest on the 5.125% Senior Notes is payable on June 15 and December 15 of each year, beginning June 15, 2013.repurchase. The 5.125% Senior Notes mature on December 15, 2022.

The indenture to the 5.125% Senior Notes contains covenants including limitations on the amount of dividends that could be paid by Cinemark USA, Inc. As of September 30, 2017, Cinemark USA, Inc. could have distributed up to approximately $2,529.3 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 5.125% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. The indenture allowsindentures allow Cinemark USA, Inc. to incur additional indebtedness if it satisfieswe satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of September 30, 20172021 was approximately 5.9 to 1.below zero.

Cinemark USA, Inc. 4.875% Senior Notes

On May 24, 2013, Cinemark USA, Inc. issued $530.0 million aggregate principal amount of the 4.875% Senior Notes due 2023, at par value (the “4.875% Senior Notes”). On March 21, 2016, Cinemark USA, Inc. issued an additional $225.0 million aggregate principal amount of the 4.875% Senior Notes at 99.0% of the principal amount plus accrued and unpaid interest from December 1, 2015. Proceeds, after payment of fees, were used to finance the redemption of Cinemark, USA, Inc.’s $200.0 million 7.375% Senior Subordinated Notes, as discussed below. These additional notes have identical terms, other than the issue date, the issue price and the first interest payment date, and constitute part of the same series as the Company’s existing 4.875% Senior Notes.  Interest on the 4.875% Senior Notes is payable on June 1 and December 1 of each year.  The 4.875% Senior Notes mature on June 1, 2023.  

The indenture to the 4.875% Senior Notes contains covenants that include limitations on the amount of dividends that Cinemark USA, Inc. can pay. As of September 30, 2017, Cinemark USA, Inc. could have distributed up to approximately $2,524.4 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 4.875% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. The indenture allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of September 30, 2017 was approximately 5.9 to 1.

Cinemark USA, Inc. 7.375% Senior Subordinated Notes

On June 3, 2011, Cinemark USA, Inc. issued $200.0 million aggregate principal amount of 7.375% Senior Subordinated Notes due 2021, at par value. On March 21, 2016, Cinemark USA, Inc. redeemed the 7.375% Senior Subordinated Notes at a make-whole premium of approximately 104% plus accrued and unpaid interest, utilizing the proceeds from the issuance of the additional $225.0 million 4.875% Senior Notes discussed above.  As a result of the redemption, the Company wrote-off approximately $2.4 million in unamortized debt issue costs, paid the make-whole premium of approximately $9.4 million and paid other fees of $1.2 million, all of which are reflected in loss on debt amendments and refinancing during the nine months ended September 30, 2016.  

Covenant Compliance

As of September 30, 2017, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.

Seasonality44


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 May to July, and during the holiday season, extending from early November through year-end. The unexpected emergence of a hit film during other periods can alter this seasonality trend. The timing of such film releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or for the same period in the following year.


Item 3. Quantitative and QualitativeQualitative 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

We are currently party to a variable rate debt facility. We have four interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with the variable interest rates on $600 million of the term loan outstanding under the Credit Agreement. An increase or decrease in interest rates would affect our interest expense relating to our variable rate debt. At September 30, 2017,2021, we had an aggregate of approximately $660.9$63.1 million of variable rate debt outstanding. Based on the interest rates in effect on the variable rate debt outstanding at September 30, 2017,2021, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $6.6$0.6 million.

The table below provides information about our fixed rate and variable rate long-term debt agreements as of September 30, 2017:2021:

 

 

Expected Maturity for the Twelve-Month Periods Ending September 30,

 

 

Average

 

 

 

(in millions)

 

 

Interest

 

 

 

2022

 

2023

 

2024

 

2025

 

2026

 

Thereafter

 

Total

 

 

Fair Value

 

 

Rate

 

Fixed rate

 

$

 

$

 

$

 

$

850.0

 

$

865.0

 

$

765.0

 

$

2,480.0

 

 

$

2,763.1

 

 

 

5.1

%

Variable rate (1)

 

 

20.3

 

 

13.3

 

 

7.8

 

 

15.2

 

 

 

 

6.5

 

 

63.1

 

 

 

61.9

 

 

 

2.8

%

Total debt

 

$

20.3

 

$

13.3

 

$

7.8

 

$

865.2

 

$

865.0

 

$

771.5

 

$

2,543.1

 

 

$

2,825.0

 

 

 

 

 

 

Expected Maturity for the Twelve-Month Periods Ending September 30,

 

 

Average

 

 

 

(in millions)

 

 

Interest

 

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

Thereafter

 

 

Total

 

 

Fair Value

 

 

Rate

 

Fixed rate

 

$

1.4

 

 

$

1.4

 

 

$

1.4

 

 

$

 

 

$

 

 

$

1,155.0

 

 

$

1,159.2

 

 

$

1,177.2

 

 

 

5.0

%

Variable rate

 

 

5.7

 

 

 

5.7

 

 

 

5.7

 

 

 

5.7

 

 

 

638.1

 

 

 

 

 

 

660.9

 

 

663.4

 

 

 

3.3

%

Total debt

 

$

7.1

 

 

$

7.1

 

 

$

7.1

 

 

$

5.7

 

 

$

638.1

 

 

$

1,155.0

 

 

$

1,820.1

 

 

$

1,840.6

 

 

 

 

 

(1)
Amounts are presented before adjusting for unamortized debt issuance costs and debt discounts.

Interest Rate Swap Agreements

Foreign Currency Exchange Rate Risk

Other than the devaluationAll of our interest rate swap agreements qualify for cash flow hedge accounting. The fair values of the Argentine peso, discussed ininterest rate swaps are recorded on our consolidated balance sheet as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. See Note 127 to the condensed consolidated financial statements therefor further discussion of the interest rate swap agreements.

Foreign Currency Exchange Rate Risk

There have been no material changes in foreign currency exchange rate risk previously disclosed in “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 20162020 filed February 23, 2017.26, 2021.

Item 4. Controls and Procedures

Evaluation of the Effectiveness of Disclosure Controls and Procedures

As of September 30, 2017,2021, we carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2017,2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 that occurred during the quarter ended September 30, 20172021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

45



PART II - OTHEROTHER INFORMATION

ThereOther than the discussion at Note 19, there have been no material changes from legal proceedings previously reported under “Business – Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 20162020 filed February 23, 2017.26, 2021.

Item 1A. RiskRisk Factors

There have been no material changes from risk factors previously disclosedSee discussion in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20162020 filed February 23, 2017.26, 2021, as updated by risk factors included in a Form 8-K that was filed on March 4, 2021.


46


Item 6. Exhibits Exhibits

 

*31.1

*31.1

Certification of Mark Zoradi, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2

Certification of Sean Gamble, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*32.1

Certification of Mark Zoradi, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2

Certification of Sean Gamble, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

* 101

Financial StatementsThe following material from the quarterly report on Form 10-Q of Cinemark Holdings, Inc.’s Form 10-Q for the quarter ended September 30, 2017, filed November 3, 2017,2021, formatted in XBRL:iXBRL (Inline eXtensible Business Reporting Language), filed herewith: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income (Loss), (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements taggedStatements.

* 104

Cover Page Interactive Data File (formatted as detailed text.inline XBRL and contained in Exhibit 101)

*

filed herewith.


SIGNATURES

* filed herewith.

47


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CINEMARK HOLDINGS, INC.

Registrant

DATE:

November 3, 20175, 2021

/s/Mark Zoradi

Mark Zoradi

Chief Executive Officer

/s/Sean Gamble

Sean Gamble

Chief Financial Officer

48

37