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 SeptemberJune 30, 20202021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 33-47040
CINEMARK USA, INC.
(Exact name of registrant as specified in its charter)
Texas |
| 75-2206284 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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3900 Dallas Parkway |
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Plano, Texas |
| 75093 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant's telephone number, including area code: (972) 665-1000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ☐ |
| Accelerated filer |
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Non-accelerated filer |
| ☒ |
| Smaller reporting company |
| ☐ |
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Emerging growth company |
| ☐ |
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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 ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered |
None | None | None |
As of October 30, 2020,August 5, 2021, 1,500 shares of Class A common stock and 182,648 shares of Class B common stock were outstanding.
1
CINEMARK USA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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| Notes to Condensed Consolidated Financial Statements (unaudited) |
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| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 1. |
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| Item 5 |
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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, inor incorporated by reference to, the Company’s Annual Report on Form 10-K filed February 21, 2020, as updated byMarch 3, 2021 and the information related to COVID-19 that was included in a Form 8-K that was filed on April 13, 2020, including the documents incorporated by reference therein, our QuarterlyCurrent Report on Form 10-Q8-K filed on August 5, 2020 and subsequent filings.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 otherwiseotherwise.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
|
| September 30, |
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| December 31, |
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| June 30, |
|
| December 31, |
| ||||
|
| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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Assets |
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Current assets |
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Cash and cash equivalents |
| $ | 430,956 |
|
| $ | 488,215 |
|
| $ | 321,097 |
|
| $ | 260,538 |
|
Inventories |
|
| 15,159 |
|
|
| 21,686 |
|
|
| 14,440 |
|
|
| 12,593 |
|
Accounts receivable |
|
| 24,627 |
|
|
| 83,722 |
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|
| 35,306 |
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|
| 25,257 |
|
Current income tax receivable |
|
| 84,105 |
|
|
| 4,082 |
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|
| 39,381 |
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|
| 158,932 |
|
Prepaid expenses and other |
|
| 34,394 |
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|
| 37,187 |
|
|
| 34,664 |
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|
| 34,400 |
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Accounts receivable from parent |
|
| 27,767 |
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|
| 24,319 |
|
|
| 38,851 |
|
|
| 36,775 |
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Total current assets |
|
| 617,008 |
|
|
| 659,211 |
|
|
| 483,739 |
|
|
| 528,495 |
|
Theatre properties and equipment |
|
| 3,252,987 |
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|
| 3,348,237 |
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|
| 3,387,203 |
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| 3,403,103 |
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Less: accumulated depreciation and amortization |
|
| 1,707,164 |
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| 1,612,990 |
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| 1,894,639 |
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|
| 1,788,041 |
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Theatre properties and equipment, net |
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| 1,545,823 |
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| 1,735,247 |
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| 1,492,564 |
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|
| 1,615,062 |
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Operating lease right-of-use assets, net |
|
| 1,286,224 |
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| 1,383,080 |
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| 1,229,587 |
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|
| 1,278,191 |
|
Other assets |
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Goodwill |
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| 1,249,427 |
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| 1,283,371 |
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| 1,255,150 |
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|
| 1,253,840 |
|
Intangible assets, net |
|
| 315,569 |
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| 321,769 |
|
|
| 312,986 |
|
|
| 314,195 |
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Investment in NCM |
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| 250,434 |
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|
| 265,792 |
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| 147,629 |
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|
| 151,962 |
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Investments in affiliates |
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| 118,589 |
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| 155,285 |
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| 23,629 |
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| 23,726 |
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Long-term deferred tax asset |
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| 16,491 |
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| 9,369 |
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Deferred charges and other assets, net |
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| 36,047 |
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| 39,114 |
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| 31,592 |
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| 33,199 |
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Total other assets |
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| 1,986,557 |
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| 2,074,700 |
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| 1,770,986 |
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| 1,776,922 |
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Total assets |
| $ | 5,435,612 |
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| $ | 5,852,238 |
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| $ | 4,976,876 |
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| $ | 5,198,670 |
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Liabilities and equity |
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Current liabilities |
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Current portion of long-term debt |
| $ | 7,965 |
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| $ | 6,595 |
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| $ | 20,910 |
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| $ | 18,056 |
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Current portion of operating lease obligations |
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| 216,382 |
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| 217,406 |
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| 211,468 |
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| 208,593 |
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Current portion of finance lease obligations |
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| 16,224 |
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| 15,432 |
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| 14,439 |
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| 16,407 |
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Current income tax payable |
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| — |
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| 5,195 |
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| — |
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| 5,632 |
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Current liability for uncertain tax positions |
|
| — |
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| 13,446 |
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Accounts payable and accrued expenses |
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| 376,853 |
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| 450,097 |
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| 396,575 |
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| 350,094 |
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Total current liabilities |
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| 617,424 |
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| 708,171 |
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| 643,392 |
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| 598,782 |
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Long-term liabilities |
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Long-term debt, less current portion |
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| 2,018,819 |
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| 1,771,342 |
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| 2,032,784 |
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| 2,024,956 |
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Operating lease obligations, less current portion |
|
| 1,137,822 |
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| 1,223,462 |
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| 1,085,539 |
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| 1,138,142 |
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Finance lease obligations, less current portion |
|
| 128,727 |
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| 141,017 |
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| 109,327 |
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| 124,609 |
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Long-term deferred tax liability |
|
| 114,866 |
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| 141,836 |
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| 79,492 |
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| 89,961 |
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Long-term liability for uncertain tax positions |
|
| 14,678 |
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| 848 |
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| 42,085 |
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| 19,225 |
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NCM screen advertising advances |
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| 346,237 |
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| 348,354 |
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| 350,362 |
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| 344,255 |
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Other long-term liabilities |
|
| 61,690 |
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| 43,001 |
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| 51,863 |
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| 73,746 |
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Total long-term liabilities |
|
| 3,822,839 |
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| 3,669,860 |
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| 3,751,452 |
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| 3,814,894 |
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Commitments and contingencies (see Note 18) |
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Equity |
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Cinemark USA, Inc.'s stockholder's equity: |
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Class A common stock, $0.01 par value: 10,000,000 shares authorized, 1,500 shares issued and outstanding |
|
| 0 |
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| 0 |
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| 0 |
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| 0 |
|
Class B common stock, no par value: 1,000,000 shares authorized, 239,893 shares issued and 182,648 shares outstanding |
|
| 49,543 |
|
|
| 49,543 |
|
|
| 49,543 |
|
|
| 49,543 |
|
Treasury stock, 57,245 Class B shares at cost |
|
| (24,233 | ) |
|
| (24,233 | ) |
|
| (24,233 | ) |
|
| (24,233 | ) |
Additional paid-in-capital |
|
| 1,303,791 |
|
|
| 1,291,618 |
|
|
| 1,440,741 |
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|
| 1,310,625 |
|
Retained earnings |
|
| 69,231 |
|
|
| 484,883 |
|
|
| (503,437 | ) |
|
| (163,284 | ) |
Accumulated other comprehensive loss |
|
| (414,398 | ) |
|
| (340,112 | ) |
|
| (391,162 | ) |
|
| (398,653 | ) |
Total Cinemark USA, Inc.'s stockholder's equity |
|
| 983,934 |
|
|
| 1,461,699 |
|
|
| 571,450 |
|
|
| 773,998 |
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Noncontrolling interests |
|
| 11,415 |
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|
| 12,508 |
|
|
| 10,580 |
|
|
| 10,996 |
|
Total equity |
|
| 995,349 |
|
|
| 1,474,207 |
|
|
| 582,032 |
|
|
| 784,994 |
|
Total liabilities and equity |
| $ | 5,435,612 |
|
| $ | 5,852,238 |
|
| $ | 4,976,876 |
|
| $ | 5,198,670 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data, unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| 2021 |
|
| 2020 |
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| 2021 |
|
| 2020 |
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Revenues |
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Admissions |
| $ | 14,901 |
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| $ | 454,429 |
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| $ | 307,400 |
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| $ | 1,371,041 |
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| $ | 153,479 |
|
| $ | 37 |
|
| $ | 209,600 |
|
| $ | 292,499 |
|
Concession |
|
| 9,116 |
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|
| 289,477 |
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|
| 199,596 |
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|
| 886,083 |
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|
| 109,814 |
|
|
| 124 |
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|
| 149,302 |
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|
| 190,480 |
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Other |
|
| 11,461 |
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|
| 77,911 |
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|
| 81,072 |
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|
| 237,172 |
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|
| 31,359 |
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|
| 8,813 |
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|
| 50,111 |
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|
| 69,611 |
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Total revenues |
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| 35,478 |
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|
| 821,817 |
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|
| 588,068 |
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|
| 2,494,296 |
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|
| 294,652 |
|
|
| 8,974 |
|
|
| 409,013 |
|
|
| 552,590 |
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Cost of operations |
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Film rentals and advertising |
|
| 8,257 |
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|
| 254,911 |
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|
| 165,262 |
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|
| 759,693 |
|
|
| 76,587 |
|
|
| 388 |
|
|
| 99,792 |
|
|
| 157,005 |
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Concession supplies |
|
| 2,688 |
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|
| 51,573 |
|
|
| 39,879 |
|
|
| 157,361 |
|
|
| 18,847 |
|
|
| 2,379 |
|
|
| 25,987 |
|
|
| 37,191 |
|
Salaries and wages |
|
| 20,181 |
|
|
| 103,270 |
|
|
| 116,589 |
|
|
| 308,316 |
|
|
| 50,407 |
|
|
| 8,864 |
|
|
| 81,573 |
|
|
| 96,408 |
|
Facility lease expense |
|
| 67,047 |
|
|
| 87,436 |
|
|
| 214,490 |
|
|
| 262,529 |
|
|
| 67,213 |
|
|
| 65,202 |
|
|
| 132,042 |
|
|
| 147,443 |
|
Utilities and other |
|
| 43,412 |
|
|
| 123,877 |
|
|
| 178,806 |
|
|
| 357,210 |
|
|
| 61,185 |
|
|
| 34,871 |
|
|
| 110,329 |
|
|
| 135,394 |
|
General and administrative expenses |
|
| 29,625 |
|
|
| 44,113 |
|
|
| 97,645 |
|
|
| 125,054 |
|
|
| 36,680 |
|
|
| 27,425 |
|
|
| 71,794 |
|
|
| 68,020 |
|
Depreciation and amortization |
|
| 62,543 |
|
|
| 67,760 |
|
|
| 191,380 |
|
|
| 196,795 |
|
|
| 66,920 |
|
|
| 63,581 |
|
|
| 135,080 |
|
|
| 128,837 |
|
Impairment of long-lived assets |
|
| 24,595 |
|
|
| 27,304 |
|
|
| 41,214 |
|
|
| 45,382 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,619 |
|
Restructuring costs |
|
| 524 |
|
|
| — |
|
|
| 20,062 |
|
|
| — |
|
|
| (740 | ) |
|
| 19,538 |
|
|
| (948 | ) |
|
| 19,538 |
|
Loss on disposal of assets and other |
|
| (13,327 | ) |
|
| 2,453 |
|
|
| (10,997 | ) |
|
| 8,057 |
|
|
| 2,358 |
|
|
| 425 |
|
|
| 6,863 |
|
|
| 2,330 |
|
Total cost of operations |
|
| 245,545 |
|
|
| 762,697 |
|
|
| 1,054,330 |
|
|
| 2,220,397 |
|
|
| 379,457 |
|
|
| 222,673 |
|
|
| 662,512 |
|
|
| 808,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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| ||||||||||||||||
Operating income (loss) |
|
| (210,067 | ) |
|
| 59,120 |
|
|
| (466,262 | ) |
|
| 273,899 |
| ||||||||||||||||
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|
|
|
|
|
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|
|
|
|
|
|
|
|
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| ||||||||||||||||
Operating loss |
|
| (84,805 | ) |
|
| (213,699 | ) |
|
| (253,499 | ) |
|
| (256,195 | ) | ||||||||||||||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest expense |
|
| (32,235 | ) |
|
| (24,967 | ) |
|
| (87,942 | ) |
|
| (75,037 | ) |
|
| (31,058 | ) |
|
| (31,041 | ) |
|
| (61,578 | ) |
|
| (55,707 | ) |
Interest income |
|
| 1,322 |
|
|
| 3,897 |
|
|
| 4,208 |
|
|
| 10,042 |
|
|
| 3,809 |
|
|
| 803 |
|
|
| 4,429 |
|
|
| 2,886 |
|
Loss on extinguishment of debt |
|
| (3,924 | ) |
|
| — |
|
|
| (6,527 | ) |
|
| — |
| ||||||||||||||||
Foreign currency exchange gain (loss) |
|
| (2,251 | ) |
|
| (4,406 | ) |
|
| (6,183 | ) |
|
| (4,785 | ) |
|
| 2,327 |
|
|
| 916 |
|
|
| (647 | ) |
|
| (3,932 | ) |
Distributions from NCM |
|
| 1,061 |
|
|
| 2,474 |
|
|
| 6,975 |
|
|
| 9,168 |
|
|
| — |
|
|
| 690 |
|
|
| 77 |
|
|
| 5,914 |
|
Interest expense - NCM |
|
| (5,901 | ) |
|
| (4,666 | ) |
|
| (17,726 | ) |
|
| (14,180 | ) |
|
| (5,962 | ) |
|
| (5,934 | ) |
|
| (11,797 | ) |
|
| (11,825 | ) |
Equity in income (loss) of affiliates |
|
| (16,077 | ) |
|
| 15,139 |
|
|
| (27,711 | ) |
|
| 33,982 |
| ||||||||||||||||
Equity in loss of affiliates |
|
| (8,109 | ) |
|
| (20,120 | ) |
|
| (14,915 | ) |
|
| (11,634 | ) | ||||||||||||||||
Total other expense |
|
| (54,081 | ) |
|
| (12,529 | ) |
|
| (128,379 | ) |
|
| (40,810 | ) |
|
| (42,917 | ) |
|
| (54,686 | ) |
|
| (90,958 | ) |
|
| (74,298 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Income (loss) before income taxes |
|
| (264,148 | ) |
|
| 46,591 |
|
|
| (594,641 | ) |
|
| 233,089 |
| ||||||||||||||||
Loss before income taxes |
|
| (127,722 | ) |
|
| (268,385 | ) |
|
| (344,457 | ) |
|
| (330,493 | ) | ||||||||||||||||
Income taxes |
|
| (119,273 | ) |
|
| 14,193 |
|
|
| (220,287 | ) |
|
| 64,615 |
|
|
| 9,337 |
|
|
| (98,007 | ) |
|
| (3,888 | ) |
|
| (101,014 | ) |
Net income (loss) |
| $ | (144,875 | ) |
| $ | 32,398 |
|
| $ | (374,354 | ) |
| $ | 168,474 |
| ||||||||||||||||
Net loss |
| $ | (137,059 | ) |
| $ | (170,378 | ) |
| $ | (340,569 | ) |
| $ | (229,479 | ) | ||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
|
| (444 | ) |
|
| 602 |
|
|
| (702 | ) |
|
| 1,957 |
|
|
| 186 |
|
|
| (427 | ) |
|
| (416 | ) |
|
| (258 | ) |
Net income (loss) attributable to Cinemark USA, Inc. |
| $ | (144,431 | ) |
| $ | 31,796 |
|
| $ | (373,652 | ) |
| $ | 166,517 |
| ||||||||||||||||
Net loss attributable to Cinemark USA, Inc. |
| $ | (137,245 | ) |
| $ | (169,951 | ) |
| $ | (340,153 | ) |
| $ | (229,221 | ) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| |||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| |||||
Net income (loss) |
| $ | (144,875 | ) |
| $ | 32,398 |
|
| $ | (374,354 | ) |
| $ | 168,474 |
| |
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $5,677, $417, $3,696 and $3,391, net of settlements |
|
| 6,528 |
|
|
| (1,291 | ) |
|
| (16,794 | ) |
|
| (10,504 | ) | |
Other comprehensive loss in equity method investments |
|
| 0 |
|
|
| (49 | ) |
|
| 0 |
|
|
| (142 | ) | |
Foreign currency translation adjustments |
|
| (1,503 | ) |
|
| (25,408 | ) |
|
| (62,830 | ) |
|
| (19,728 | ) | |
Total other comprehensive loss, net of tax |
|
| 5,025 |
|
|
| (26,748 | ) |
|
| (79,624 | ) |
|
| (30,374 | ) | |
Total comprehensive income (loss), net of tax |
|
| (139,850 | ) |
|
| 5,650 |
|
|
| (453,978 | ) |
|
| 138,100 |
| |
Comprehensive (income) loss attributable to noncontrolling interests |
|
| 444 |
|
|
| (602 | ) |
|
| 702 |
|
|
| (1,957 | ) | |
Comprehensive income (loss) attributable to Cinemark USA, Inc. |
| $ | (139,406 | ) |
| $ | 5,048 |
|
| $ | (453,276 | ) |
| $ | 136,143 |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net loss |
| $ | (137,059 | ) |
| $ | (170,378 | ) |
| $ | (340,569 | ) |
| $ | (229,479 | ) |
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $603, $275, $2,847 and $1,954, net of settlements |
|
| 746 |
|
|
| 849 |
|
|
| 6,450 |
|
|
| (23,322 | ) |
Foreign currency translation adjustments |
|
| 8,259 |
|
|
| (3,702 | ) |
|
| (1,206 | ) |
|
| (61,327 | ) |
Total other comprehensive income (loss), net of tax |
|
| 9,005 |
|
|
| (2,853 | ) |
|
| 5,244 |
|
|
| (84,649 | ) |
Total comprehensive loss, net of tax |
|
| (128,054 | ) |
|
| (173,231 | ) |
|
| (335,325 | ) |
|
| (314,128 | ) |
Comprehensive (income) loss attributable to noncontrolling interests |
|
| (186 | ) |
|
| 427 |
|
|
| 416 |
|
|
| 258 |
|
Comprehensive loss attributable to Cinemark USA, Inc. |
| $ | (128,240 | ) |
| $ | (172,804 | ) |
| $ | (334,909 | ) |
| $ | (313,870 | ) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (374,354 | ) |
| $ | 168,474 |
| ||||||||
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: |
|
|
|
|
|
|
|
| ||||||||
Net loss |
| $ | (340,569 | ) |
| $ | (229,479 | ) | ||||||||
Adjustments to reconcile net loss to cash used for operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation |
|
| 187,748 |
|
|
| 193,032 |
|
|
| 133,733 |
|
|
| 126,387 |
|
Amortization of intangible and other assets |
|
| 3,632 |
|
|
| 3,763 |
|
|
| 1,347 |
|
|
| 2,450 |
|
Amortization of debt issue costs |
|
| 4,638 |
|
|
| 3,983 |
|
|
| 3,556 |
|
|
| 2,917 |
|
Interest accrued on NCM screen advertising advances |
|
| 11,797 |
|
|
| 11,825 |
| ||||||||
Amortization of NCM screen advertising advances and other deferred revenues |
|
| (23,647 | ) |
|
| (12,203 | ) |
|
| (16,094 | ) |
|
| (15,795 | ) |
Amortization of accumulated losses for amended swap agreements |
|
| 5,338 |
|
|
| — |
|
|
| 2,247 |
|
|
| 2,669 |
|
Interest accrued on NCM screen advertising advances |
|
| 17,726 |
|
|
| — |
| ||||||||
Impairment of long-lived assets |
|
| 41,214 |
|
|
| 45,382 |
|
|
| — |
|
|
| 16,619 |
|
Share based awards compensation expense |
|
| 12,172 |
|
|
| 9,799 |
|
|
| 10,116 |
|
|
| 7,974 |
|
(Gain) loss on disposal of assets and other |
|
| (10,997 | ) |
|
| 8,057 |
| ||||||||
Loss on disposal of assets and other |
|
| 6,863 |
|
|
| 2,330 |
| ||||||||
Loss on extinguishment of debt |
|
| 6,527 |
|
|
| — |
| ||||||||
Non-cash rent expense |
|
| 1,649 |
|
|
| (3,252 | ) |
|
| (679 | ) |
|
| 833 |
|
Equity in (income) loss of affiliates |
|
| 27,711 |
|
|
| (33,982 | ) | ||||||||
Equity in loss of affiliates |
|
| 14,915 |
|
|
| 11,634 |
| ||||||||
Deferred income tax expenses |
|
| (29,941 | ) |
|
| (5,314 | ) |
|
| (13,597 | ) |
|
| 3,380 |
|
Distributions from equity investees |
|
| 25,430 |
|
|
| 28,163 |
|
|
| 156 |
|
|
| 23,284 |
|
Changes in assets and liabilities and other |
|
| (60,727 | ) |
|
| (9,392 | ) |
|
| 158,278 |
|
|
| (121,174 | ) |
Net cash provided by (used for) operating activities |
|
| (172,408 | ) |
|
| 396,510 |
| ||||||||
Net cash used for operating activities |
|
| (21,404 | ) |
|
| (154,146 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to theatre properties and equipment |
|
| (67,618 | ) |
|
| (186,512 | ) |
|
| (32,819 | ) |
|
| (46,959 | ) |
Acquisition of U.S. theatres, net of cash acquired |
|
| — |
|
|
| (10,170 | ) | ||||||||
Proceeds from sale of theatre properties and equipment and other |
|
| 212 |
|
|
| 377 |
|
|
| 1,995 |
|
|
| 198 |
|
Investment in joint ventures and other, net |
|
| (50 | ) |
|
| — |
|
|
| — |
|
|
| (50 | ) |
Net cash used for investing activities |
|
| (67,456 | ) |
|
| (196,305 | ) |
|
| (30,824 | ) |
|
| (46,811 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions received from parent |
|
| 120,000 |
|
|
| — |
| ||||||||
Dividends paid to parent |
|
| (42,000 | ) |
|
| (118,825 | ) |
|
| — |
|
|
| (42,000 | ) |
Payroll taxes paid as a result of stock withholdings |
|
| (2,865 | ) |
|
| (2,247 | ) |
|
| (12 | ) |
|
| (2,798 | ) |
Proceeds from revolving line of credit |
|
| — |
|
|
| 98,800 |
| ||||||||
Proceeds from issuance of senior notes |
|
| 1,170,000 |
|
|
| 250,000 |
| ||||||||
Proceeds from other borrowings |
|
| 257,167 |
|
|
| — |
|
|
| 9,012 |
|
|
| 6,136 |
|
Redemption of senior notes |
|
| (1,155,000 | ) |
|
| — |
| ||||||||
Repayments of long-term debt |
|
| (4,947 | ) |
|
| (4,947 | ) |
|
| (4,204 | ) |
|
| (3,298 | ) |
Payment of debt issue costs |
|
| (7,859 | ) |
|
| — |
|
|
| (17,272 | ) |
|
| (7,858 | ) |
Fees paid related to debt refinancing |
|
| (2,058 | ) |
|
| — |
| ||||||||
Payments on finance leases |
|
| (11,497 | ) |
|
| (10,830 | ) |
|
| (7,373 | ) |
|
| (7,620 | ) |
Other |
|
| (392 | ) |
|
| (1,588 | ) |
|
| — |
|
|
| (392 | ) |
Net cash provided by (used for) financing activities |
|
| 187,607 |
|
|
| (138,437 | ) |
|
| 113,093 |
|
|
| 290,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (5,002 | ) |
|
| (5,296 | ) |
|
| (306 | ) |
|
| (6,536 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
| (57,259 | ) |
|
| 56,472 |
| ||||||||
Increase (decrease) in cash and cash equivalents |
|
| 60,559 |
|
|
| 83,477 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
| 488,215 |
|
|
| 426,216 |
|
|
| 260,538 |
|
|
| 488,215 |
|
End of period |
| $ | 430,956 |
|
| $ | 482,688 |
|
| $ | 321,097 |
|
| $ | 571,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
7
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
1. | The Company and Basis of Presentation |
Cinemark USA, Inc., a wholly-owned subsidiary of Cinemark Holdings, Inc., and its subsidiaries operate 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, 2019,2020, 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 of which the Company has control are consolidated while those affiliates of which the Company owns between 20% and 50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 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. The results of these subsidiaries and affiliates are included in the condensed consolidated financial statements effective with their formation or from their dates of acquisition. 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, 2019,2020, included in the Annual Report on Form 10-K filed February 21, 2020March 3, 2021 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three and ninesix months ended SeptemberJune 30, 20202021 are not necessarily indicative of the results to be achieved for the full year.
2. | Impact of COVID-19 Pandemic |
The outbreak ofAs 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 are widespread, and the situation continues to evolve.have been widespread. As a movie exhibitor that operates spaces where patrons gather in close proximity, the Company has been, and continues to be significantly impacted by protective actions taken by governmental authorities to control the spread of 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 effective March 17, 2020 and March 18, 2020, respectively.In conjunction with the temporary closure of its theatres in March of 2020, the Company 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.
As of SeptemberJune 30, 2020,2021, the Company had reopened 252all 323 of its domestic theatres and 15152 of its 198 international theatres showing limited volume oftheatres. During the three months ended June 30, 2021, the Company showed many new releases along with some library content duringcontent. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours. While some staffing has been brought backhours in certain locations and the Company’s focus on initiatives to pre-COVID-19 levels given the theatre reopenings, theenhance productivity. The Company also continues to maintain a temporary reduction in staffing while limitinglimit capital expenditures to essential activities and projects. The Company also continuescontinued to work with landlords and other vendors on extended or modified contractualduring the six months ended June 30, 2021 to extend payment terms while evaluatingas it reopened theatres and continues to recover from the statusimpacts of the COVID-19 pandemic and local government regulations in assessing its plans to reopen its remaining theatres.pandemic.
The Company’s focus on maintaining a healthy balance sheet and low leverage allowed it to enter the global COVID-19 crisis in a strong financial position. Based on the Company’s current levelestimates of operations,recovery, it believes that it has, and will generate, sufficient cash to sustain operations until late 2021, which would extend into 2022 when considering the additional income tax benefits discussed below.operations. Nonetheless, the COVID-19 pandemic has had, and may continuecontinues to have, adverse effects on the Company’s business, results of operations, cash flows and financial condition, access to credit markets and ability to service existing and future indebtedness, some of which may be significant.condition.
8
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Health and Safety Protocols
The Company has implemented health and safety protocols in its theatres as a result of the pandemic for the safety of its employees and guests including, but not limited to, the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With these comprehensive health and safety protocols in place, we believe we can more safely operate theaters while prioritizing the health of employees, guests and communities. The Company will continue to evolve these protocols based on changes to recommendations by local authorities throughout the region, as well as based on the Company’s experience as it reopens theatres domestically and throughout Latin America.
Restructuring Charges
In addition to the Company’s initial actions in response to the COVID-19 pandemic discussed above, duringDuring June 2020, Company management approved and announced a restructuring plan to realign its operations creatingto create a more efficient cost structure (referred to herein as the “2020 Restructuring“Restructuring Plan”). The 2020 Restructuring Plan primarily includesincluded a permanent headcount reduction at its domestic corporate office and the permanent closure of 14certain domestic and 7 international theatres. The Company recorded $524 and $20,062 in restructuring costs on the condensed consolidated statement of income for the three and nine months ended September 30, 2020, respectively. The following table summarizes activity recorded during the costs of the 2020 Restructuring Plan, payments made, noncash write-offs and the remaining liability at Septemberthree months ended June 30, 2020:2021:
|
| 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 |
| |||||||||
Restructuring charges during the three months ended June 30, 2020 |
| $ | 8,955 |
| $ | 7,589 |
| $ | 16,544 |
|
| $ | 163 |
| $ | 2,831 |
| $ | 2,994 |
|
| $ | 9,118 |
| $ | 10,420 |
| $ | 19,538 |
|
Amounts paid |
|
| (90 | ) |
| (482 | ) |
| (572 | ) |
|
| — |
|
| (42 | ) |
| (42 | ) |
|
| (90 | ) |
| (524 | ) |
| (614 | ) |
Noncash write-offs |
|
| — |
|
| 88 |
|
| 88 |
|
|
| — |
|
| (2,374 | ) |
| (2,374 | ) |
|
| — |
|
| (2,286 | ) |
| (2,286 | ) |
Reserve balance at June 30, 2020 |
| $ | 8,865 |
| $ | 7,195 |
| $ | 16,060 |
|
| $ | 163 |
| $ | 415 |
| $ | 578 |
|
| $ | 9,028 |
| $ | 7,610 |
| $ | 16,638 |
|
Restructuring charges during the three months ended September 30, 2020 (1) |
|
| — |
|
| 154 |
|
| 154 |
|
|
| 17 |
|
| 353 |
|
| 370 |
|
|
| 17 |
|
| 507 |
|
| 524 |
|
Amounts paid |
|
| (6,521 | ) |
| (436 | ) |
| (6,957 | ) |
|
| (180 | ) |
| (313 | ) |
| (493 | ) |
|
| (6,701 | ) |
| (749 | ) |
| (7,450 | ) |
Noncash write-offs |
|
| — |
|
| 47 |
|
| 47 |
|
|
| — |
|
| (129 | ) |
| (129 | ) |
|
| — |
|
| (82 | ) |
| (82 | ) |
Reserve balance at September 30, 2020 |
| $ | 2,344 |
| $ | 6,960 |
| $ | 9,304 |
|
| $ | — |
| $ | 326 |
| $ | 326 |
|
| $ | 2,344 |
| $ | 7,286 |
| $ | 9,630 |
|
|
| 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 |
|
The unpaid andremaining accrued restructuring costs of $9,630$5,243 are reflected in accounts payable and accrued expenses on the condensed consolidated balance sheet as of SeptemberJune 30, 2020.
Income Tax Considerations
The Company has elected to take advantage of certain tax-related benefits available under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) signed into U.S. federal law on March 27, 2020. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss (“NOL”) utilization and carryback periods, modifications to the net interest deduction limitations and a technical correction to the
9
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
2021.2017 Tax Cuts and Jobs Act, which makes certain qualified improvement property eligible for bonus depreciation. Per the provisions of the CARES Act, the Company has deferred payment of certain employer payroll taxes for 2020 and has recorded payroll tax credits for expenses related to paying wages and health benefits to employees who were not working as a result of closures and reduced receipts associated with COVID-19.
An income tax benefit of $(119,273) was recorded for the third quarter of 2020 compared to income tax expense of $14,193 for the third quarter of 2019 on book (loss)/income of $(264,148) and $46,591, respectively. The effective tax rate was approximately 45.2% for the third quarter of 2020 compared to 30.5% for the third quarter of 2019. The Company’s 2020 effective tax rate was positively impacted by provisions in the CARES Act that allow for net operating losses originating in 2018, 2019 or 2020 to be carried back to earlier tax years, many of which had a 35% corporate tax rate. As a result of the pandemic, Cinemark has incurred significant U.S. losses, which the Company is carrying back to prior years. The Company recorded an income tax benefit of $(220,287) for the nine months ended September 30, 2020 with regard to U.S. operating losses, tax losses with respect to investments in foreign subsidiaries and a write down of certain intercompany receivables associated with the Company’s foreign subsidiaries. The Company has recorded an income tax receivable of $84,105 as of September 30, 2020 and received cash tax refunds of $115,769 during the nine months ended September 30, 2020.
If the Company receives certain government disaster relief assistance, it may be subject to certain requirements imposed by the government on the recipients of the aid including restrictions on executive officer compensation, share buybacks, dividends, prepayment of debt, incurrence of additional indebtedness and other similar restrictions until the aid is repaid or redeemed in full. However, the Company cannot predict the manner in which such benefits will be allocated or administered and cannot predict whether it will be able to access such benefits in a timely manner or at all.
3. | New Accounting Pronouncements |
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,Standards Update (“ASU 2019-12”ASU”). The purpose of ASU 2019-12 is to simplify the accounting for income taxes. The improvements in ASU 2019-12 include removing certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. ASU 2019-12 also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within that year. The amendments in ASU 2019-12 should be applied prospectively. The Company is evaluating the impact of ASU 2019-12 and does not expect ASU-2019-12 to have a significant impact on the condensed consolidated financial statements.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”)and ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”). The purpose of ASU 2020-04 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 reporting. More specifically, the amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of ASU 2020-04 and itsASU 2021-01 and their impact on the condensed consolidated financial statements.
ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the 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 in 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 will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was 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 treasury stock method will be 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. The Company is currently evaluating the impact of ASU 2020-06 on its condensed consolidated financial statements.
10
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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 while theatres remained closed. These discussions and negotiations have remained ongoing as the Company continues to be impacted by the COVID-19 pandemic.with certain of its landlords. The amendments signed with the landlords involve varying concessions, including the abatement of rent payments 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 some cases, the Company is entitled to rent-free periods while theatres remain closed in certain locations due to local regulations. Total payments deferred as of SeptemberJune 30, 20202021 were approximately $62,559 and are$56,022, of which $45,573 is included in accounts payable and accrued expenses and $10,449 is included in other long-term liabilities in the condensed consolidated balance sheet.
In April 2020, the FASB staff 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 obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. The election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
The Company elected to not remeasure the related lease liabilities and right-of-use assets for those leases where the concessions and deferrals did not result in a significant change in total payments under the lease and where the remaining lease term did not change as a result of the 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. During the three
9
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and nine months ended September 30, 2020, the Company did not recognize a material amount of negative lease expense related to rent abatement concessions.per share data
The following table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30 |
|
| September 30 |
|
| June 30 |
|
| June 30 |
| ||||||||||||||||||||
Lease Cost | Classification | 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| Classification | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Operating lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment (1) | Utilities and other | $ | 823 |
|
| $ | 1,569 |
|
| $ | 2,495 |
|
| $ | 5,173 |
| Utilities and other | $ | 423 |
|
| $ | 131 |
|
| $ | 868 |
|
| $ | 1,672 |
|
Real Estate (2)(3) | Facility lease expense |
| 65,970 |
|
|
| 88,149 |
|
|
| 211,088 |
|
|
| 262,783 |
| Facility lease expense |
| 67,679 |
|
|
| 63,460 |
|
|
| 131,438 |
|
|
| 145,118 |
|
Total operating lease costs |
| $ | 66,793 |
|
| $ | 89,718 |
|
| $ | 213,583 |
|
| $ | 267,956 |
|
| $ | 68,102 |
|
| $ | 63,591 |
|
| $ | 132,306 |
|
| $ | 146,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of leased assets | Depreciation and amortization | $ | 3,665 |
|
| $ | 3,703 |
|
| $ | 11,052 |
|
| $ | 11,182 |
| Depreciation and amortization | $ | 3,141 |
|
| $ | 3,680 |
|
| $ | 6,391 |
|
| $ | 7,387 |
|
Interest on lease liabilities | Interest expense |
| 1,725 |
|
|
| 1,922 |
|
|
| 5,333 |
|
|
| 5,927 |
| Interest expense |
| 1,491 |
|
|
| 1,757 |
|
|
| 3,061 |
|
|
| 3,608 |
|
Total finance lease costs |
| $ | 5,390 |
|
| $ | 5,625 |
|
| $ | 16,385 |
|
| $ | 17,109 |
|
| $ | 4,632 |
|
| $ | 5,437 |
|
| $ | 9,452 |
|
| $ | 10,995 |
|
(1) | Includes approximately |
|
(2) | Includes approximately |
(3) | Approximately |
|
The following table represents the minimum cash lease payments included in the measurementrecorded as lease expense, interest expense and a reduction of lease liabilities, andas well as the non-cash addition of lease assets for the periods indicated.
11
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| Nine Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| September 30, |
|
| June 30, |
| ||||||||||
Other Information |
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Contractual cash payments included in the measurement of lease liabilities(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash outflows for operating leases |
| $ | 205,276 |
|
| $ 211,940 |
|
| $ | 133,621 |
|
| $ | 138,025 |
| |
Cash outflows for finance leases - operating activities |
| $ | 5,304 |
|
| $ | 5,756 |
|
| $ | 3,056 |
|
| $ | 3,579 |
|
Cash outflows for finance leases - financing activities |
| $ | 11,497 |
|
| $ 10,830 |
|
| $ | 7,373 |
|
| $ | 7,620 |
| |
Non-cash amount of leased assets obtained in exchange for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities - real estate |
| $ | 84,209 |
|
| $ | 53,526 |
| ||||||||
Operating lease liabilities - equipment |
| $ | 32 |
|
| $ | 668 |
| ||||||||
Operating lease liabilities |
| $ | 55,227 |
|
| $ | 60,844 |
| ||||||||
Finance lease liabilities |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| (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 |
|
As of SeptemberJune 30, 2020,2021, the Company had signed lease agreements with total noncancelablecontractual minimum lease payments of approximately $220,417$158,149 related to theatre leases that had not yet commenced. The timing of lease commencement is dependent on the completion of construction of the related theatre facility. Additionally, these amounts are 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 theatrestheatre leases which have not yet commenced are not included inexcluded from the right-of-use assets and lease liabilities as of SeptemberJune 30, 2020. There were 0 noncancelable lease agreements signed, but not yet commenced, related to equipment leases as of September 30, 2020. 2021.
5.Revenue Recognition10
CINEMARK USA, 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 recognizes 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. 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 prepaid 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 a 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 generally 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. These advances are recognized on either a straight-line basis over the term of the contracts or as the Company meets its performance obligations in accordance with the terms of the contracts.
Accounts receivable as of SeptemberJune 30, 20202021 and December 31, 20192020 included approximately $6,162$12,338 and $31,620$6,232 of receivables, respectively, 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 ninesix months ended SeptemberJune 30, 20202021 or SeptemberJune 30, 2019.2020.
Disaggregation of Revenue
The following tables present revenues for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, 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 |
|
| Six Months Ended |
| ||||||||||||||
| June 30, 2021 |
|
| June 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 | $ | 140,567 |
| $ | 12,912 |
| $ | 153,479 |
|
| $ | 189,054 |
| $ | 20,546 |
| $ | 209,600 |
|
Concession revenues |
| 99,357 |
|
| 10,457 |
|
| 109,814 |
|
|
| 132,398 |
|
| 16,904 |
|
| 149,302 |
|
Screen advertising, screen rental and promotional revenues (2) |
| 15,322 |
|
| 582 |
|
| 15,904 |
|
|
| 26,489 |
|
| 2,783 |
|
| 29,272 |
|
Other revenues |
| 14,015 |
|
| 1,440 |
|
| 15,455 |
|
|
| 18,409 |
|
| 2,430 |
|
| 20,839 |
|
Total revenues | $ | 269,261 |
| $ | 25,391 |
| $ | 294,652 |
|
| $ | 366,350 |
| $ | 42,663 |
| $ | 409,013 |
|
12
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
| June 30, 2020 |
|
| June 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 | $ | 37 |
| $ | — |
| $ | 37 |
|
| $ | 232,363 |
| $ | 60,136 |
| $ | 292,499 |
|
Concession revenues |
| 55 |
|
| 69 |
|
| 124 |
|
|
| 152,813 |
|
| 37,667 |
|
| 190,480 |
|
Screen advertising, screen rental and promotional revenues (2) |
| 7,883 |
|
| 478 |
|
| 8,361 |
|
|
| 26,092 |
|
| 12,924 |
|
| 39,016 |
|
Other revenues |
| 180 |
|
| 272 |
|
| 452 |
|
|
| 24,330 |
|
| 6,265 |
|
| 30,595 |
|
Total revenues | $ | 8,155 |
| $ | 819 |
| $ | 8,974 |
|
| $ | 435,598 |
| $ | 116,992 |
| $ | 552,590 |
|
11
CINEMARK USA, 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, 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 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
|
| June 30, 2021 |
|
| June 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 |
| $ | 249,427 |
| $ | 23,901 |
| $ | 273,328 |
|
| $ | 329,961 |
| $ | 38,213 |
| $ | 368,174 |
|
Goods and services transferred over time (2) |
|
| 19,834 |
|
| 1,490 |
|
| 21,324 |
|
|
| 36,389 |
|
| 4,450 |
|
| 40,839 |
|
Total |
| $ | 269,261 |
| $ | 25,391 |
| $ | 294,652 |
|
| $ | 366,350 |
| $ | 42,663 |
| $ | 409,013 |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||
| September 30, 2019 |
|
| September 30, 2019 |
| ||||||||||||||||
| U.S. |
| International |
|
|
|
|
| U.S. |
|
| International |
|
|
|
|
| ||||
| Operating |
| Operating |
|
|
|
|
| Operating |
|
| Operating |
|
|
|
|
| ||||
Major Goods/Services | Segment (1) |
| Segment |
| Consolidated |
|
| Segment (1) |
|
| Segment |
|
| Consolidated |
| ||||||
Admissions revenues | $ | 351,122 |
| $ | 103,307 |
| $ | 454,429 |
|
| $ | 1,066,884 |
|
| $ | 304,157 |
|
| $ | 1,371,041 |
|
Concession revenues |
| 230,415 |
|
| 59,062 |
|
| 289,477 |
|
|
| 704,727 |
|
|
| 181,356 |
|
|
| 886,083 |
|
Screen advertising, screen rental and promotional revenues |
| 21,114 |
|
| 16,448 |
|
| 37,562 |
|
|
| 63,996 |
|
|
| 49,587 |
|
|
| 113,583 |
|
Other revenues |
| 30,394 |
|
| 9,955 |
|
| 40,349 |
|
|
| 95,180 |
|
|
| 28,409 |
|
|
| 123,589 |
|
Total revenues | $ | 633,045 |
| $ | 188,772 |
| $ | 821,817 |
|
| $ | 1,930,787 |
|
| $ | 563,509 |
|
| $ | 2,494,296 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
|
| June 30, 2020 |
|
| June 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 |
| $ | 89 |
| $ | 77 |
| $ | 166 |
|
| $ | 401,531 |
| $ | 101,329 |
| $ | 502,860 |
|
Goods and services transferred over time (2) |
|
| 8,066 |
|
| 742 |
|
| 8,808 |
|
|
| 34,067 |
|
| 15,663 |
|
| 49,730 |
|
Total |
| $ | 8,155 |
| $ | 819 |
| $ | 8,974 |
|
| $ | 435,598 |
| $ | 116,992 |
| $ | 552,590 |
|
|
| 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 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||
|
| September 30, 2019 |
|
| September 30, 2019 |
| ||||||||||||||||
|
| 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 |
| $ | 610,063 |
| $ | 169,171 |
| $ | 779,234 |
|
| $ | 1,860,828 |
|
| $ | 504,702 |
|
| $ | 2,365,530 |
|
Goods and services transferred over time |
|
| 22,982 |
|
| 19,601 |
|
| 42,583 |
|
|
| 69,959 |
|
|
| 58,807 |
|
|
| 128,766 |
|
Total |
| $ | 633,045 |
| $ | 188,772 |
| $ | 821,817 |
|
| $ | 1,930,787 |
|
| $ | 563,509 |
|
| $ | 2,494,296 |
|
| (1) | U.S. segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 16 for additional information on intercompany eliminations. |
| (2) | Amount includes amortization of NCM screen advertising advances. See Deferred Revenues below. |
13
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Deferred Revenues
The following table presents changes in the Company’s NCM screen advertising advances and deferred revenues for the ninesix months ended SeptemberJune 30, 2020.2021.
|
| NCM screen advertising advances (1) |
|
| Other Deferred Revenues (2) |
|
| Total |
|
| NCM screen advertising advances (1) |
|
| Other Deferred Revenues (2) |
| |||||
Balance at January 1, 2020 |
| $ | 348,354 |
|
| $ | 138,426 |
|
| $ | 486,780 |
| ||||||||
Balance at January 1, 2021 |
| $ | 344,255 |
|
| $ | 138,830 |
| ||||||||||||
Amounts recognized as accounts receivable |
|
| — |
|
|
| 2,788 |
|
|
| 2,788 |
|
|
| — |
|
|
| 2,993 |
|
Cash received from customers in advance |
|
| — |
|
|
| 45,933 |
|
|
| 45,933 |
|
|
| — |
|
|
| 21,964 |
|
Common units received from NCM (see Note 9) |
|
| 3,620 |
|
|
| — |
|
|
| 3,620 |
| ||||||||
Common units received from NCM (see Note 8) |
|
| 10,237 |
|
|
| — |
| ||||||||||||
Interest accrued related to significant financing component |
|
| 17,726 |
|
|
| — |
|
|
| 17,726 |
|
|
| 11,797 |
|
|
| — |
|
Revenue recognized during period |
|
| (23,463 | ) |
|
| (44,714 | ) |
|
| (68,177 | ) |
|
| (15,927 | ) |
|
| (29,661 | ) |
Foreign currency translation adjustments |
|
| — |
|
|
| (2,022 | ) |
|
| (2,022 | ) |
|
| — |
|
|
| (56 | ) |
Balance at September 30, 2020 |
| $ | 346,237 |
|
| $ | 140,411 |
|
| $ | 486,648 |
| ||||||||
Balance at June 30, 2021 |
| $ | 350,362 |
|
| $ | 134,070 |
|
| (1) | See Note 8 for the maturity of balance as of |
| (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 balance sheet. |
The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of SeptemberJune 30, 20202021 and when the Company expects to recognize this revenue.
|
| Twelve Months Ended September 30, |
|
|
|
|
|
|
|
|
|
| Twelve Months Ended June 30, |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Remaining Performance Obligations |
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| Thereafter |
|
| Total |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
| ||||||||||||||
Other Deferred revenue |
| $ | 125,429 |
|
| $ | 14,936 |
|
| $ | 46 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 140,411 |
| ||||||||||||||||||||||||||||
Other deferred revenues |
| $ | 120,589 |
|
| $ | 13,481 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 134,070 |
|
6. | 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”). On March 25, 2020, the Company borrowed $98,800 under the revolving credit line of the Credit Agreement, which was repaid on September 30, 2020.
As of SeptemberJune 30, 2020,2021, there was $641,381$636,434 outstanding under the term loan and 0 borrowings were outstanding under the revolving credit line. As of SeptemberJune 30, 2020, approximately2021, $100,000 was available for borrowing under the revolving credit
12
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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. TheAs a result of the June 15, 2021 amendment to the Credit Agreement discussed below, the revolving credit line matures on November 28, 2022.
2024. The average interest rate applicable to outstanding term loan borrowings under the Credit Agreement at SeptemberJune 30, 20202021 was approximately 3.4 %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 which applies when amounts are outstanding under the revolving line of credit, 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)(i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, ii)(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 Cinemark Holdings, Inc.’s 4.50% Convertibleconvertible senior notes.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes by our parent company, Cinemark Holdings, Inc. that occurreddiscussed 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. The Company incurred debt issue costs of approximately $500 in connection with the extension of the revolving credit line, which are recorded as a reduction of long-term debt on August 21, 2020.the consolidated balance sheet. An additional $83 of related costs were expensed during the three and six months ended June 30, 2021.
8.750% Secured5.875% Senior Notes
On April 20, 2020,March 16, 2021, Cinemark USA, Inc. issued $250,000 8.750%$405,000 aggregate principal amount of 5.875% senior secured notes due 2026, at par value (the “8.750% Secured“5.875% Senior Notes”). The 8.750% SecuredProceeds, 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 will mature on May 1, 2025; provided, however, that if (i) on September 13, 2022, the aggregate outstanding principal amount(the “5.125% Senior Notes”) and to redeem any of the 5.125% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise
14
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
acquired, retired, cancelled or discharged exceeds $50,000,remained outstanding after the 8.750% Secured Notes will mature on September 14, 2022 and (ii) on February 27, 2023, the aggregate outstanding principal amounttender offer. See further discussion of the 4.875% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds $50,000, the 8.750% Secured Notes will mature on February 28, 2023.tender offer below. Interest on the 8.750% Secured5.875% Senior Notes will beis payable on May 1March 15 and November 1September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on November 1, 2020. 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 8.750% Secured5.875% Senior Notes will beare fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of the Company’sCinemark USA, Inc.’s subsidiaries that guarantee, assume or in any other manner become liable with respect to any of the Company’sCinemark USA, Inc.’s or its guarantors’ othera guarantor’s 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.
The 8.750% Secured5.875% Senior Notes and the guarantees will be the Company’sare 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 obligationssubordinated debt. The 5.875% Senior Notes and they will: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 8.750% Secured5.875% 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, governing the 8.750% Secured Notes, Cinemark USA, Inc.Company would be required to make an offer to repurchase the 8.750% Secured5.875% 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 8.750% Secured5.875% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies awe satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.
Additional BorrowingsPrior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of International Subsidiaries
During May 2020, the Company’s subsidiary in Peru borrowed5.875% Senior Notes at its option at 100% of the USD equivalent of approximately $2,811 underprincipal amount plus a loan that bears interest at approximately 1%. Principal payments are due monthly beginning in July 2021 through June 2023. Accruedmake-whole premium plus accrued and unpaid interest is to be paid when principal payments are due. The Company is subject to certain customary negative covenants under the loan.
During May, June and September 2020, the Company’s subsidiary in Colombia borrowed the USD equivalent of approximately $4,357 under three variable rate loans. Aggregate principal payments are due monthly beginning in December 2020 through September 2025. Accrued and unpaid interest is to be paid when principal payments are due. The variable interest rates on the loans ranged from approximately 7.0%5.875% Senior Notes to 9.0% asthe date of September 30, 2020. The Company is subjectredemption. 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 certain customary negative covenants and ratio covenants under the loans.
Interest Rate Swap Agreements
Effective March 31, 2020, the Company amended and extended its 3 existing interest rate swap agreements and entered into a fourth interest rate swap agreement, all of which are used15, 2023, Cinemark USA, Inc. may redeem up to hedge a portion40% of the interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualify for cash flow hedge accounting. Below is a summaryaggregate principal amount of the Company’s interest rate swap agreements designated as cash flow hedges as5.875% Senior Notes from the net proceeds of September 30, 2020:certain equity offerings at the redemption price set forth in the indenture.
1513
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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 six months ended June 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.
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 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.
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.
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
14
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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.
Additional Borrowings of International Subsidiaries
During the six months ended June 30, 2021, certain of the Company’s international subsidiaries borrowed an aggregate of $9,012 under various local bank loans. Below is a summary of these loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Estimated |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value at |
| |
Notional |
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| ||
Amount |
|
| Effective Date |
| Pay Rate |
|
| Receive Rate |
| Expiration Date |
| 2020 (1) |
| |||
$ | 137,500 |
|
| December 31, 2018 |
| 2.12% |
|
| 1-Month LIBOR |
| December 31, 2024 |
| $ | 10,719 |
| |
$ | 175,000 |
|
| December 31, 2018 |
| 2.12% |
|
| 1-Month LIBOR |
| December 31, 2024 |
|
| 13,647 |
| |
$ | 137,500 |
|
| December 31, 2018 |
| 2.19% |
|
| 1-Month LIBOR |
| December 31, 2024 |
|
| 11,192 |
| |
$ | 150,000 |
|
| March 31, 2020 |
| 0.57% |
|
| 1-Month LIBOR |
| March 31, 2022 |
|
| 926 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 36,484 |
|
|
| Loan Amounts |
|
|
|
|
|
|
|
|
| |
Loan Description |
| (in USD) |
|
| Interest Rates |
|
| Covenants |
| Maturity | ||
Peru bank loan |
| $ | 3,277 |
|
| 4.8% |
|
| Negative covenants |
| January 2024 | |
Brazil bank loan |
| $ | 5,735 |
|
| 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 six months ended June 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 June 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 June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Estimated |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value at |
| |
Notional |
|
|
|
|
|
|
|
|
|
|
|
| June 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 |
| $ | 7,236 |
| |
$ | 175,000 |
|
| December 31, 2018 |
| 2.12% |
|
| 1-Month LIBOR |
| December 31, 2024 |
|
| 9,215 |
| |
$ | 137,500 |
|
| December 31, 2018 |
| 2.19% |
|
| 1-Month LIBOR |
| December 31, 2024 |
|
| 7,592 |
| |
$ | 150,000 |
|
| March 31, 2020 |
| 0.57% |
|
| 1-Month LIBOR |
| March 31, 2022 |
|
| 507 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 24,550 |
|
(1) | Approximately |
Upon amending the interest rate swap agreements effective March 31,2020, the Company determined 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 $2,669$1,124 and $5,338$2,248 was recorded in amortization of accumulated losses for amended swapsinterest expense in the condensed consolidated income statement for the three and ninesix months ended SeptemberJune 30, 2020,2021, 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.
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”). The carrying value of the Company’s long-term debt, was $2,052,276 and $1,801,327 as of September 30, 2020 and December 31, 2019, respectively, excluding unamortized debt discounts and debt issue costs.costs, was $2,087,815 and $2,067,900 as of June 30, 2021 and December 31, 2020, respectively. The fair value of the Company’s long-term debt was $1,839,691$2,127,341 and $1,826,503$1,978,322 as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively.
1615
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
7. | Equity |
Below is a summary of changes in stockholders’ equity attributable to Cinemark USA, Inc., noncontrolling interests and total equity for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
|
| Class A Common Stock |
| Class B Common Stock |
| Treasury Stock |
| Additional Paid-In-Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| Total Cinemark USA, Inc. Stockholder's Equity |
| Noncontrolling Interests |
| Total Equity |
| |||||||||
Balance at January 1, 2021 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,310,625 |
| $ | (163,284 | ) | $ | (398,653 | ) | $ | 773,998 |
| $ | 10,996 |
| $ | 784,994 |
|
Share based awards compensation expense |
|
| — |
|
| — |
|
| — |
|
| 4,436 |
|
| — |
|
| — |
|
| 4,436 |
|
| — |
|
| 4,436 |
|
Contributions from parent |
|
| — |
|
| — |
|
| — |
|
| 120,000 |
|
|
|
|
| — |
|
| 120,000 |
|
| — |
|
| 120,000 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (202,908 | ) |
| — |
|
| (202,908 | ) |
| (602 | ) |
| (203,510 | ) |
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 |
|
| — |
|
| 49,543 |
|
| (24,233 | ) |
| 1,435,061 |
|
| (366,192 | ) |
| (401,290 | ) |
| 692,889 |
|
| 10,394 |
|
| 703,283 |
|
Share based awards compensation expense |
|
| — |
|
| — |
|
| — |
|
| 5,680 |
|
| — |
|
| — |
|
| 5,680 |
|
| — |
|
| 5,680 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (137,245 | ) |
| — |
|
| (137,245 | ) |
| 186 |
|
| (137,059 | ) |
Unrealized loss 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 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,440,741 |
| $ | (503,437 | ) | $ | (391,162 | ) | $ | 571,452 |
| $ | 10,580 |
| $ | 582,032 |
|
|
| Class A Common Stock |
| Class B Common Stock |
| Treasury Stock |
| Additional Paid-In-Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| Total Cinemark USA, Inc. Stockholder's Equity |
| Noncontrolling Interests |
| Total Equity |
|
| Class A Common Stock |
| Class B Common Stock |
| Treasury Stock |
| Additional Paid-In-Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| Total Cinemark USA, Inc. Stockholder's Equity |
| Noncontrolling Interests |
| Total Equity |
| ||||||||||||||||||
Balance at January 1, 2020 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,291,618 |
| $ | 484,883 |
| $ | (340,112 | ) | $ | 1,461,699 |
| $ | 12,508 |
| $ | 1,474,207 |
|
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,291,618 |
| $ | 484,883 |
| $ | (340,112 | ) | $ | 1,461,699 |
| $ | 12,508 |
| $ | 1,474,207 |
|
Share based awards compensation expense |
|
| — |
| — |
| — |
| 3,882 |
| — |
| — |
| 3,882 |
| — |
| 3,882 |
|
|
| — |
| — |
| — |
| 3,882 |
| — |
| — |
| 3,882 |
| — |
| 3,882 |
| ||||||||||||||||
Dividends paid to parent |
|
| — |
| — |
| — |
| — |
| (42,000 | ) |
| — |
| (42,000 | ) |
| — |
| (42,000 | ) |
|
| — |
| — |
| — |
| — |
| (42,000 | ) |
| — |
| (42,000 | ) |
| — |
| (42,000 | ) | ||||||||||||
Dividends paid to noncontrolling interests |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (392 | ) |
| (392 | ) |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (392 | ) |
| (392 | ) | ||||||||||||||
Net income (loss) |
|
| — |
| — |
| — |
| — |
| (59,270 | ) |
| — |
| (59,270 | ) |
| 169 |
| (59,101 | ) | ||||||||||||||||||||||||||||||||||
Net loss |
|
| — |
| — |
| — |
| — |
| (59,270 | ) |
| — |
| (59,270 | ) |
| 169 |
| (59,101 | ) | ||||||||||||||||||||||||||||||||||
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
| — |
| — |
| — |
| — |
| — |
| (24,171 | ) |
| (24,171 | ) |
|
|
| (24,171 | ) |
|
| — |
| — |
| — |
| — |
| — |
| (24,171 | ) |
| (24,171 | ) |
| — |
| (24,171 | ) | ||||||||||||
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (57,625 | ) |
| (57,625 | ) |
| — |
|
| (57,625 | ) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (57,625 | ) |
| (57,625 | ) |
| — |
|
| (57,625 | ) |
Balance at March 31, 2020 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,295,500 |
| $ | 383,613 |
| $ | (421,908 | ) | $ | 1,282,515 |
| $ | 12,285 |
| $ | 1,294,800 |
|
|
| — |
|
| 49,543 |
|
| (24,233 | ) |
| 1,295,500 |
|
| 383,613 |
|
| (421,908 | ) |
| 1,282,515 |
|
| 12,285 |
|
| 1,294,800 |
|
Share based awards compensation expense |
|
| — |
|
| — |
|
| — |
|
| 4,092 |
|
| — |
|
| — |
|
| 4,092 |
|
| — |
|
| 4,092 |
|
|
| — |
| — |
| — |
| 4,092 |
| — |
| — |
| 4,092 |
| — |
| 4,092 |
| ||||||||
Net loss |
|
| — |
| — |
| — |
| — |
| (169,951 | ) |
| — |
| (169,951 | ) |
| (427 | ) |
| (170,378 | ) |
|
| — |
| — |
| — |
| — |
| (169,951 | ) |
| — |
| (169,951 | ) |
| (427 | ) |
| (170,378 | ) | ||||||||||
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
| — |
| — |
| — |
| — |
| — |
| 849 |
| 849 |
| — |
| 849 |
| ||||||||||||||||||||||||||||||||||||
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 |
|
|
| — |
| — |
| — |
| — |
| — |
| 2,669 |
| 2,669 |
| — |
| 2,669 |
| ||||||||||||||||
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3,702 | ) |
| (3,702 | ) |
| — |
|
| (3,702 | ) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3,702 | ) |
| (3,702 | ) |
| — |
|
| (3,702 | ) |
Balance at June 30, 2020 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,299,593 |
| $ | 213,662 |
| $ | (422,092 | ) | $ | 1,116,473 |
| $ | 11,859 |
| $ | 1,128,332 |
|
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,299,593 |
| $ | 213,662 |
| $ | (422,092 | ) | $ | 1,116,473 |
| $ | 11,859 |
| $ | 1,128,332 |
|
Share based awards compensation expense |
|
| — |
|
| — |
|
| — |
|
| 4,198 |
|
| — |
|
| — |
|
| 4,198 |
|
| — |
|
| 4,198 |
| ||||||||||||||||||||||||||||
Net loss |
|
| — |
| — |
| — |
| — |
| (144,431 | ) |
| — |
| (144,431 | ) |
| (444 | ) |
| (144,875 | ) | |||||||||||||||||||||||||||||||||
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 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,303,791 |
| $ | 69,231 |
| $ | (414,398 | ) | $ | 983,934 |
| $ | 11,415 |
| $ | 995,349 |
|
1716
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| Class A Common Stock |
| Class B Common Stock |
| Treasury Stock |
| Additional Paid-In-Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| Total Cinemark USA, Inc. Stockholder's Equity |
| Noncontrolling Interests |
| Total Equity |
| |||||||||
Balance at January 1, 2019 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,277,921 |
| $ | 480,580 |
| $ | (319,007 | ) | $ | 1,464,804 |
| $ | 12,379 |
| $ | 1,477,183 |
|
Cumulative effect of change in accounting principle, net of taxes of $6,054 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 16,985 |
|
| — |
|
| 16,985 |
|
| — |
|
| 16,985 |
|
Share based awards compensation expense |
|
| — |
|
| — |
|
| — |
|
| 2,743 |
|
| — |
|
| — |
|
| 2,743 |
|
| — |
|
| 2,743 |
|
Dividends paid to parent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (39,575 | ) |
| — |
|
| (39,575 | ) |
| — |
|
| (39,575 | ) |
Dividends paid to noncontrolling interests |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,000 | ) |
| (1,000 | ) |
Net income |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 33,177 |
|
| — |
|
| 33,177 |
|
| 465 |
|
| 33,642 |
|
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3,311 | ) |
| (3,311 | ) |
| — |
|
| (3,311 | ) |
Other comprehensive loss in equity method investees |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (71 | ) |
| (71 | ) |
| — |
|
| (71 | ) |
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 755 |
|
| 755 |
|
| — |
|
| 755 |
|
Balance at March 31, 2019 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,280,664 |
| $ | 491,167 |
| $ | (321,634 | ) | $ | 1,475,507 |
| $ | 11,844 |
| $ | 1,487,351 |
|
Share based awards compensation expense |
|
| — |
|
| — |
|
| — |
|
| 3,447 |
|
| — |
|
| — |
|
| 3,447 |
|
| — |
|
| 3,447 |
|
Dividends paid to parent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (39,600 | ) |
| — |
|
| (39,600 | ) |
| — |
|
| (39,600 | ) |
Dividends paid to noncontrolling interests |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (294 | ) |
| (294 | ) |
Net income |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 101,544 |
|
| — |
|
| 101,544 |
|
| 890 |
|
| 102,434 |
|
Other comprehensive loss in equity method investees |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
|
| (22 | ) |
| (22 | ) |
| — |
|
| (22 | ) |
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (5,902 | ) |
| (5,902 | ) |
| — |
|
| (5,902 | ) |
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,925 |
|
| 4,925 |
|
| — |
|
| 4,925 |
|
Balance at June 30, 2019 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,284,111 |
| $ | 553,111 |
| $ | (322,633 | ) | $ | 1,539,899 |
| $ | 12,440 |
| $ | 1,552,339 |
|
Share based awards compensation expense |
|
| — |
|
| — |
|
| — |
|
| 3,609 |
|
| — |
|
| — |
|
| 3,609 |
|
| — |
|
| 3,609 |
|
Dividends paid to parent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (39,650 | ) |
| — |
|
| (39,650 | ) |
| — |
|
| (39,650 | ) |
Dividends paid to noncontrolling interests |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (294 | ) |
| (294 | ) |
Net income |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 31,796 |
|
| — |
|
| 31,796 |
|
| 602 |
|
| 32,398 |
|
Other comprehensive loss in equity method investees |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (49 | ) |
| (49 | ) |
| — |
|
| (49 | ) |
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,291 | ) |
| (1,291 | ) |
| — |
|
| (1,291 | ) |
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (25,408 | ) |
| (25,408 | ) |
|
|
|
| (25,408 | ) |
Balance at September 30, 2019 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,287,720 |
| $ | 545,257 |
| $ | (349,381 | ) | $ | 1,508,906 |
| $ | 12,748 |
| $ | 1,521,654 |
|
8. | Investment in National CineMedia LLC |
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 |
|
| 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, 2020 |
| $ | 265,792 |
| $ | (348,354 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Balance as of January 1, 2021 |
| $ | 151,962 |
| $ | (344,255 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Receipt of common units due to annual common unit adjustment ("CUA") |
|
| 3,620 |
| (3,620 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
|
| 10,237 |
| (10,237 | ) |
| — |
| — |
| — |
|
| — |
| — |
| |||||
Screen rental revenues earned under ESA (1) |
|
| — |
| — |
| — |
| — |
|
| (4,209 | ) |
| — |
|
| 4,209 |
|
|
| — |
| — |
| — |
| — |
| (3,790 | ) |
| — |
| 3,790 |
| ||||||||
Interest accrued related to significant financing component |
|
| — |
|
| (17,726 | ) |
| — |
| — |
| — |
|
| 17,726 |
|
| — |
|
|
| — |
| (11,797 | ) |
| — |
| — |
| — |
| 11,797 |
| — |
| |||||||
Receipt of excess cash distributions |
|
| (14,168 | ) |
| — |
|
| (6,975 | ) |
| — |
| — |
| — |
|
| 21,143 |
| ||||||||||||||||||||||||
Receipt under tax receivable agreement |
|
| (156 | ) |
| — |
| (77 | ) |
| — |
| — |
| — |
| 233 |
| ||||||||||||||||||||||||||
Equity in loss |
|
| (4,810 | ) |
| — |
| — |
|
| 4,810 |
|
| — |
| — |
| — |
|
|
| (14,414 | ) |
| — |
| — |
| 14,414 |
| — |
| — |
| — |
| ||||||||
Amortization of screen advertising advances |
|
| — |
|
| 23,463 |
|
| — |
|
| — |
|
| (23,463 | ) |
| — |
|
| — |
|
|
| — |
|
| 15,927 |
|
| — |
|
| — |
|
| (15,927 | ) |
| — |
|
| — |
|
Balance as of and for the nine months ended September 30, 2020 |
| $ | 250,434 |
| $ | (346,237 | ) | $ | (6,975 | ) | $ | 4,810 |
| $ | (27,672 | ) | $ | 17,726 |
| $ | 25,352 |
| ||||||||||||||||||||||
Balance as of and for the six months ended June 30, 2021 |
| $ | 147,629 |
| $ | (350,362 | ) | $ | (77 | ) | $ | 14,414 |
| $ | (19,717 | ) | $ | 11,797 |
| $ | 4,023 |
|
18
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
(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 |
Investment in National CineMedia
NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising to our theatres. TAs described in Note 5 to the Company’s financial statements as included in its 2019 Annual Report on Form 10-K, on February 13, 2007, National Cinemedia, Inc. (“NCMI”), an entity that serves as the sole manager of NCM, completed an initial public offering (“IPO”) of its common stock. In connection with the NCMI initial public offering, the Company amended its operating agreement and the ESA. At the time of the NCMI IPO and as a result of amending the ESA, the Company received approximately $174,000 in cash consideration from NCM. The proceeds were recorded as deferred revenue or NCM screen advertising advances and was being amortized over the term of the Amended and Restated ESA, or through February 2041. Following the NCMI IPO, thehe 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.
Common Unit Adjustments
In addition to the consideration received upon the NCMI IPO and ESA modification in 2007, theThe Company also periodically receives consideration in the form of common units from NCM. Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCMI and the Company, annualAnnual 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. As discussed in Note 5 to the Company’s financial statements as included in its 2019 Annual Report on Form 10-K, theThe common units received (collectively referred to as the Company’s “Tranche 2 Investment”) are recorded at estimated fair value as an increase in the Company’s investment in NCM with an offset to NCM screen advertising advances. The Company’s Tranche 2 Investment is accounted for following the equity method, with undistributed equity earnings related to its Tranche 2 Investment included as a component of earnings in equity in income of affiliates and distributions received related to its Tranche 2 Investment are recorded as a reduction of investment basis.
During March 2020,2021, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company received an additional 1,112,3682,311,482 common units of NCM, each of which is convertible into 1 share of NCMI 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 NCM screen advertising advances of approximately $3,620.advances. The fair value of the common units received was estimated based on the market price of 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.
17
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of SeptemberJune 30, 2020,2021, the Company owned a total of 40,850,06843,161,550 common units of NCM representing an ownership interest of approximately 25%26%. Each of the Company’s common units in NCM is convertible into 1 share of NCM, Inc. common stock. As of SeptemberJune 30, 2020,2021, the estimated fair value of the Company’s investment in NCM was approximately $111,112$218,829 based on NCM, Inc.’s stock price as of SeptemberJune 30, 20202021 of $2.72$5.07 per share (Level 1 input as defined in FASB ASC Topic 820), which was below the Company’s carrying value of $250,434. The market value of NCM, Inc.’s stock price may vary due to the performance of the business, industry trends, general and economic conditions and other factors, including those resulting from the impact of COVID-19 (see Note 2). The Company does not believe that the decline in NCM, Inc.’s stock price is other than temporaryas the Company and other industry participants, who are also members of the NCM network, have reopened some theatres and will continue to reopen theatres as local government restrictions allow. The Company expects the industry to recover gradually over time. Therefore, no impairment of the Company’s investment in NCM was recorded during the three and nine months ended September 30, 2020.
Exhibitor Services Agreement
As discussed above, the Company’s domestic theatres are part of 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 receives a monthly theatre access fee for participation in the
19
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
NCM network and also earns screen advertising revenue on a per patron basis. The screen advertising revenues 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. SubsequentSince the agreement was amended, the Company was required to evaluate the amendment, the ESA is accounted for as a leaserevised contract under ASC Topic 842.842, Leases, and as a result, determined that the ESA 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 screenlease 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 condensed consolidated income statement.
The recognition of revenue related to the NCM screen advertising advances will beare recorded on a straight-line basis through February 2041.
|
| Twelve Months Ended September 30, |
|
|
|
|
|
|
|
|
|
| Twelve Months Ended June 30, |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Remaining Maturity |
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| Thereafter |
|
| Total |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
| ||||||||||||||
NCM screen advertising advances |
| $ | 8,131 |
|
| $ | 8,693 |
|
| $ | 9,295 |
|
| $ | 9,940 |
|
| $ | 10,630 |
|
| $ | 299,548 |
|
| $ | 346,237 |
|
| $ | 8,819 |
|
| $ | 9,428 |
|
| $ | 10,081 |
|
| $ | 10,780 |
|
| $ | 11,528 |
|
| $ | 299,726 |
|
| $ | 350,362 |
|
(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
PriorIn 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 September 17, 2019 amendment ofconsideration received upon the ESA modification during 2007, the Company applied a significant financing component, as required by ASC Topic 606, duealso 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 newly 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 ASC Topic 606. As a result of the significant financing component, the Company recognized incremental screen advertising advances (the $174,000rental revenue and interest expense of $15,927 and $11,797, respectively, during the six months ended June 30, 2021 and incremental screen rental revenue and interest expense of $15,612 and $11,825, respectively, during the six months ended June 30, 2020. The interest expense was calculated using the Company’s incremental borrowing rates at the time when the cash was received atfrom the NCMI IPO and the periodiceach tranche of common unit adjustments) and completion of the performance obligation. units was received from NCM, which 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 amended 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 agreement represents a financing arrangement. As a result of the significant financing component, the Company recognized incremental screen rental revenue and an offsetting interest expense of $23,463 and $17,726, respectively, during the nine months ended September 30, 2020. The interest 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, which ranged from 4.4% to 8.3%.
NCM Financial Information
Below is summary financial information for NCM for the periods indicated:
|
| Three Months Ended |
|
| Three Months ended |
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||
|
| September 24, 2020 |
|
| September 26, 2019 |
|
| September 24, 2020 |
|
| September 26, 2019 |
| ||||
Gross revenues |
| $ | 6,000 |
|
| $ | 110,513 |
|
| $ | 74,700 |
|
| $ | 297,613 |
|
Operating income (loss) |
| $ | (20,073 | ) |
| $ | 39,349 |
|
| $ | (38,973 | ) |
| $ | 87,949 |
|
Net income (loss) |
| $ | (34,950 | ) |
| $ | 25,307 |
|
| $ | (81,350 | ) |
| $ | 45,907 |
|
|
| As of |
|
| As of |
| ||
|
| September 24, 2020 |
|
| December 26, 2019 |
| ||
Current assets |
| $ | 170,749 |
|
| $ | 185,400 |
|
Noncurrent assets |
| $ | 693,018 |
|
| $ | 706,600 |
|
Current liabilities |
| $ | 47,153 |
|
| $ | 125,500 |
|
Noncurrent liabilities |
| $ | 1,073,742 |
|
| $ | 947,800 |
|
Members deficit |
| $ | (257,128 | ) |
| $ | (181,300 | ) |
2018
CINEMARK USA, 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 periods indicated:
|
| Three Months Ended |
|
| Three Months ended |
|
| Six Months Ended |
|
| Six Months Ended |
| ||||
|
| July 1, 2021 |
|
| June 25, 2020 |
|
| July 1, 2021 |
|
| June 25, 2020 |
| ||||
Gross revenues |
| $ | 13,958 |
|
| $ | 4,000 |
|
| $ | 19,403 |
|
| $ | 68,700 |
|
Operating income (loss) |
| $ | (29,699 | ) |
| $ | (23,800 | ) |
| $ | (57,938 | ) |
| $ | (18,900 | ) |
Net loss |
| $ | (46,867 | ) |
| $ | (37,800 | ) |
| $ | (90,364 | ) |
| $ | (46,400 | ) |
|
| As of |
|
| As of |
| ||
|
| July 1, 2021 |
|
| December 31, 2020 |
| ||
Current assets |
| $ | 114,665 |
|
| $ | 142,566 |
|
Noncurrent assets |
| $ | 674,769 |
|
| $ | 685,643 |
|
Current liabilities |
| $ | 40,546 |
|
| $ | 46,872 |
|
Noncurrent liabilities |
| $ | 1,115,424 |
|
| $ | 1,072,207 |
|
Members deficit |
| $ | (366,536 | ) |
| $ | (290,870 | ) |
9. | Other Investments |
Below is a summary of activity for each of the Company’s other investments for the nine months ended September 30, 2020:
|
| DCIP |
| AC JV, LLC |
| DCDC |
| FE Concepts |
| Other |
| Total |
| ||||||
Balance at January 1, 2020 |
| $ | 124,696 |
| $ | 5,022 |
| $ | 3,169 |
| $ | 19,519 |
| $ | 2,879 |
| $ | 155,285 |
|
Cash distributions received |
|
| (10,383 | ) |
| 0 |
|
| (878 | ) |
| 0 |
|
| 0 |
|
| (11,261 | ) |
Equity loss |
|
| (20,083 | ) |
| (618 | ) |
| (1,197 | ) |
| (1,003 | ) |
| 0 |
|
| (22,901 | ) |
Other |
|
| 50 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| (2,584 | ) |
| (2,534 | ) |
Balance at September 30, 2020 |
| $ | 94,280 |
| $ | 4,404 |
| $ | 1,094 |
| $ | 18,516 |
| $ | 295 |
| $ | 118,589 |
|
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 June 30, 2021, the Company had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. The Company accounts for its investment in DCIP and its subsidiaries under the equity method of accounting. On March 10, 2010, DCIP and its subsidiaries completed an initial financing transaction to enable the purchase, deployment and leasing of digital projection systems to 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 digital 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 late 2021. The timing of cost recoupment is dependent on VPF payments from studios. Pursuant to the operating agreement between the Exhibitors and DCIP, DCIP began to distribute excess cash to the Exhibitors upon the payoff of its outstanding debt, which occurred during the year ended December 31, 2019.
As of September 30,Effective November 1, 2020, the Company hadamended 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 33% voting interestdistribution 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 and a 24.3% economic interestat the time of the distribution, the investment in DCIP.DCIP was reduced to zero at the time of the distribution. The Company accounts fordoes not recognize undistributed equity in the earnings or loss of its investment in DCIP and its subsidiaries underuntil such time that future net earnings, less distributions received, surpass the equity methodamount of accounting.
the excess distribution.
Below is summary financial information for DCIP for the periods indicated:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||||||
Gross revenues |
| $ | 1,084 |
|
| $ | 40,200 |
|
| $ | 20,809 |
|
| $ | 125,869 |
|
| $ | 14,098 |
|
| $ | 23 |
|
| $ | 19,722 |
|
| $ | 32,533 |
|
Operating income (loss) |
| $ | (29,878 | ) |
| $ | 22,617 |
|
| $ | (72,422 | ) |
| $ | 73,396 |
|
| $ | 19,461 |
|
| $ | (37,305 | ) |
| $ | 23,441 |
|
| $ | (42,544 | ) |
Net income (loss) |
| $ | (30,554 | ) |
| $ | 22,362 |
|
| $ | (79,660 | ) |
| $ | 69,323 |
|
| $ | 20,056 |
|
| $ | (37,966 | ) |
| $ | 23,957 |
|
| $ | (49,106 | ) |
|
| As of |
| |||||
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Current assets |
| $ | 28,299 |
|
| $ | 51,382 |
|
Noncurrent assets |
| $ | 461,276 |
|
| $ | 581,547 |
|
Current liabilities |
| $ | 58,375 |
|
| $ | 70,515 |
|
Noncurrent liabilities |
| $ | 710 |
|
| $ | 190 |
|
Members' equity |
| $ | 430,490 |
|
| $ | 562,224 |
|
2119
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of September 30, 2020, the Company had 3,812 digital projection systems being leased under the master equipment lease agreement with Kasima LLC, which is an indirect subsidiary of DCIP and a related party to the Company.
|
| As of |
| |||||
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
Current assets |
| $ | 39,792 |
|
| $ | 36,372 |
|
Noncurrent assets |
| $ | 139 |
|
| $ | 205 |
|
Current liabilities |
| $ | 13,426 |
|
| $ | 39,844 |
|
Noncurrent liabilities |
| $ | 355 |
|
| $ | 687 |
|
Members' equity |
| $ | 26,150 |
|
| $ | (3,954 | ) |
The Company had the following transactions with DCIP, reflected in utilities and other costs on the condensed consolidated statements of income, during the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||||||
Equipment lease payments (1) |
| $ | 346 |
|
| $ | 1,105 |
|
| $ | 1,384 |
|
| $ | 3,357 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1,038 |
|
Warranty reimbursements from DCIP |
| $ | — |
|
| $ | (2,953 | ) |
| $ | (3,123 | ) |
| $ | (8,842 | ) |
| $ | (434 | ) |
| $ | — |
|
| $ | (700 | ) |
| $ | (3,123 | ) |
Management service fees |
| $ | — |
|
| $ | 128 |
|
| $ | 84 |
|
| $ | 438 |
|
| $ | 4 |
|
| $ | — |
|
| $ | 15 |
|
| $ | 84 |
|
| (1) |
|
|
AC JV, LLCOther Investment Activity
During December 2013,Below is a summary of activity for each of the Company, Regal, AMC (the “AC Founding Members”) and NCM entered into a series of agreements that resulted in the formation of AC JV, LLC (“AC”), a joint venture that owns “Fathom Events” formerly operated by NCM. The Fathom Events business focuses on the marketing and distribution of live and pre-recorded entertainment programming to various theatre operators, including concerts, opera and symphony, DVD product releases and marketing events, theatrical premieres, Broadway plays, live sporting events andCompany’s other special events. The Company paid event fees to AC of $2,258 and $10,332investments for the ninesix months ended SeptemberJune 30, 2020 and 2019, respectively, which are included in film rentals and advertising costs on the condensed consolidated statements of income. The Company accounts for its investment in AC under the equity method of accounting.2021:
Digital Cinema Distribution Coalition
|
| 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) |
|
| (938 | ) |
| 46 |
|
| 391 |
|
| 0 |
|
| (501 | ) |
Other |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 404 |
|
| 404 |
|
Balance at June 30, 2021 |
| $ | 2,807 |
| $ | 1,301 |
| $ | 18,664 |
| $ | 857 |
| $ | 23,629 |
|
Digital Cinema Distribution Coalition (“DCDC”)Below is a joint venture amongsummary of transactions with each of 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 $208 and $703 to DCDC duringCompany’s other investees for the ninesix months ended SeptemberJune 30, 2020 and 2019, respectively, related to content delivery services provided by DCDC. These fees are included in film rentals and advertising costs on the condensed consolidated statements of income. The Company accounts for its investment in DCDC under the equity method of accounting.2021:
|
|
| Six Months Ended |
| |||||
Investee | Transactions |
| June 30, 2021 |
|
| June 30, 2020 |
| ||
AC JV, LLC | Event fees paid (1) |
| $ | 587 |
|
| $ | 2,258 |
|
DCDC | Content delivery fees paid (1) |
| $ | 211 |
|
| $ | 208 |
|
FE Concepts | Theatre service fees received (2) |
| $ | (31 | ) |
| $ | (10 | ) |
(1) | Included in film rentals and advertising costs on the condensed consolidated statements of income. |
(2) | Included in other revenues on the condensed consolidated statements of income. |
FE Concepts, LLC
During April 2018, the Company, through its wholly-owned indirect subsidiary CNMK Texas Properties, LLC (“CNMK”), formed a joint venture, FE Concepts, LLC (“FE Concepts”) with AWSR Investments, LLC (“AWSR”), an entity owned by Lee Roy Mitchell and Tandy Mitchell. FE Concepts operates a family entertainment center that offers bowling, gaming, movies and other amenities that opened during December 2019. The Company and AWSR each invested approximately $20,000 and each have a 50% voting interest in FE Concepts. The Company accounts for its investment in FE Concepts under the equity method of accounting. The Company has a theatre services agreement with FE Concepts under which it provides film booking and equipment monitoring services. The Company recorded $3 and $19 of theatre services revenue under the agreement during the three and nine months ended September 30, 2020, respectively.
Additional Considerations
Each of the investments above have been adversely impacted by the COVID-19 pandemic (see Note 2) due to the temporary closure of theatres across the U.S. The Company does not believe that any resulting decline in value of the underlying investments is other than temporary as the Company and other industry participants, who also have equity ownership interests in certain of the above investments, have reopened some theatres and will continue to reopen theatres as local government restrictions allow. The Company expects the industry to recover gradually over time.
2220
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
10. | Share Based Awards |
Restricted Stock – During the ninesix months ended SeptemberJune 30, 2020,2021, Cinemark Holdings, Inc. granted 1,045,8851,050,348 shares of restricted stock to its directors and employees of the Company. The fair value of the restricted stock granted was determined based on the market valueclosing price of Cinemark Holdings, Inc.’s common stock on the dates ofday preceding the grant date, which ranged from $8.39$21.01 to $32.12$23.98 per share. The Company assumed forfeiture rates for the restricted stock awards that ranged from 0% to 10%. TheCertain of the restricted stock awards vested immediately on the grant date while others vest over periods ranging from one to four years. 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.
Below is a summary of restricted stock activity for the ninesix months ended SeptemberJune 30, 2020:2021:
|
| Shares of |
|
| Weighted Average |
|
| Shares of |
|
| Weighted Average |
| ||||
|
| Restricted |
|
| Grant Date |
|
| Restricted |
|
| Grant Date |
| ||||
|
| Stock |
|
| Fair Value |
|
| Stock |
|
| Fair Value |
| ||||
Outstanding at January 1, 2020 |
|
| 783,823 |
|
| $ | 37.53 |
| ||||||||
Outstanding at January 1, 2021 |
|
| 1,431,975 |
|
| $ | 21.11 |
| ||||||||
Granted |
|
| 1,045,885 |
|
| $ | 18.35 |
|
|
| 1,050,348 |
|
| $ | 21.38 |
|
Vested |
|
| (326,281 | ) |
| $ | 35.63 |
|
|
| (115,072 | ) |
| $ | 23.81 |
|
Forfeited |
|
| (56,133 | ) |
| $ | 33.63 |
|
|
| (41,482 | ) |
| $ | 18.19 |
|
Outstanding at September 30, 2020 |
|
| 1,447,294 |
|
| $ | 24.25 |
| ||||||||
Unvested restricted stock at September 30, 2020 |
|
| 1,447,294 |
|
| $ | 24.25 |
| ||||||||
Outstanding at June 30, 2021 |
|
| 2,325,769 |
|
| $ | 21.15 |
| ||||||||
Unvested restricted stock at June 30, 2021 |
|
| 2,325,769 |
|
| $ | 21.15 |
|
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Compensation expense recognized by the Company during the period |
| $ | 7,548 |
|
| $ | 6,769 |
|
| $ | 8,487 |
|
| $ | 4,945 |
|
Additional compensation expense recognized by Cinemark Holdings, Inc. during the period |
| $ | 687 |
|
| $ | 687 |
|
| $ | 459 |
|
| $ | 458 |
|
Fair value of restricted shares held by Company employees that vested during the period |
| $ | 8,567 |
|
| $ | 6,650 |
|
| $ | 1,148 |
|
| $ | 8,323 |
|
Fair value of restricted shares held by Cinemark Holdings, Inc.’s directors that vested during the period |
| $ | 377 |
|
| $ | 980 |
|
| $ | 1,329 |
|
| $ | 377 |
|
Income tax benefit recognized upon vesting of restricted stock awards held by Company employees |
| $ | 2,533 |
|
| $ | 1,228 |
| ||||||||
Income tax benefit (cost) recognized upon vesting of restricted stock awards held by Company employees |
| $ | (224 | ) |
| $ | 2,474 |
| ||||||||
Additional income tax benefit recognized upon vesting of restricted stock awards held by Cinemark Holdings, Inc.'s directors |
| $ | 145 |
|
| $ | 245 |
|
| $ | 279 |
|
| $ | 146 |
|
As of SeptemberJune 30, 2020,2021, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $22,858,$32,908, of which $22,208$32,029 will be recognized by the Company and $650$880 will be recognized by Cinemark Holdings, Inc. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.
Impact of 2020 Restructuring Plan - As part of the Company’s employee-related restructuring actions discussed in Note 2, the vesting period for certain share based awards will be accelerated on a pro-rata basis based upon the grant dates and each employee’s separation date. The Company considers the accelerated vest of these awards to be a modification under ASC Topic 718 Stock Compensation. Based on the terms of the severance agreements, the Company estimated the number of awards expected to vest at each employee’s expected separation date and revalued such awards based on the modification date, or the date on which employees were notified of the 2020 Restructuring Plan. The modification date fair value per share was $15.95. The Company recorded incremental compensation expense of approximately $521 related to these modifications, which is reflected in restructuring costs on the Company’s condensed consolidated income statement.
Restricted Stock Units – During the nine months ended September 30, 2020, Cinemark Holdings, Inc. granteddid not grant any restricted stock units representing 436,681 hypothetical shares of common stock to employees of the Company. 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, 2021six months ended June 30, 2021.
2321
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
based on a formula utilizing a multiple of Adjusted EBITDA subject to certain adjustments as specified byDuring the six months ended June 30, 2021, 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 6%, which is the threshold, one-third of the maximum restricted stock units vest. If the IRR for the two-year period is at least 8%, which is the target, two-thirds of the maximum restricted stock units vest. If the IRR for the two-year period is at least 14%, 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 2020 will vest subject to an additional two-year service requirement and will be paid in the form of Cinemark Holdings, Inc.’s common stock ifBoard of Directors evaluated the participant continues to provide services through the fourth anniversaryimpact of the grant date. Restricted stock unit award participants are eligible to receive dividend equivalent payments fromCOVID-19 pandemic on the grant date if, and atperformance metric used for 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 February 2019 and February 2020 and determined that the nine months ended September 30, 2020at eachCOVID-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 three target levels of financial performance (excluding forfeiture assumptions):
|
| Number of |
|
|
|
|
| |
|
| Shares |
|
| Value at |
| ||
|
| Vesting |
|
| Grant |
| ||
at IRR of at least 6% |
|
| 190,707 |
|
| $ | 6,125 |
|
at IRR of at least 8% |
|
| 286,060 |
|
| $ | 9,188 |
|
at IRR of at least 14% |
|
| 436,681 |
|
| $ | 14,026 |
|
Due to the fact that the IRR for the two-year performance period could not be determined at the time of the2019 and 2020 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 awards was determinedat target based onupon the closing priceunforeseen, external circumstances beyond management’s control, the projected macroeconomic conditions through 2021 and beyond, and the uncertain timing as to the recovery of Cinemark Holdings, Inc.’s common stock on the date of grant, which was $32.12 per share. The Company assumed a forfeiture rate of 5% for the restricted stock unit awards. If during the service period, additional information becomes available to lead the Company to believe a different IRR level will be achieved for the two-year performance period, the Company will reassess the number of units that are expected to vest for the grant and adjust its compensation expense accordingly on a prospective basis over the remaining service period.Company’s industry.
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Number of restricted stock unit awards that vested during the period |
|
| 120,293 |
|
|
| 88,074 |
|
|
| 15,230 |
|
|
| 117,500 |
|
Fair value of restricted stock unit awards that vested during the period |
| $ | 3,669 |
|
| $ | 3,550 |
|
| $ | 314 |
|
| $ | 3,634 |
|
Accumulated dividends paid upon vesting of restricted stock unit awards |
| $ | 576 |
|
| $ | 375 |
|
| $ | 62 |
|
| $ | 563 |
|
Compensation expense recognized during the period |
| $ | 4,624 |
|
| $ | 3,030 |
|
| $ | 1,629 |
|
| $ | 3,029 |
|
Income tax benefit recognized upon vesting of restricted stock unit awards |
| $ | 215 |
|
| $ | 175 |
| ||||||||
Income tax benefit (cost) related to stock unit awards |
| $ | (306 | ) |
| $ | 526 |
|
As of SeptemberJune 30, 2020,2021, the estimated remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $13,559.$8,388. The weighted average period over which this remaining compensation expense will be recognized is approximately two2 years. As of SeptemberJune 30, 2020,2021, the Company had restricted stock units outstanding that represented a total of 978,591561,041 hypothetical shares of common stock, net of forfeitures, assuming an IRR of 9.3% was achievedreflecting actual certified performance levels for the 2017 grants, an IRR of 8.6% was achieved for the 2018 grants and the maximum IRR level is achieved for all other grants outstanding.
11. | Goodwill and Other Intangible Assets |
A summary of the Company’s goodwill is as follows:
|
| 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 |
|
| — |
|
|
| 1,310 |
|
|
| 1,310 |
|
Balance at June 30, 2021 (1) |
| $ | 1,182,853 |
|
| $ | 72,297 |
|
| $ | 1,255,150 |
|
24
(1) | Balances are presented net of accumulated impairment losses of $214,031 for the U.S. operating segment and $43,750 for the international operating segment. See discussion of the qualitative impairment analysis performed by the Company as of June 30, 2021 at Note 12. |
A summary of the Company’s intangible assets is as follows:
|
| Balance at January 1, 2021 |
| Amortization |
| Other (1) |
| Balance at June 30, 2021 |
| ||||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount |
| $ | 82,432 |
| $ | — |
| $ | 117 |
| $ | 82,549 |
|
Accumulated amortization |
|
| (68,416 | ) |
| (1,326 | ) |
| 0 |
|
| (69,742 | ) |
Total net intangible assets with finite lives |
| $ | 14,016 |
| $ | (1,326 | ) | $ | 117 |
| $ | 12,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradename and other |
|
| 300,179 |
|
| — |
|
| 0 |
|
| 300,179 |
|
Total intangible assets, net |
| $ | 314,195 |
| $ | (1,326 | ) | $ | 117 |
| $ | 312,986 |
|
(1) | Amount represents foreign currency translation adjustments. |
22
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Total |
| |||
Balance at January 1, 2020 (1) |
| $ | 1,182,853 |
|
| $ | 100,518 |
|
| $ | 1,283,371 |
|
Impairment |
|
| — |
|
|
| (16,128 | ) |
|
| (16,128 | ) |
Foreign currency translation adjustments |
|
| — |
|
|
| (17,816 | ) |
|
| (17,816 | ) |
Balance at September 30, 2020 |
| $ | 1,182,853 |
|
| $ | 66,574 |
|
| $ | 1,249,427 |
|
|
|
|
|
A summary of the Company’s intangible assets is as follows:
|
| Balance at January 1, 2020 |
| Amortization |
| Other (1) |
| Balance at September 30, 2020 |
| ||||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount |
| $ | 85,007 |
| $ | — |
| $ | (2,018 | ) | $ | 82,989 |
|
Accumulated amortization |
|
| (63,924 | ) |
| (3,569 | ) |
| 0 |
|
| (67,493 | ) |
Total net intangible assets with finite lives |
| $ | 21,083 |
| $ | (3,569 | ) | $ | (2,018 | ) | $ | 15,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradename and other |
|
| 300,686 |
|
| — |
|
| (613 | ) |
| 300,073 |
|
Total intangible assets — net |
| $ | 321,769 |
| $ | (3,569 | ) | $ | (2,631 | ) | $ | 315,569 |
|
|
|
The estimated aggregate future amortization expense for intangible assets is as follows:
For the three months ended December 31, 2020 |
| $ | 1,373 |
| ||||
For the twelve months ended December 31, 2021 |
|
| 2,765 |
| ||||
For the six months ended December 31, 2021 |
| $ | 1,377 |
| ||||
For the twelve months ended December 31, 2022 |
|
| 2,612 |
|
|
| 2,581 |
|
For the twelve months ended December 31, 2023 |
|
| 2,514 |
|
|
| 2,485 |
|
For the twelve months ended December 31, 2024 |
|
| 2,514 |
|
|
| 2,485 |
|
For the twelve months ended December 31, 2025 |
|
| 2,363 |
| ||||
Thereafter |
|
| 3,718 |
|
|
| 1,516 |
|
Total |
| $ | 15,496 |
|
| $ | 12,807 |
|
25
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
12. | Impairment of Long-Lived Assets |
Due toThe Company performed a qualitative impairment analysis on its long-lived assets as of March 31, 2021 and June 30, 2021. The Company’s qualitative analyses considered economic and market conditions, industry trading multiples and the temporary closureimpact of recent industry developments and events on the estimated fair values as determined during its most recent quantitative assessments performed as of December 31, 2020. The Company’s consideration of economic and market conditions included the status of the COVID-10 pandemic and its impact on the Company’s theatres effective March 18, 2020recovery as well as future film release schedules. As a result of the COVID-19 pandemic (see Note 2), the Company performedqualitative assessment, no impairment of long-lived asset impairment evaluations during each quarterassets was recorded during the ninethree and six months ended SeptemberJune 30, 2020. The following table is a summary of the evaluations performed by asset classification.
|
|
|
| ||||
|
|
|
| ||||
|
|
|
|
| |||
|
|
| |||||
|
|
| |||||
|
|
|
|
| |||
|
|
| |||||
|
|
| |||||
|
|
|
|
| |||
|
|
| |||||
|
|
|
|
|
Goodwill –2021. The Company evaluates goodwillwill continue to evaluate actual theatre performance, economic and market conditions, industry trading multiples and industry projections during the remainder of 2021 for potential impairment as follows:exposure.
|
|
|
|
Tradename Intangible assets – The Company evaluates tradename intangible assets for impairment as follows:
|
|
|
|
Other Long-lived Assets– The Company evaluates other long-lived assets for impairment as follows:
26
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
|
|
The following table is a summary of the impairment recorded as a result of the evaluations discussed aboveperformed during the three and ninesix months ended SeptemberJune 30, 2020:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Six Months Ended |
| |||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
| |||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
| |||||
U.S. Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatre properties |
| $ | 2,075 |
|
| $ | 24,502 |
|
| $ | 5,718 |
|
| $ | 26,754 |
|
| $ | 3,643 |
|
Theatre operating lease right-of-use assets |
|
| 1,123 |
|
|
| 2,157 |
|
|
| 7,075 |
|
|
| 10,204 |
|
|
| 5,952 |
|
Cost method investment |
|
| 2,500 |
|
|
| — |
|
|
| 2,500 |
|
|
| — |
| ||||
U.S. total |
|
| 5,698 |
|
|
| 26,659 |
|
|
| 15,293 |
|
|
| 36,958 |
|
|
| 9,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatre properties |
|
| 938 |
|
|
| 645 |
|
|
| 5,422 |
|
|
| 6,796 |
|
|
| 4,484 |
|
Theatre operating lease right-of-use assets |
|
| 1,654 |
|
|
| — |
|
|
| 4,194 |
|
|
| 1,628 |
|
|
| 2,540 |
|
Goodwill |
|
| 16,128 |
|
|
| — |
|
|
| 16,128 |
|
|
| — |
| ||||
Intangible assets |
|
| 177 |
|
|
| — |
|
|
| 177 |
|
|
| — |
| ||||
International total |
|
| 18,897 |
|
|
| 645 |
|
|
| 25,921 |
|
|
| 8,424 |
|
|
| 7,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impairment |
| $ | 24,595 |
|
| $ | 27,304 |
|
| $ | 41,214 |
|
| $ | 45,382 |
|
| $ | 16,619 |
|
13. | Fair Value Measurements |
The Company determines fair value measurements in accordance with ASC Topic 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.
Below is a summary of liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of SeptemberJune 30, 20202021 and December 31, 2019:2020:
23
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
|
| Carrying |
|
| Fair Value Hierarchy |
|
|
|
| Carrying |
|
| Fair Value Hierarchy |
| ||||||||||||||||||||
Description |
| As of, |
| Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| As of, |
| Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
Interest rate swap liabilities (1) |
| September 30, 2020 |
| $ | 36,484 |
|
| $ | — |
|
| $ | 36,484 |
|
| $ | — |
|
| June 30, 2021 |
| $ | 24,550 |
|
| $ | — |
|
| $ | 24,550 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap liabilities (1) |
| December 31, 2019 |
| $ | 15,995 |
|
| $ | — |
|
| $ | 15,995 |
|
| $ | — |
|
| December 31, 2020 |
| $ | 33,847 |
|
| $ | — |
|
| $ | 33,847 |
|
| $ | — |
|
| (1) | See further discussion of interest rate swaps at Note 6. |
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 1211 and Note 13)12). See additional explanation of fair value measurement
27
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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, 2019,2020, filed February 21, 2020.March 3, 2021. There were no changes in valuation techniques. The Company elected to perform its goodwill impairment evaluation using both the market approach and the income approach for the ninesix months ended SeptemberJune 30, 2020.2021. There were 0 transfers in to or out of Level 1, Level 2 or Level 3 during the ninesix months ended SeptemberJune 30, 2020. 2021.
14. | Foreign Currency Translation |
The accumulated other comprehensive loss account in stockholders’ equity of $414,398$391,162 and $340,112$398,653 as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively, primarily includes cumulative foreign currency net losses of $390,881$376,850 and $328,053,$375,644, respectively, from translating the financial statements of the Company’s international subsidiaries and the cumulative changes in fair value of the Company’s interest rate swap agreements that are designated as hedges.
As of SeptemberJune 30, 2020,2021, 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. 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. The financial information of the Company’s Argentina subsidiaries has beenwas remeasured in U.S. dollars in accordance with ASC Topic 830, Foreign Currency Matters, effective beginning July 1, 2018.
Below is a summary of the impact of translating the SeptemberJune 30, 20202021 and 20192020 financial statements of the Company’s international subsidiaries:
|
|
|
|
|
|
|
|
|
| Other Comprehensive Loss for |
| ||||
|
| Exchange Rate as of |
|
| Six Months Ended |
| |||||||||
Country |
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2021 |
| June 30, 2020 |
| ||||
Brazil |
|
| 4.97 |
|
|
| 5.20 |
|
| $ | 2,766 |
| $ | (49,478 | ) |
Chile |
|
| 729.44 |
|
|
| 714.14 |
|
|
| (1,401 | ) |
| (8,233 | ) |
Colombia |
|
| 3,756.67 |
|
|
| 3,432.50 |
|
|
| (134 | ) |
| (2,523 | ) |
Peru |
|
| 3.90 |
|
|
| 3.65 |
|
|
| (1,959 | ) |
| (2,480 | ) |
All other |
|
|
|
|
|
|
|
|
|
| (478 | ) |
| 1,387 |
|
|
|
|
|
|
|
|
|
|
| $ | (1,206 | ) | $ | (61,327 | ) |
24
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
|
|
|
|
|
|
|
| Other Comprehensive Income (Loss) for |
| ||||
|
| Exchange Rate as of |
|
| Nine Months Ended |
| |||||||||
Country |
| September 30, 2020 |
|
| December 31, 2019 |
|
| September 30, 2020 |
| September 30, 2019 |
| ||||
Brazil |
|
| 5.63 |
|
|
| 4.02 |
|
| $ | (51,453 | ) | $ | (14,492 | ) |
Chile |
|
| 785.93 |
|
|
| 736.86 |
|
|
| (5,046 | ) |
| (4,017 | ) |
Colombia |
|
| 3,878.95 |
|
|
| 3,277.14 |
|
|
| (2,584 | ) |
| (1,507 | ) |
Peru |
|
| 3.62 |
|
|
| 3.37 |
|
|
| (3,187 | ) |
| (203 | ) |
All other |
|
|
|
|
|
|
|
|
|
| (560 | ) |
| 491 |
|
|
|
|
|
|
|
|
|
|
| $ | (62,830 | ) | $ | (19,728 | ) |
|
(1) Beginning July 1, 2018, Argentina was deemed highly inflationary. A gain of $425 and $633 for the six months ended June 30, 2021 and 2020, respectively, is reflected as foreign currency exchange loss |
15. | Supplemental Cash Flow Information |
The following is provided as supplemental information to the condensed consolidated statements of cash flows:
|
| Nine Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| September 30, |
|
| June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Cash paid for interest |
| $ | 53,364 |
|
| $ | 56,326 |
|
| $ | 59,890 |
|
| $ | 47,014 |
|
Cash paid (refunds received) for income taxes, net |
| $ | (108,776 | ) |
| $ | 69,498 |
|
| $ | (136,397 | ) |
| $ | 5,229 |
|
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 (1) |
| $ | (7,933 | ) |
| $ | (13,642 | ) | ||||||||
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment (2) |
| $ | (3,536 | ) |
| $ | 1,043 |
| ||||||||
Interest expense - NCM (see Note 8) |
| $ | (17,726 | ) |
| $ | (14,180 | ) |
| $ | (11,797 | ) |
| $ | (11,825 | ) |
Investment in NCM – receipt of common units (see Note 8) |
| $ | 3,620 |
|
| $ | 1,552 |
|
| $ | 10,237 |
|
| $ | 3,620 |
|
(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 6. |
(2) | Additions to theatre properties and equipment included in accounts payable as of |
16. | 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
28
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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.
Below is a breakdown of selected financial information by reportable operating segment:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 34,639 |
|
| $ | 636,628 |
|
| $ | 472,096 |
|
| $ | 1,941,545 |
|
| $ | 269,437 |
|
| $ | 8,155 |
|
| $ | 366,704 |
|
| $ | 437,457 |
|
International |
|
| 1,069 |
|
|
| 188,772 |
|
|
| 118,061 |
|
|
| 563,509 |
|
|
| 25,391 |
|
|
| 819 |
|
|
| 42,663 |
|
|
| 116,992 |
|
Eliminations |
|
| (230 | ) |
|
| (3,583 | ) |
|
| (2,089 | ) |
|
| (10,758 | ) |
|
| (176 | ) |
|
| — |
|
|
| (354 | ) |
|
| (1,859 | ) |
Total revenues |
| $ | 35,478 |
|
| $ | 821,817 |
|
| $ | 588,068 |
|
| $ | 2,494,296 |
|
| $ | 294,652 |
|
| $ | 8,974 |
|
| $ | 409,013 |
|
| $ | 552,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | (105,279 | ) |
| $ | 132,705 |
|
| $ | (144,918 | ) |
| $ | 454,665 |
|
| $ | 946 |
|
| $ | (95,905 | ) |
| $ | (75,539 | ) |
| $ | (39,639 | ) |
International |
|
| (22,232 | ) |
|
| 37,411 |
|
|
| (33,459 | ) |
|
| 113,346 |
|
|
| (12,340 | ) |
|
| (21,366 | ) |
|
| (27,293 | ) |
|
| (11,227 | ) |
Total Adjusted EBITDA |
| $ | (127,511 | ) |
| $ | 170,116 |
|
| $ | (178,377 | ) |
| $ | 568,011 |
|
| $ | (11,394 | ) |
| $ | (117,271 | ) |
| $ | (102,832 | ) |
| $ | (50,866 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 17,903 |
|
| $ | 50,679 |
|
| $ | 54,604 |
|
| $ | 148,609 |
|
| $ | 11,483 |
|
| $ | 11,028 |
|
| $ | 25,124 |
|
| $ | 36,701 |
|
International |
|
| 2,756 |
|
|
| 20,664 |
|
|
| 13,014 |
|
|
| 37,903 |
|
|
| 3,656 |
|
|
| 1,788 |
|
|
| 7,695 |
|
|
| 10,258 |
|
Total capital expenditures |
| $ | 20,659 |
|
| $ | 71,343 |
|
| $ | 67,618 |
|
| $ | 186,512 |
|
| $ | 15,139 |
|
| $ | 12,816 |
|
| $ | 32,819 |
|
| $ | 46,959 |
|
25
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table sets forth a reconciliation of net income (loss)loss to Adjusted EBITDA:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Net income (loss) |
| $ | (144,875 | ) |
| $ | 32,398 |
|
| $ | (374,354 | ) |
| $ | 168,474 |
| ||||||||||||||||
Net loss |
| $ | (137,059 | ) |
| $ | (170,378 | ) |
| $ | (340,569 | ) |
| $ | (229,479 | ) | ||||||||||||||||
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
| (119,273 | ) |
|
| 14,193 |
|
|
| (220,287 | ) |
|
| 64,615 |
|
|
| 9,337 |
|
|
| (98,007 | ) |
|
| (3,888 | ) |
|
| (101,014 | ) |
Interest expense (1) |
|
| 32,235 |
|
|
| 24,967 |
|
|
| 87,942 |
|
|
| 75,037 |
|
|
| 31,058 |
|
|
| 31,041 |
|
|
| 61,578 |
|
|
| 55,707 |
|
Other (income) expense, net (2) |
|
| 22,907 |
|
|
| (9,964 | ) |
|
| 47,412 |
|
|
| (25,059 | ) | ||||||||||||||||
Other expense, net (2) |
|
| 7,935 |
|
|
| 24,335 |
|
|
| 22,932 |
|
|
| 24,505 |
| ||||||||||||||||
Cash distributions from DCIP (3) |
|
| — |
|
|
| 2,694 |
|
|
| 10,383 |
|
|
| 7,912 |
|
|
| — |
|
|
| 5,222 |
|
|
| — |
|
|
| 10,383 |
|
Cash distributions from other equity investees (4) |
|
| 2,146 |
|
|
| 5,804 |
|
|
| 15,047 |
|
|
| 20,251 |
|
|
| — |
|
|
| 1,456 |
|
|
| 156 |
|
|
| 12,901 |
|
Depreciation and amortization |
|
| 62,543 |
|
|
| 67,760 |
|
|
| 191,380 |
|
|
| 196,795 |
|
|
| 66,920 |
|
|
| 63,581 |
|
|
| 135,080 |
|
|
| 128,837 |
|
Impairment of long-lived assets |
|
| 24,595 |
|
|
| 27,304 |
|
|
| 41,214 |
|
|
| 45,382 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,619 |
|
Restructuring costs |
|
| 524 |
|
|
| — |
|
|
| 20,062 |
|
|
| — |
|
|
| (740 | ) |
|
| 19,538 |
|
|
| (948 | ) |
|
| 19,538 |
|
(Gain) loss on disposal of assets and other |
|
| (13,327 | ) |
|
| 2,453 |
|
|
| (10,997 | ) |
|
| 8,057 |
| ||||||||||||||||
Loss on disposal of assets and other |
|
| 2,358 |
|
|
| 425 |
|
|
| 6,863 |
|
|
| 2,330 |
| ||||||||||||||||
Loss on extinguishment of debt |
|
| 3,924 |
|
|
| — |
|
|
| 6,527 |
|
|
| — |
| ||||||||||||||||
Non-cash rent expense |
|
| 816 |
|
|
| (1,102 | ) |
|
| 1,649 |
|
|
| (3,252 | ) |
|
| (807 | ) |
|
| 1,424 |
|
|
| (679 | ) |
|
| 833 |
|
Share based awards compensation expense |
|
| 4,198 |
|
|
| 3,609 |
|
|
| 12,172 |
|
|
| 9,799 |
|
|
| 5,680 |
|
|
| 4,092 |
|
|
| 10,116 |
|
|
| 7,974 |
|
Adjusted EBITDA |
| $ | (127,511 | ) |
| $ | 170,116 |
|
| $ | (178,377 | ) |
| $ | 568,011 |
|
| $ | (11,394 | ) |
| $ | (117,271 | ) |
| $ | (102,832 | ) |
| $ | (50,866 | ) |
| (1) | Includes amortization of debt issue costs and amortization of accumulated losses for amended swap agreements. |
| (2) | Includes interest income, foreign currency exchange |
| (3) |
|
| (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 8 and 9). These distributions are reported entirely within the U.S. operating segment. |
|
29
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Financial Information About Geographic Areas
Below is a breakdown of selected financial information by geographic area:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
Revenues |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
U.S. |
| $ | 34,639 |
|
| $ | 636,628 |
|
| $ | 472,096 |
|
| $ | 1,941,545 |
|
| $ | 269,437 |
|
| $ | 8,155 |
|
| $ | 366,704 |
|
| $ | 437,457 |
|
Brazil |
|
| 513 |
|
|
| 79,776 |
|
|
| 53,829 |
|
|
| 240,263 |
|
|
| 5,463 |
|
|
| 348 |
|
|
| 9,901 |
|
|
| 53,316 |
|
Other international countries |
|
| 556 |
|
|
| 108,996 |
|
|
| 64,232 |
|
|
| 323,246 |
|
|
| 19,928 |
|
|
| 471 |
|
|
| 32,762 |
|
|
| 63,676 |
|
Eliminations |
|
| (230 | ) |
|
| (3,583 | ) |
|
| (2,089 | ) |
|
| (10,758 | ) |
|
| (176 | ) |
|
| — |
|
|
| (354 | ) |
|
| (1,859 | ) |
Total |
| $ | 35,478 |
|
| $ | 821,817 |
|
| $ | 588,068 |
|
| $ | 2,494,296 |
|
| $ | 294,652 |
|
| $ | 8,974 |
|
| $ | 409,013 |
|
| $ | 552,590 |
|
|
| As of |
|
| As of |
|
| As of |
|
| As of |
| ||||
Theatre Properties and Equipment-net |
| September 30, 2020 |
|
| December 31, 2019 |
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||||
U.S. |
| $ | 1,324,924 |
|
| $ | 1,436,275 |
|
| $ | 1,286,878 |
|
| $ | 1,392,780 |
|
Brazil |
|
| 71,338 |
|
|
| 118,367 |
|
|
| 69,486 |
|
|
| 72,080 |
|
Other international countries |
|
| 149,561 |
|
|
| 180,605 |
|
|
| 136,200 |
|
|
| 150,202 |
|
Total |
| $ | 1,545,823 |
|
| $ | 1,735,247 |
|
| $ | 1,492,564 |
|
| $ | 1,615,062 |
|
17. | Related Party Transactions |
The Company manages theatresa theatre for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Lee Roy Mitchell is Cinemark Holdings, Inc.’s Chairman of the Board of Directors and directly and indirectly owns approximately 8% of Cinemark Holdings, Inc.’s common stock.
26
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Under the agreement, management fees are paid by Laredo to the Company at a rate of 5% of annual theatre revenues up to $50,000 and 3% of annual theatre revenues in excess of $50,000.revenues. The Company recorded $123 $116 and $539$114 of management fee revenues during the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.
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. Copper Beech 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 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 ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the aggregate amounts paid to Copper Beech for the use of the aircraft was $12$0 and $111,$12, respectively.
The Company leases 14 theatres and 1 parking facility from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy. Raymond Syufy is one of Cinemark Holdings, Inc.’s directors and is an officer of the general partner of Syufy. Of these 15 leases, 14 have fixed minimum annual rent. The 1 lease without minimum annual rent has rent based upon a specified percentage of gross sales as defined in the lease. For the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company paid total rent of approximately $17,271$12,042 and $20,006,$10,542, respectively, to Syufy. The Company negotiated a deferral of rent payments for April, May and June of 2020 for 4 of the 14 leased theatres to be paid back over the months of July through December of 2020. The Company did not remeasure its lease liabilities and lease right-of-use assets as a result of these negotiations in accordance with FASB guidance. See further discussion at Note 4.
The Company has 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 offers bowling, gaming, movies and other amenities that opened during December 2019. See Note 9 for further discussion. The Company has a theatre services agreement with FE Concepts under which the Company receives management fees for providing film booking and equipment monitoring services for the facility. The Company recorded $19 of management fees during the nine months ended September 30, 2020.
The Company has paid certain fees on behalf of its parent, Cinemark Holdings, Inc., and Cinemark Holdings, Inc. has paid income taxes and other expenses on behalf of the Company. The net receivable from Cinemark Holdings, Inc. as of SeptemberJune 30,
30
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
2020 2021 and December 31, 20192020 was $27,767$38,851 and $24,319,$36,775, respectively. The Company paidreceived contributions from Cinemark Holdings, Inc. cashof $120,000 during the three months ended March 31, 2021 and paid dividends of $42,000 and $118,825to Cinemark Holdings, Inc. during the ninesix months ended SeptemberJune 30, 2020 and 2019, respectively.2020.
18. | Commitments and Contingencies |
From time to time, the Company is involved in various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, patent claims, landlord-tenant disputes, contractual 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. While the Company cannot predict the outcome of this litigation, management believes this lawsuit will not have a material adverse effect on the company’s financial position or results of operations.
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.
Flagship Theatres of Palm Desert, LLC d/b/a Cinemas Palme D’Or v. Century Theatres, Inc., 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 tortiously 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. On May 10, 2018, after a five-week jury trial, the jury found no liability on one circuit dealing claim and awarded Plaintiff damages on the other claim, which are tripled for antitrust damage awards. Plaintiff would also be entitled to certain court costs and to seek at least some portion of its attorney’s fees. During 2018, the Company recorded a litigation reserve based on the jury award, court costs and attorney’s fees. The trial court denied a motion for a judgment notwithstanding the verdict and a motion for a new trial. The Company appealed the judgment. On October 2, 2020 the Court of Appeals of the State of California reversed the judgement in favor of the Plaintiff and rendered judgement in favor of the Company. Plaintiff has agreed to not appeal this ruling to the California Supreme Court; therefore, the ruling in favor of the Company is final and non-appealable. The Company reversed the litigation reserve in the third quarter of 2020.
|
|
As of September 30, 2020, the Company had outstanding $400,000 aggregate principal amount of 5.125% senior notes due 2022, or the 5.125% Senior Notes, $755,000 aggregate principal amount of 4.875% senior notes due 2023, or the 4.875% Senior Notes, and $250,000 aggregate principal amount of the 8.750% secured notes due 2023, or the 8.750% Secured Notes (collectively the “Notes”). These Notes are fully and unconditionally guaranteed on a joint and several basis by the following subsidiaries (collectively the “Guarantor Subsidiaries”) of Cinemark USA, Inc.:
Sunnymead Cinema Corp., Cinemark Properties, Inc., Greeley Holdings, Inc., Cinemark Partners I, Inc., CNMK Investments, Inc., CNMK Texas Properties, LLC., Cinemark Concessions LLC, Century Theatres, Inc., Marin Theatre Management, LLC, Century Theatres NG, LLC, Cinearts LLC, Cinearts Sacramento, LLC, Corte Madera Theatres, LLC, Novato Theatres, LLC, San Rafael Theatres, LLC, Northbay Theatres, LLC, Century Theatres Summit Sierra, LLC and Century Theatres Seattle, LLC.
The following tables include summary financial information for stand-alone Cinemark USA, Inc. (the “Parent” and “Issuer”) and the Guarantor Subsidiaries in the aggregate, all of which reflect all investments in subsidiaries as if accounted for under the equity method of accounting. As such, net income (loss) for each of the Parent and Guarantors reflects equity income (loss) of their
31
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
respective subsidiaries. All amounts are presented prior to elimination entries necessary to consolidate the Parent and all of its subsidiaries.
|
| As of September 30, 2020 |
| |||||
|
| Parent |
|
| Guarantors |
| ||
Summary Balance Sheet Information |
|
|
|
|
|
|
|
|
Current assets |
| $ | 341,689 |
|
| $ | 186,027 |
|
Noncurrent assets |
| $ | 4,410,997 |
|
| $ | 1,396,608 |
|
Current liabilities |
| $ | 536,760 |
|
| $ | 138,020 |
|
Long-term liabilities |
| $ | 3,231,989 |
|
| $ | 474,683 |
|
Stockholder's equity |
| $ | 983,937 |
|
| $ | 969,933 |
|
|
| As of December 31, 2019 |
| |||||
|
| Parent |
|
| Guarantors |
| ||
Summary Balance Sheet Information |
|
|
|
|
|
|
|
|
Current assets |
| $ | 244,063 |
|
| $ | 444,481 |
|
Noncurrent assets |
| $ | 4,820,174 |
|
| $ | 1,403,687 |
|
Current liabilities |
| $ | 573,273 |
|
| $ | 147,366 |
|
Long-term liabilities |
| $ | 3,029,265 |
|
| $ | 500,566 |
|
Stockholder's equity |
| $ | 1,461,699 |
|
| $ | 1,200,236 |
|
|
| Nine Months Ended September 30, 2020 |
| |||||
|
| Parent |
|
| Guarantors |
| ||
Summary Income Statement Information |
|
|
|
|
|
|
|
|
Revenues |
| $ | 224,915 |
|
| $ | 266,091 |
|
Operating loss |
| $ | (193,236 | ) |
| $ | (161,599 | ) |
Net loss |
| $ | (373,653 | ) |
| $ | (157,502 | ) |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes and schedules included elsewhere in this report.
Recent Developments
The outbreak ofAs we have previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibitionour industry. The social and economic effects arehave been widespread, and the situation continues to evolve. As a movie exhibitor that operates spaces where patrons gather in close proximity, we have been, and continue to be, significantly impacted by protective actions taken by governmental authorities to control the spread of theCOVID-19 pandemic. To comply with government mandates atAt the initial outbreak of the COVID-19 pandemic, to comply with government mandates, we temporarily closed all of our theatres in the U.S. and Latin America effective March 17, 2020 and March 18, 2020, respectively.In conjunction with the temporary closure of our theatres in March 2020, we 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.
We have implemented a variety of health and safety protocols in our theatres for the safety of our employees, guests and surrounding communities. We consistently monitor health authority recommendations and the status of the virus in assessing the safety protocols we have in place.
As of SeptemberJune 30, 2020,2021, we had reopened 252all 323 of our domestic theatres and 15152 of our 198 international theatres showing limited volume oftheatres. During the three months ended June 30, 2021, we showed many new releases along with some library content duringcontent. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours. While some staffing has been brought backhours in certain locations and our focus on initiatives to pre-COVID-19 levels given the theatre reopenings, weenhance productivity. We also continue to maintain a temporary reduction in staffing while limitinglimit capital expenditures to essential activities and projects. We also continuecontinued to work with landlords and other vendors on extended or modified contractualduring the six months ended June 30, 2021 to extend payment terms while evaluatingas we reopened theatres and continue to recover from the statusimpacts of the COVID-19 pandemic and local government regulations in assessing our plans to reopen our remaining theatres. pandemic.
Our focus on maintaining a healthy balance sheet and low leverage allowed us to enter the global COVID-19 crisis in a strong financial position. Based on our current levelestimates of operations,recovery, we believe that we have and will generate sufficient cash to sustain operations until late 2021, which would extend into 2022 when consideringfor the additional income tax benefits discussed at Note 2foreseeable future as we work to our condensed consolidated financial statements.return to historical working capital levels. Nonetheless, the COVID-19 pandemic has had, and may continuecontinues to have, adverse effects on our business, results of operations, cash flows and financial condition, access to credit markets and ability to service existing and future indebtedness, some of which may be significant.
We have elected to take advantage of certain tax-related benefits available under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) signed into U.S. federal law on March 27, 2020. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss (“NOL”) utilization and carryback periods, modifications to the net interest deduction limitations and a technical correction to the 2017 Tax Cuts and Jobs Act, which makes certain qualified improvement property eligible for bonus depreciation. Per the provisions of the CARES Act, we have deferred payment of certain employer payroll taxes for 2020 and have recorded payroll tax credits for expenses related to paying wages and health benefits to employees who were not working as a result of closures and reduced receipts associated with COVID-19.
If we receive certain government disaster relief assistance, it may be subject to certain requirements imposed by the government on the recipients of the aid including restrictions on executive officer compensation, share buybacks, dividends, prepayment of debt, incurrence of additional indebtedness and other similar restrictions until the aid is repaid or redeemed in full. However, we cannot predict the manner in which such benefits will be allocated or administered and cannot predict whether we will be able to access such benefits in a timely manner or at all.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 SeptemberJune 30, 2020,2021, we managed our business under two reportable operating segments – U.S. markets and international markets. See Note 1716 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. 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 through AC JV, LLC. NCM providestheatres. In-theatre advertising for our domestic theatres with various forms of in-theatre advertising. Ouris provided by National CineMedia. In our international locations, our Flix Media subsidiaries provide screen advertising and alternative content for our international circuit and to other international exhibitors.
Films leading the box office during the ninesix months ended SeptemberJune 30, 20202021 included the carryover from The Croods: A New Age and Wonder Woman 1984, and new releases Tom & Jerry, Godzilla vs. Kong, Bad Boys for Life, 1917, Sonic the Hedgehog, Jumanji:A Quiet Place Part II, Cruella, The Next Level, Star Wars: Episode IX –Conjuring: The Rise of Skywalker, Birds of Prey, Dolittle, Little Women,Devil Made Me Do It, Peter Rabbit 2, F9: The Invisible ManFast Saga, Mortal Kombat and The Call of the WildDemon Slayer: Kimetsu no Yaiba.Films currently scheduled for release during the remainder of 2020 2021 include Wonder Woman 1984Black Widow, The Boss Baby: Family Business, Suicide Squad, Venom: Let There Be Carnage, No Time to Die, Eternals, Top Gun Maverick, Encanto and the Marvel sequel Croods: A New Age,Spider-man; No Way Home, among other films. Films scheduled for release during the remainder of 2020 could be rescheduled as a result of the COVID-19 pandemic.
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 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 capital and finance leases and the number of owned theatres.
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 salaries and wages,base, incentive compensation and benefit costsbenefits for our corporate office personnel, facility expenses for our corporate offices, consulting fees, legalprofessional fees, auditcloud-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 |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||||||||||
|
| September 30, |
|
|
|
| September 30, |
|
| June 30, |
|
|
|
| June 30, |
| ||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
|
| 2020 |
|
|
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
|
| 2021 |
|
|
|
| 2020 |
| ||||||||||
Operating data (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Admissions |
| $ | 14.9 |
|
| $ | 454.5 |
| �� |
| $ | 307.4 |
| $ | 1,371.1 |
|
| $ | 153.5 |
|
| $ | — |
|
|
| $ | 209.6 |
| $ | 292.5 |
| ||||||||
Concession |
|
| 9.1 |
|
|
| 289.5 |
|
|
| 199.6 |
| 886.1 |
|
|
| 109.8 |
|
|
| 0.1 |
|
|
| 149.3 |
| 190.5 |
| ||||||||||||
Other |
|
| 11.5 |
|
|
| 77.8 |
|
|
|
| 81.1 |
|
| 237.1 |
|
|
| 31.3 |
|
|
| 8.9 |
|
|
|
| 50.1 |
|
| 69.6 |
| ||||||||
Total revenues |
| $ | 35.5 |
|
| $ | 821.8 |
|
|
| $ | 588.1 |
| $ | 2,494.3 |
|
| $ | 294.6 |
|
| $ | 9.0 |
|
|
| $ | 409.0 |
| $ | 552.6 |
| ||||||||
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Film rentals and advertising |
|
| 8.2 |
|
|
| 254.9 |
|
|
| 165.2 |
| 759.7 |
|
|
| 76.6 |
|
|
| 0.4 |
|
|
| 99.8 |
| 157.0 |
| ||||||||||||
Concession supplies |
|
| 2.7 |
|
|
| 51.5 |
|
|
| 39.9 |
| 157.3 |
|
|
| 18.8 |
|
|
| 2.4 |
|
|
| 26.0 |
| 37.2 |
| ||||||||||||
Salaries and wages |
|
| 20.2 |
|
|
| 103.3 |
|
|
| 116.6 |
| 308.3 |
|
|
| 50.4 |
|
|
| 8.8 |
|
|
| 81.6 |
| 96.4 |
| ||||||||||||
Facility lease expense |
|
| 67.1 |
|
|
| 87.4 |
|
|
| 214.5 |
| 262.5 |
|
|
| 67.2 |
|
|
| 65.2 |
|
|
| 132.0 |
| 147.4 |
| ||||||||||||
Utilities and other |
|
| 43.3 |
|
|
| 123.9 |
|
|
| 178.7 |
| 357.2 |
|
|
| 61.2 |
|
|
| 34.9 |
|
|
| 110.3 |
| 135.4 |
| ||||||||||||
General and administrative expenses |
|
| 30.0 |
|
|
| 44.0 |
|
|
| 97.6 |
|
|
| 125.1 |
|
|
| 36.7 |
|
|
| 27.4 |
|
|
| 71.8 |
|
|
| 68.0 |
| ||||||||
Depreciation and amortization |
|
| 62.6 |
|
|
| 67.8 |
|
|
| 191.4 |
| 196.8 |
|
|
| 66.9 |
|
|
| 63.5 |
|
|
| 135.1 |
| 128.8 |
| ||||||||||||
Impairment of long-lived assets |
|
| 24.6 |
|
|
| 27.3 |
|
|
| 41.2 |
| 45.4 |
|
|
| — |
|
|
| — |
|
|
| — |
| 16.6 |
| ||||||||||||
Restructuring costs |
|
| 0.6 |
|
|
| — |
|
|
| 20.1 |
| — |
|
|
| (0.7 | ) |
|
| 19.5 |
|
|
| (0.9 | ) |
| 19.5 |
| |||||||||||
Loss on disposal of assets and other |
|
| (13.3 | ) |
|
| 2.5 |
|
|
|
| (11.0 | ) |
|
| 8.1 |
|
|
| 2.4 |
|
|
| 0.4 |
|
|
|
| 6.9 |
|
| 2.3 |
| |||||||
Total cost of operations |
|
| 246.0 |
|
|
| 762.6 |
|
|
|
| 1,054.2 |
|
| 2,220.4 |
|
|
| 379.5 |
|
|
| 222.5 |
|
|
|
| 662.6 |
|
| 808.6 |
| ||||||||
Operating income (loss) |
| $ | (210.5 | ) |
| $ | 59.2 |
|
|
| $ | (466.1 | ) |
| $ | 273.9 |
| |||||||||||||||||||||||
Operating loss |
| $ | (84.9 | ) |
| $ | (213.5 | ) |
|
|
| $ | (253.6 | ) |
| $ | (256.0 | ) | ||||||||||||||||||||||
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|
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| |||||||
Operating data as a percentage of total revenues: |
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|
|
|
|
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| ||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||||||||||||
Admissions |
|
| 42.0 | % |
|
| 55.3 | % |
|
|
| 52.3 | % |
| 55.0 | % |
|
| 52.1 | % |
|
| 0.0 | % |
|
|
| 51.2 | % |
| 52.9 | % | ||||||||
Concession |
|
| 25.6 | % |
|
| 35.2 | % |
|
|
| 33.9 | % |
| 35.5 | % |
|
| 37.3 | % |
|
| 1.1 | % |
|
|
| 36.5 | % |
| 34.5 | % | ||||||||
Other |
|
| 32.4 | % |
|
| 9.5 | % |
|
|
|
| 13.8 | % |
|
| 9.5 | % |
|
| 10.6 | % |
|
| 98.9 | % |
|
|
|
| 12.3 | % |
|
| 12.6 | % | ||||
Total revenues |
|
| 100.0 | % |
|
| 100.0 | % |
|
|
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
|
|
| 100.0 | % |
|
| 100.0 | % | ||||
Cost of operations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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| ||||||||
Film rentals and advertising |
| NM |
|
|
| 56.1 | % |
|
|
| 53.7 | % |
| 55.4 | % |
|
| 49.9 | % |
| NM |
|
|
| 47.6 | % |
| 53.7 | % | |||||||||||
Concession supplies |
| NM |
|
|
| 17.8 | % |
|
|
| 20.0 | % |
| 17.8 | % |
|
| 17.1 | % |
| NM |
|
|
| 17.4 | % |
| 19.5 | % | |||||||||||
Salaries and wages |
| NM |
|
|
| 12.6 | % |
|
|
| 19.8 | % |
| 12.4 | % |
|
| 17.1 | % |
| NM |
|
|
| 20.0 | % |
| 17.4 | % | |||||||||||
Facility lease expense |
| NM |
|
|
| 10.6 | % |
|
|
| 36.5 | % |
| 10.5 | % |
|
| 22.8 | % |
| NM |
|
|
| 32.3 | % |
| 26.7 | % | |||||||||||
Utilities and other |
| NM |
|
|
| 15.1 | % |
|
|
| 30.4 | % |
| 14.3 | % |
|
| 20.8 | % |
| NM |
|
|
| 27.0 | % |
| 24.5 | % | |||||||||||
General and administrative expenses |
| NM |
|
|
| 5.4 | % |
|
|
| 16.6 | % |
| 5.0 | % |
|
| 12.5 | % |
| NM |
|
|
| 17.6 | % |
| 12.3 | % | |||||||||||
Total cost of operations |
| NM |
|
|
| 92.8 | % |
|
|
| 179.3 | % |
| 89.0 | % |
|
| 128.8 | % |
| NM |
|
|
| 162.0 | % |
| 146.3 | % | |||||||||||
Operating income (loss) |
| NM |
|
|
| 7.2 | % |
|
|
| (79.3 | )% |
| 11.0 | % | |||||||||||||||||||||||||
Operating loss |
|
| (28.8 | )% |
| NM |
|
|
| (62.0 | )% |
| (46.3 | )% |
(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 March 18, 2020. |
Three months ended SeptemberJune 30, 20202021 versus SeptemberJune 30, 20192020
Three months ended June 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 ouropened five domestic theatres in late June 2020 and operated under a test-and-learn strategy to define training, communication, implementation and execution of enhanced health andtest our new safety protocols. These theatres opened to reduced operating hours withprotocols, showing library content andcontent. We offered “welcome back” pricing for movie tickets and concession products to encourage our patrons to return to the movies. As of SeptemberDuring the three months ended June 30, 2020 we had 25213 thousand patrons visit our five domestic theatres and 15generated $37 thousand of admissions revenue and $57 thousand of concession revenues. Other revenues of $8.9 million for the three months ended June 30, 2020 primarily included the amortization of deferred NCM screen advertising advances (see Note 8). Please see below for a summary of our performance for the three months ended June 30, 2021.
Three months ended June 31, 2021 – We had reopened all 323 of our domestic theatres and 152 of our 198 international theatres reopened. We continueas of June 30, 2021. Certain of our international theatres had to monitor the statustemporarily close again during portions of the second quarter of 2021 due to the COVID-19 pandemic and local government regulations to plan the reopening of our remaining theatres.pandemic.
|
| U.S. Operating Segment |
|
|
| International Operating Segment |
|
| Consolidated |
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
|
| Consolidated |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Constant Currency (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 2020 |
| 2019 |
|
|
| 2020 (4) |
| 2019 |
|
| 2020 |
|
| 2020 |
| 2019 |
|
| 2021 |
|
| 2021 |
|
|
| 2021 |
| ||||||||||||
Admissions revenues (1) |
| $ | 14.9 |
| $ | 351.1 |
|
| $ | 0.1 |
| $ | 103.4 |
|
| $ | 0.1 |
|
| $ | 15.0 |
| $ | 454.5 |
|
| $ | 140.6 |
|
| $ | 12.9 |
|
| $ | 153.5 |
| ||||
Concession revenues (1) |
| $ | 8.9 |
| $ | 230.4 |
|
| $ | 0.3 |
| $ | 59.1 |
|
| $ | 0.4 |
|
| $ | 9.2 |
| $ | 289.5 |
|
| $ | 99.4 |
|
| $ | 10.4 |
|
| $ | 109.8 |
| ||||
Other revenues (1)(2) |
| $ | 10.8 |
| $ | 51.5 |
|
| $ | 0.7 |
| $ | 26.3 |
|
| $ | 0.8 |
|
| $ | 11.5 |
| $ | 77.8 |
|
| $ | 29.3 |
|
| $ | 2.0 |
|
| $ | 31.3 |
| ||||
Total revenues (1)(2) |
| $ | 34.6 |
| $ | 633.0 |
|
| $ | 1.1 |
| $ | 188.8 |
|
| $ | 1.3 |
|
| $ | 35.7 |
| $ | 821.8 |
|
| $ | 269.3 |
|
| $ | 25.3 |
|
| $ | 294.6 |
| ||||
Attendance (1) |
|
| 1.9 |
| 44.1 |
|
|
| — |
| 29.2 |
|
|
|
|
|
|
| 1.9 |
| 73.3 |
|
|
| 15.1 |
|
|
| 4.0 |
|
|
| 19.1 |
| |||||||
Average ticket price (1) |
| $ | 8.01 |
| $ | 7.96 |
|
| N/M |
| $ | 3.54 |
|
| N/M |
|
| $ | 7.96 |
| $ | 6.20 |
|
| $ | 9.33 |
|
| $ | 3.21 |
|
| $ | 8.04 |
| ||||||
Concession revenues per patron (1) |
| $ | 4.79 |
| $ | 5.22 |
|
| N/M |
| $ | 2.02 |
|
| N/M |
|
| $ | 4.87 |
| $ | 3.95 |
|
| $ | 6.59 |
|
| $ | 2.60 |
|
| $ | 5.75 |
|
(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 16 to our condensed consolidated financial statements. |
| U.S.We showed new releases during a majority of the second quarter of 2021, including A Quiet Place Part II, Godzilla vs. Kong, F9: The Fast Saga, Cruella, The Conjuring: The Devil Made Me Do It, Mortal Kombat and Demon Slayer: Kimetsu no Yaiba. Additionally, we continued to offer Private Watch Parties to our patrons. Average ticket price was $9.33, primarily as a result of pricing and ticket mix. Concession revenues per patron was $6.59driven by price increases, enhanced food items reintroduced at certain theatres and the recognition of previously deferred loyalty revenues. Other revenues for the second quarter of 2021 included screen rental revenue, promotional and trailer placement income related to the recent new film releases and transactional fees. Other revenues for the second quarter of 2020 primarily included the amortization of NCM screen advertising advances. |
• | International.We offered some new releases and library content in our international theatres during the second quarter of 2021, resulting in 4 million in attendance, $12.9 million of admissions revenue and $10.4 million of concessions revenue. Our average ticket price was $3.21 as reported and $3.31 in constant currency. Concession revenues per patron was $2.60 as reported and $2.68 in constant currency driven by increased purchase incidence of our core concession items, the impact of inflation, new premium combo offerings, and increased retail concession sales. Certain of our international theatres had to temporarily close again for portions of the second quarter of 2021 due to local restrictions, impacting admissions and concessions revenue. 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 June 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 |
| $ | 70.3 |
|
| $ | 0.2 |
|
| $ | 6.3 |
|
| $ | 0.2 |
|
| $ | 6.6 |
|
| $ | 76.6 |
|
| $ | 0.4 |
|
Concession supplies |
| $ | 16.1 |
|
| $ | 1.5 |
|
| $ | 2.7 |
|
| $ | 0.9 |
|
| $ | 2.7 |
|
| $ | 18.8 |
|
| $ | 2.4 |
|
Salaries and wages |
| $ | 43.5 |
|
| $ | 3.4 |
|
| $ | 6.9 |
|
| $ | 5.4 |
|
| $ | 7.2 |
|
| $ | 50.4 |
|
| $ | 8.8 |
|
Facility lease expense |
| $ | 59.9 |
|
| $ | 59.8 |
|
| $ | 7.3 |
|
| $ | 5.4 |
|
| $ | 7.3 |
|
| $ | 67.2 |
|
| $ | 65.2 |
|
Utilities and other |
| $ | 52.9 |
|
| $ | 28.8 |
|
| $ | 8.3 |
|
| $ | 6.1 |
|
| $ | 8.5 |
|
| $ | 61.2 |
|
| $ | 34.9 |
|
(1) | Constant currency |
|
|
|
|
|
• |
|
Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the three months ended September 30, 2020 and 2019.
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Consolidated |
| |||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| Constant Currency (1) 2020 |
|
| 2020 |
|
| 2019 |
| |||||||
Film rentals and advertising |
| $ | 8.1 |
|
| $ | 203.5 |
|
| $ | 0.1 |
|
| $ | 51.4 |
|
| $ | 0.1 |
|
| $ | 8.2 |
|
| $ | 254.9 |
|
Concession supplies |
| $ | 2.3 |
|
| $ | 38.6 |
|
| $ | 0.4 |
|
| $ | 12.9 |
|
| $ | 0.6 |
|
| $ | 2.7 |
|
| $ | 51.5 |
|
Salaries and wages |
| $ | 15.9 |
|
| $ | 83.2 |
|
| $ | 4.3 |
|
| $ | 20.1 |
|
| $ | 5.4 |
|
| $ | 20.2 |
|
| $ | 103.3 |
|
Facility lease expense |
| $ | 60.8 |
|
| $ | 64.5 |
|
| $ | 6.3 |
|
| $ | 22.9 |
|
| $ | 8.2 |
|
| $ | 67.1 |
|
| $ | 87.4 |
|
Utilities and other |
| $ | 36.5 |
|
| $ | 91.7 |
|
| $ | 6.8 |
|
| $ | 32.2 |
|
| $ | 8.6 |
|
| $ | 43.3 |
|
| $ | 123.9 |
|
|
|
| U.S. Film rentals and advertising costs for |
|
Salaries and wages decreasedincreased to $43.5 million for the thirdsecond quarter of 20202021 as someall of our theatres were temporarily closed during this timereopened by the end of the quarter requiring hiring and other theatres opened duringtraining of employees. We also began extending operating hours to accommodate the third quarterrelease of 2020 with limited operating hours.new films while maintaining our focus on efficient staffing levels. Facility lease expense, decreased for the third quarter of 2020 compared to the third quarter of 2019which is primarily due tofixed in nature, reflects a declineslight 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 decreased for the third quarter of 2020 comparedincreased to the third quarter of 2019,$52.9 million, as many of these costs, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, are variable in nature and were impacted byhave increased with the temporary closure of our theatres and reduced operating hours of the theatres that were reopenedimproved attendance from new film content.
| • | International. |
Salaries and wages decreasedincreased to $6.9 million as reported for the thirdsecond quarter of 2020 compared to the third quarter of 2019. The decrease was due to a majority2021 as many of our international theatres remaining closed during the period.reopened. Facility lease expense decreasedincreased to $7.3 million for the thirdsecond quarter of 2020 compared to2021 reflecting payment of rent under alternative structures, such as percentage rents in place of minimum fixed rents, as theatres recover, partially offset by the third quarterimpact of 2019. The decrease was due to lower percentage rent and rent-free periods allowed inthe permanent closure of certain international locations due to mall closures.theatres. Utilities and other costs decreased for the third quarter of 2020 comparedincreased to the third quarter of 2019,$8.3 million, as many of these costs are variable in nature and were impacted byhave increased with the temporary closure of our theatres.improved attendance from new film content and theatre reopenings.
General and Administrative Expenses. General and administrative expenses decreasedincreased to $36.7 million for the thirdsecond quarter of 2021 compared to $27.4 million for the second quarter of 2020. The increase is primarily due to the temporary salary reductions and furloughs for our corporate workforce during the second quarter of 2020 comparedin response to the third quartertemporary closure of 2019. The decrease was primarily due to temporary salary reductions for corporate office staff through the endall of August, the impact of the 2020 Restructuring Plan (see Note 2) that permanently reduced headcount and reduced travel expense.our theatres in March 2020.
Depreciation and Amortization. Depreciation and amortization expense decreasedincreased $3.4 million during the thirdsecond quarter of 2020 compared to the third quarter of 2019. The decrease was2021 primarily due to the impactdigital projectors received in a non-cash distribution from DCIP during the fourth quarter of theatre assets previously impaired and changes in foreign currency exchange rates in certain countries in which we operate. 2020. See Note 129 to ourthe condensed consolidated financial statements for discussion of impairment.the non-cash distribution from DCIP.
Impairment of Long-Lived Assets.Restructuring Costs. We recorded asset impairment charges of $24.6 million on assets held and used during the third quarter of 2020 compared to $27.3Restructuring costs were $(0.7) million during the thirdsecond quarter of 2019. The asset impairment charges recorded during the third quarter of 2020 were primarily a result of the prolonged impact of the COVID pandemic on our operations, as some theatres remained closed and film content continues2021 compared to shift into future periods, both of which impacted our estimated future cash flows for theatres. Impairment charges for the third quarter of 2020 impacted seven countries and impairment charges for the third quarter of 2019 impacted six countries. See Note 12 to our condensed consolidated financial statements.
Restructuring Costs. We recorded restructuring costs of $0.5$19.5 million during the thirdsecond quarter of 2020. The costscredit recorded during the thirdsecond quarter of 2021 was primarily the result of settlements of lease obligations below the original estimated amounts. Charges recorded during the second quarter of 2020 were duerelated to accrual adjustments made for theatres closed as parta restructuring plan implemented during the second quarter of our 2020 Restructuring Plan.2020. See Note 2 to our condensed consolidated financial statements for further discussion.
(Gain) Loss on Disposal of Assets and Other. We recorded a gainloss on disposal of assets and other of $2.4 million during the thirdsecond quarter of 20202021 compared to a loss$0.4 million during the thirdsecond quarter of 2019.2020. Activity for the thirdsecond quarter of 20202021 was primarily related to a favorable litigation outcome for a case that was previously accrued.the termination of certain lease agreements, partially offset by gains on sales of excess land parcels. Activity for the thirdsecond quarter of 20192020 was primarily due to the retirement of assets related to theatre remodels.
Interest Expense.Loss on Extinguishment of Debt. Interest expense, which includes amortizationWe recorded a loss on extinguishment of debt issueof $3.9 million during the second quarter of 2021 related to the early retirement of our 4.875% Senior Notes, including a write-off of unamortized debt issuance costs and amortization of accumulated losses for swap amendments increased during the third quarter of 2020 to $32.2 million compared to $25.0 million for the third quarter of 2019. The increase was primarily due to the issuance of 8.750% senior secured notes on April 20, 2020.legal and other fees paid. See Note 6 to our condensed consolidated financial statements.
Distributions from NCM. We recorded distributions from NCM of $1.1 million during the third quarter of 2020 compared to $2.5 million recorded during the third quarter of 2019, which 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 8 to our condensed consolidated financial statements for discussion of our investment in NCM.
Interest expense – NCM. We recorded non-cash interest expense of $5.9 million for the thirdsecond quarter of 2020 compared to $4.7 million recorded during2021 and in the thirdsecond quarter of 2019,2020, related to the significant financing component associated with certain of our agreements with NCM. See Note 8 to our condensed consolidated financial statements for further discussion.
Equity in Income (Loss)Loss of Affiliates. We recorded equity in loss of affiliates of $(16.1)$8.1 million during the thirdsecond quarter of 20202021 compared to equity in income of affiliates of $15.1$20.1 million during the thirdsecond quarter of 2019. The decrease in2020. Our equity income (loss) of affiliates is primarily due to the impact of theatres being temporarily closed as a result ofmethod investees have also been impacted the COVID-19 pandemic as discussed atand the temporary closure of our theatres. See Note 2 to our condensed consolidated financial statements.statements for additional discussion of the COVID-19 pandemic. See Notes 8 and 9 to our condensed consolidated financial statements for information about our equity investments.
Income Taxes. An income tax benefitexpense of $(119.3)$9.3 million was recorded for the thirdsecond quarter of 20202021 compared to an income tax expensebenefit of $14.2$(98.0) million for the thirdsecond quarter of 2019.2020. The effective tax rate was approximately 45.2%(7.3)% for the thirdsecond quarter of 20202021 compared to 30.5%36.5% for the thirdsecond quarter of 2019. See 2020. The effective tax rate for the second quarter of 2021 was unfavorablyIncome Tax Considerations
at Note 2impacted by valuation allowances related to our condensed consolidated financial statementscertain foreign tax credits and deferred tax assets for further discussion.which the ultimate realization is uncertain. 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.
NineSix months ended SeptemberJune 30, 2021 (the “2021 period”) versus June 30, 2020 versus September 30, 2019 (the “2020 period”)
AllWe had reopened all 323 of our domestic theatres and 152 of our 198 international theatres wereas of June 30, 2021. Certain of our international theatres had to temporarily closed effective March 17, 2020 and March 18, 2020, respectively,close again for portions of the 2021 period due to the COVID-19 pandemic. We began reopening our domestic theatres in June 2020 and operated under a test-and-learn strategy to define 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. We continue to monitor the status of the COVID-19 pandemic and local government regulations to plan the reopening of our remainingas we reopen theatres.
|
| 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) |
| $ | 189.1 |
| $ | 232.3 |
|
| (18.6 | )% |
|
| $ | 20.5 |
| $ | 60.2 |
|
| (65.9 | )% |
| $ | 21.9 |
|
| (63.6 | )% |
|
| $ | 209.6 |
| $ | 292.5 |
|
| (28.3 | )% |
Concession revenues (1) |
| $ | 132.4 |
| $ | 152.8 |
|
| (13.4 | )% |
|
| $ | 16.9 |
| $ | 37.7 |
|
| (55.2 | )% |
| $ | 17.8 |
|
| (52.8 | )% |
|
| $ | 149.3 |
| $ | 190.5 |
|
| (21.6 | )% |
Other revenues (1)(2) |
| $ | 44.9 |
| $ | 50.4 |
|
| (10.9 | )% |
|
| $ | 5.2 |
| $ | 19.2 |
|
| (72.9 | )% |
| $ | 6.0 |
|
| (68.8 | )% |
|
| $ | 50.1 |
| $ | 69.6 |
|
| (28.0 | )% |
Total revenues (1)(2) |
| $ | 366.4 |
| $ | 435.5 |
|
| (15.9 | )% |
|
| $ | 42.6 |
| $ | 117.1 |
|
| (63.6 | )% |
| $ | 45.7 |
|
| (61.0 | )% |
|
| $ | 409.0 |
| $ | 552.6 |
|
| (26.0 | )% |
Attendance (1) |
|
| 20.3 |
|
| 27.9 |
|
| (27.2 | )% |
|
|
| 6.5 |
|
| 17.9 |
|
| (63.7 | )% |
|
|
|
|
|
|
|
|
|
| 26.8 |
|
| 45.8 |
|
| (41.5 | )% |
Average ticket price (1) |
| $ | 9.31 |
| $ | 8.33 |
|
| 11.8 | % |
|
| $ | 3.15 |
| $ | 3.36 |
|
| (6.3 | )% |
| $ | 3.36 |
|
| — | % |
|
| $ | 7.81 |
| $ | 6.39 |
|
| 22.2 | % |
Concession revenues per patron (1) |
| $ | 6.52 |
| $ | 5.48 |
|
| 19.0 | % |
|
| $ | 2.59 |
| $ | 2.11 |
|
| 22.7 | % |
| $ | 2.73 |
|
| 29.4 | % |
|
| $ | 5.56 |
| $ | 4.16 |
|
| 33.7 | % |
Total revenues were $588.1 million for the nine months ended September 30, 2020 (“2020 period”) and $2,494.3 million for the nine months ended September 30, 2019 (“2019 period”). The table below, presented by reportable operating segment, summarizes our revenue performance and certain key performance indicators for the nine months ended September 30, 2019 and 2020.
|
| U.S. Operating Segment |
|
|
| International Operating Segment |
|
|
| Consolidated |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Constant Currency (3) |
|
|
|
|
|
|
|
|
| |
|
| 2020 |
| 2019 |
|
|
| 2020 |
| 2019 |
|
| 2020 |
|
|
| 2020 |
| 2019 |
| |||||||
Admissions revenues (1) |
| $ | 247.2 |
| $ | 1,066.9 |
|
|
| $ | 60.2 |
| $ | 304.2 |
|
| $ | 71.2 |
|
|
| $ | 307.4 |
| $ | 1,371.1 |
|
Concession revenues (1) |
| $ | 161.7 |
| $ | 704.7 |
|
|
| $ | 37.9 |
| $ | 181.4 |
|
| $ | 44.2 |
|
|
| $ | 199.6 |
| $ | 886.1 |
|
Other revenues (1)(2) |
| $ | 61.2 |
| $ | 159.2 |
|
|
| $ | 19.9 |
| $ | 77.9 |
|
| $ | 24.4 |
|
|
| $ | 81.1 |
| $ | 237.1 |
|
Total revenues (1)(2) |
| $ | 470.1 |
| $ | 1,930.8 |
|
|
| $ | 118.0 |
| $ | 563.5 |
|
| $ | 139.8 |
|
|
| $ | 588.1 |
| $ | 2,494.3 |
|
Attendance (1) |
|
| 29.8 |
|
| 132.9 |
|
|
|
| 17.9 |
|
| 82.9 |
|
|
|
|
|
|
|
| 47.7 |
|
| 215.8 |
|
Average ticket price (1) |
| $ | 8.30 |
| $ | 8.03 |
|
|
| $ | 3.36 |
| $ | 3.67 |
|
| $ | 3.98 |
|
|
| $ | 6.44 |
| $ | 6.35 |
|
Concession revenues per patron (1) |
| $ | 5.43 |
| $ | 5.30 |
|
|
| $ | 2.12 |
| $ | 2.19 |
|
| $ | 2.47 |
|
|
| $ | 4.18 |
| $ | 4.11 |
|
(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 16 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 |
| • | U.S. |
| • | International. |
|
|
Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the ninesix months ended SeptemberJune 30, 20202021 and 2019.2020.
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Consolidated |
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Consolidated |
| ||||||||||||||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| Constant Currency (1) 2020 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| Constant Currency (1) 2021 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||
Film rentals and advertising |
| $ | 136.3 |
|
| $ | 610.3 |
|
| $ | 28.9 |
|
| $ | 149.4 |
|
| $ | 34.4 |
|
| $ | 165.2 |
|
| $ | 759.7 |
|
| $ | 89.6 |
|
| $ | 128.2 |
|
| $ | 10.2 |
|
| $ | 28.8 |
|
| $ | 11.0 |
|
| $ | 99.8 |
|
| $ | 157.0 |
|
Concession supplies |
| $ | 29.4 |
|
| $ | 117.6 |
|
| $ | 10.5 |
|
| $ | 39.7 |
|
| $ | 12.5 |
|
| $ | 39.9 |
|
| $ | 157.3 |
|
| $ | 21.6 |
|
| $ | 27.1 |
|
| $ | 4.4 |
|
| $ | 10.1 |
|
| $ | 4.6 |
|
| $ | 26.0 |
|
| $ | 37.2 |
|
Salaries and wages |
| $ | 90.5 |
|
| $ | 247.4 |
|
| $ | 26.1 |
|
| $ | 60.9 |
|
| $ | 31.8 |
|
| $ | 116.6 |
|
| $ | 308.3 |
|
| $ | 68.4 |
|
| $ | 74.6 |
|
| $ | 13.2 |
|
| $ | 21.8 |
|
| $ | 14.4 |
|
| $ | 81.6 |
|
| $ | 96.4 |
|
Facility lease expense |
| $ | 186.0 |
|
| $ | 194.1 |
|
| $ | 28.5 |
|
| $ | 68.4 |
|
| $ | 34.2 |
|
| $ | 214.5 |
|
| $ | 262.5 |
|
| $ | 118.9 |
|
| $ | 125.2 |
|
| $ | 13.1 |
|
| $ | 22.2 |
|
| $ | 13.6 |
|
| $ | 132.0 |
|
| $ | 147.4 |
|
Utilities and other |
| $ | 140.3 |
|
| $ | 260.8 |
|
| $ | 38.4 |
|
| $ | 96.4 |
|
| $ | 46.5 |
|
| $ | 178.7 |
|
| $ | 357.2 |
|
| $ | 92.9 |
|
| $ | 103.8 |
|
| $ | 17.4 |
|
| $ | 31.6 |
|
| $ | 19.0 |
|
| $ | 110.3 |
|
| $ | 135.4 |
|
(1) | Constant currency expense amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for |
| • | U.S. Film rentals and advertising costs for the 2021 period were |
Salaries and wages decreased $6.2 million for the 20202021 period from the 2019 period primarily due to the temporary closure of all of our U.S. theatres for a portion of the 2020 period and limitedas theatre operating hours upon reopening.continue expand, but have not returned to normal, and our operational teams focus on more efficient staffing levels. Facility lease expense, which is primarily fixed in nature, decreased for the 2020 period from the 2019 period$6.3 million primarily due to a decline in percentage rent expense.expense and common area maintenance costs, as well as the permanent closure of certain theatres. Utilities and other costs decreased for the 2020 period from the 2019 period,$10.9 million, as many of these costs, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, are variable in nature and were impacted by lower attendance, reduced operating hours of our theatres and limited capacities during the theatres that were reopened.first half of the 2021 period.
| • | International. Film rentals and advertising costs for the 2021 period were |
Salaries and wages decreased $8.6 million as reported and in constant currency for the 2021 period as compared to the 2020 period, compared todriven by the 2019 period. The decrease was due the temporary closureperiodic and varying closures of all of our international theatres on March 18, 2020, fifteen of which reopened beginning in August.and limited operating hours for those theatres that are open. Facility lease expense decreased $9.1 million as reported and in constant currency for 2020 period compareddue to our negotiations with certain landlords to shift from a minimum rent structure to percentage rent while we recover from the 2019 period. The decrease was due topandemic, as well as lower percentage rent and rent-free periods allowed in certain international locations due to mall closures.at other locations. Utilities and other costs decreased $14.2 million as reported, and in constant currency for the 2020 period compared to the 2019 period as many of these costs are variable in nature, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, are variable in nature and were impacted by the temporary closurelimited operating hours of our theatres and reduced operating hours ofas well as periodic closures during the theatres that were reopened.2021 period.
General and Administrative Expenses. General and administrative expenses decreasedincreased $3.8 million for the 20202021 period compared to the 20192020 period. The decrease wasincrease is primarily due to the temporary salary reductions and the furlough of a portion offurloughs for our corporate office staff for a portionworkforce that occurred during the second half of the 2020 period, in response to the impacttemporary closure of all of our theatres in March 2020, increased share based compensation expense due to the issuance of equity awards to employees as retention measures during 2020 Restructuring Plan (see Note 2) and the impact of changes in foreign currency exchange rates in certain countries in which we operate.early 2021, and increased consulting and other professional fees.
Depreciation and Amortization. Depreciation and amortization expense decreasedincreased $6.3 million during the 20202021 period compared the 2019 period. The decrease was primarily due to previously impaired theatre assets. the digital projectors received in a non-cash distribution from DCIP during the fourth quarter of 2020. See Note 129 to ourthe condensed consolidated financial statements for discussion of impairment.the non-cash distribution from DCIP.
Impairment of Long-Lived Assets. No asset impairment charges were recorded during the 2021 period. We recorded asset impairment charges on assets held and used of $41.2$16.6 million during the 2020 period compared to $45.4 million during the 2019 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 industry conditions, temporary closures, recovery expectations, increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. The long-lived asset impairment charges recorded during the 2020 period were alsoprimarily a result of the prolonged impact of the COVID pandemic on our operations, as some theatres remained closed and film content continuescontinued to shift into
future periods, both of which impactimpacted our estimated future cash flows for theatres. Impairment charges for the 2020 period impacted seven countries and impairment charges for the 2019 period impacted seveneight countries. See Note 12 to our condensed consolidated financial statements.
Restructuring costs.Costs. WeRestructuring costs were $(0.9) million during the 2021 period compared to $19.5 million during the 2020 period. The credit recorded restructuring costsduring the 2021 period was primarily the result of $20.1 millionsettlements of lease obligations below the original estimated amounts. Charges recorded during the 2020 period related to the 2020 Restructuring Plana restructuring plan implemented during the 2020 period.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 gainloss on disposal of assets and other of $6.9 million during 2020the 2021 period compared to a loss$2.3 million during the 20192020 period. Activity for the 20202021 period was primarily related to the write-off of certain digital projectors recently received from DCIP in a favorable litigation outcome for a casenon-cash distribution that was previously accrued,were replaced with laser projectors, partially offset by gains on the retirementsales of assets related to theatre remodels.excess land parcels. See Note 9 for discussion of the distribution of digital projectors from DCIP. Activity for the 20192020 period was primarily due to the retirement of assets related to theatre remodels.
Interest Expense. Interest expense, which includes amortization of debt issue costs and amortization of accumulated losses infor swap amendments, increased to $61.6 million during the 20202021 period compared to $55.7 million for the 2019 period2019.2020 period. The increase was primarily due to the issuance of 8.750% senior secured notes on April 20, 2020.2020 and the issuance of 5.875% senior secured notes on March 16, 2021. See Note 6 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 2021 period related to the early retirement of our 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 6 to our condensed consolidated financial statements.
Distributions from NCM. We recorded distributions from NCM of $7.0$0.1 million during the 20202021 period compared to $9.2$5.9 million recorded during the 2019 period, 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 8 to our condensed consolidated financial statements for discussion of our investment in NCM.
Interest expense – NCM. We recorded non-cash interest expense of $17.7$11.8 million for the 2021 and 2020 period compared to $14.2 million recorded during the 2019 period,periods, related to the significant financing component associated with certain of our agreements with NCM. See Note 8 to our condensed consolidated financial statements for further discussion.
Equity in Income (Loss)Loss of Affiliates. We recorded equity in loss of affiliates of $14.9 million during the 2021 period compared to $11.6 million during the 2020 period compared to equity in income of affiliates during the 2019 period. The decreaseincrease in equity income (loss)loss of affiliates is primarily due to the impact of theatres being temporarily closed as a result of the COVID-19 pandemic as discussed at Note 2.2 to our condensed consolidated financial statements. See Notes 8 and 9 to our condensed consolidated financial statements for information about our equity investments.
Income Taxes. An income tax benefit of $(220.3)$(3.9) million was recorded for the 20202021 period compared to income tax expensebenefit of $64.2$(101.0) million recorded for the 20192020 period. The effective tax rate was approximately 37.0%1.1% for the 2021 period compared to 30.6% for the 2020 period. As a result of 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 comparedwas favorably impacted by the carryback of 2020 losses to 27.7% fortax years that had a 35% federal tax rate under the 2019 period. See Income Tax Considerations at Note 2 to our condensed consolidated financial statements for further discussion.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.
Liquidity and Capital Resources
Operating Activities
We primarily collect our revenues in cash, mainly through box office receipts and the sale of concessions. Our revenues are received in cash prior to the payment of related 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 all of our theatres effectiveduring March 18, 2020. As2020, we reopen our theatres to limited operating hours, we will fundhave funded operating expenses with cash on hand and recent additional financing discussed below under Financing Activities.
Cash used for operating activities was $(172.4)$21.4 million for the ninesix months ended SeptemberJune 30, 20202021 compared to cash provided by operating activities of $396.5$154.1 million for the ninesix months ended SeptemberJune 30, 2019.2020. The decrease in cash provided byused for operating activities was primarily a result of $136.8 million of tax refunds received during April 2021, the temporary closuretiming and level of allrevenues earned during each period and the timing of our theatres effective March 18, 2020. payments to vendors for expenses incurred during each period, partially offset by payments of previously deferred rent.
As discussed in Note 4 ofto our condensed consolidated financial statements, we negotiated the deferral of rent and other lease-related payments for the second and third quarters ofin 2020 with many of our landlords, resulting in approximately $62.6$56.0 million in deferred lease payments as of SeptemberJune 30, 2020. We began to repay previously deferred amounts during the third quarter of 2020, while a majority of the repayments2021. Approximately $45.6 million will be made throughout 2021.repaid within one year and the remaining $10.4 million will be repaid in subsequent years.
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 $(67.5)30.8 million for the ninesix months ended SeptemberJune 30, 20202021 compared to $(196.3)46.8 million for the ninesix months ended SeptemberJune 30, 2019.2020. The decrease in cash used for investing activities was primarily due to the suspension of non-essentialreduced capital expenditures in responseas we continue to the temporary closure of our theatres. limit spend to essential projects.
Capital expenditures for the ninesix months ended SeptemberJune 30, 20202021 and 20192020 were as follows (in millions):
Period |
| New Theatres |
|
| Existing Theatres |
|
| Total |
| |||
Nine Months Ended September 30, 2020 |
| $ | 18.7 |
|
| $ | 48.9 |
|
| $ | 67.6 |
|
Nine Months Ended September 30, 2019 |
| $ | 54.7 |
|
| $ | 131.8 |
|
| $ | 186.5 |
|
Period |
| New Theatres |
|
| Existing Theatres |
|
| Total |
| |||
Six Months Ended June 30, 2021 |
| $ | 10.5 |
|
| $ | 22.3 |
|
| $ | 32.8 |
|
Six Months Ended June 30, 2020 |
| $ | 9.8 |
|
| $ | 37.2 |
|
| $ | 47.0 |
|
We operated 533521 theatres with 5,9745,864 screens worldwide as of SeptemberJune 30, 2020.2021. Theatres and screens acquired, built and closed during the three months ended SeptemberJune 30, 20202021 were as follows:
|
| January 1, 2020 |
|
| Built |
|
| Closed |
|
| September 30, 2020 |
|
| January 1, 2021 |
|
| Built |
|
| Closed |
|
| June 30, 2021 |
| ||||||||
U.S (42 states) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatres |
|
| 345 |
|
|
| 1 |
|
|
| 15 |
|
|
| 331 |
|
|
| 331 |
|
|
| — |
|
|
| (8) |
|
|
| 323 |
|
Screens |
|
| 4,645 |
|
|
| 12 |
|
|
| 140 |
|
|
| 4,517 |
|
|
| 4,507 |
|
|
| — |
|
|
| (81) |
|
|
| 4,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International (15 countries) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatres |
|
| 209 |
|
|
| 1 |
|
|
| 8 |
|
|
| 202 |
|
|
| 200 |
|
|
| 1 |
|
|
| (3) |
|
|
| 198 |
|
Screens |
|
| 1,487 |
|
|
| 16 |
|
|
| 46 |
|
|
| 1,457 |
|
|
| 1,451 |
|
|
| 6 |
|
|
| (19) |
|
|
| 1,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatres |
|
| 554 |
|
|
| 2 |
|
|
| 23 |
|
|
| 533 |
|
|
| 531 |
|
|
| 1 |
|
|
| (11) |
|
|
| 521 |
|
Screens |
|
| 6,132 |
|
|
| 28 |
|
|
| 186 |
|
|
| 5,974 |
|
|
| 5,958 |
|
|
| 6 |
|
|
| (100) |
|
|
| 5,864 |
|
As of SeptemberJune 30, 2020,2021, we had the following signed commitments (costs in millions):
|
| Theatres |
|
| Screens |
|
| Estimated Cost (1) |
|
| Theatres |
|
| Screens |
|
| Estimated Cost (1) |
| ||||||
Remainder of 2020 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Remainder of 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
U.S. |
|
| 2 |
|
|
| 16 |
|
| $ | 6.6 |
|
|
| 3 |
|
|
| 42 |
|
| $ | 33.4 |
|
International |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 24 |
|
|
| 3.7 |
|
Total |
|
| 2 |
|
|
| 16 |
|
| $ | 6.6 |
|
|
| 5 |
|
|
| 66 |
|
| $ | 37.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent to 2020 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Subsequent to 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
U.S. |
|
| 10 |
|
|
| 126 |
|
| $ | 89.2 |
|
|
| 5 |
|
|
| 60 |
|
| $ | 37.9 |
|
International |
|
| 10 |
|
|
| 79 |
|
|
| 36.8 |
|
|
| 7 |
|
|
| 49 |
|
|
| 24.3 |
|
Total |
|
| 20 |
|
|
| 205 |
|
| $ | 126.0 |
|
|
| 12 |
|
|
| 109 |
|
| $ | 62.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments at September 30, 2020 |
|
| 22 |
|
|
| 221 |
|
| $ | 132.6 |
| ||||||||||||
Total commitments at June 30, 2021 |
|
| 17 |
|
|
| 175 |
|
| $ | 99.3 |
|
| (1) | We expect approximately |
|
Actual expenditures for continued theatre development, remodels and acquisitions are subject to change based upon the availability of attractive opportunities. We may 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 provided by financing activities was $187.6$113.1 million for the ninesix months ended SeptemberJune 30, 20202021 compared to cash used for financing activities of $(138.4) million for the nine months ended September 30, 2019. The increase in cash provided by financing activities was primarily dueof $291.0 million for the six months ended June 30, 2020. During the six months ended June 30, 2021, we received a contribution of $120.0 million from our parent company, issued the 5.875% Senior Notes and issued the 5.25% Senior Notes, the proceeds of which were used to redeem the 5.125% Senior Notes and the 4.875% Senior Notes as discussed further below. We paid approximately $17.3 million in debt issuance of 8.750%costs and $2.1 million in fees related to these transactions and amendments to our Senior Secured notesCredit Facility during the six months ended June 30, 2021. During the six months ended June 30, 2020, we borrowed $98.8 million on April 20, 2020.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 Cinemark Holdings, Inc., our parent company, of $42.0 million.
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 SeptemberJune 30, 20202021 (in millions):
Cinemark USA, Inc. term loan |
| $ | 641.4 |
|
| $ | 636.4 |
|
Cinemark USA, Inc. 5.125% senior notes due 2022 |
|
| 400.0 |
| ||||
Cinemark USA, Inc. 4.875% senior notes due 2023 |
|
| 755.0 |
| ||||
Cinemark USA, Inc. 8.750% senior secured notes due 2025 |
|
| 250.0 |
|
|
| 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 |
|
| 7.0 |
|
|
| 31.4 |
|
Total long-term debt |
| $ | 2,053.4 |
|
| $ | 2,087.8 |
|
Less current portion |
|
| 8.0 |
|
|
| 20.9 |
|
Subtotal long-term debt, less current portion |
| $ | 2,045.4 |
|
| $ | 2,066.9 |
|
Less: Debt discounts and debt issuance costs, net of accumulated amortization |
|
| 26.6 |
|
|
| 34.1 |
|
Long-term debt, less current portion, net of debt issuance costs |
| $ | 2,018.8 |
| ||||
Long-term debt, less current portion, net of debt discounts and unamortized debt issuance costs |
| $ | 2,032.8 |
|
As of SeptemberJune 30, 2020,2021, $100.0100 million was available for borrowing under the revolving line of credit.
Contractual Obligations
In April 2020,During the six months ended June 30, 2021, Cinemark USA, Inc. issued $250.0 million 8.750% senior secured notes. Additionally, in Maythe 5.875% Senior Notes and June 2020, our international subsidiaries in Peruthe 5.25% Senior Notes and Colombia borrowed $7.2 million under four separate loan agreements.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 June 30, 2020,2021, reflecting these additional obligations.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) |
| $ | 2,053.4 |
|
| $ | 8.0 |
|
| $ | 1,173.2 |
|
| $ | 872.2 |
|
| $ | — |
|
Scheduled interest payments on long-term debt (2) |
| $ | 335.2 |
|
| $ | 101.2 |
|
| $ | 173.1 |
|
| $ | 60.9 |
|
| $ | — |
|
(1) Amounts are presented before adjusting for 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 effect on September 30, 2020. The average interest rates in effect on our fixed rate and variable rate debt are 5.3% and 2.3%, respectively, as of September 30, 2020.
|
| 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) |
| $ | 2,087.8 |
|
| $ | 20.9 |
|
| $ | 23.6 |
|
| $ | 1,272.0 |
|
| $ | 771.3 |
|
Scheduled interest payments on long-term debt (2) |
| $ | 556.3 |
|
| $ | 108.6 |
|
| $ | 214.5 |
|
| $ | 152.8 |
|
| $ | 80.4 |
|
| (1) | Amounts are presented before adjusting for unamortized debt issuance costs and debt discounts. |
(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 effect on June 30, 2021. The average interest rates in effect on our fixed rate and variable rate debt are 5.3% and 2.9%, respectively, as of June 30, 2021. |
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, 20192020 filed February 21, 2020.March 3, 2021.
Off-Balance Sheet Arrangements
We 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 and a $100.0 million revolving credit line (the “Credit Agreement”). Under the amended Credit Agreement, quarterly principal payments of $1.6 million are due on the term loan through December 31, 2024, with a final principal payment of $613.4 million due on March 29, 2025. Cinemark USA, Inc. had $100.0 million available borrowing capacity on the revolving credit line as of SeptemberJune 30, 2020.2021.
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 0.75% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 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 0.50% to 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 1.50% to 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.
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, 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 (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 Cinemark Holdings, Inc.’s issuance of 4.50% Convertible Senior Notes, we 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 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 Cinemark Holdings, Inc.’s 4.50% Convertible Senior Notes.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes by Cinemark Holdings, Inc., Cinemark USA, Inc.’s parent company, which occurred on August 21, 2020.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 6 of our condensed consolidated financial statements for discussion of the interest rate swaps.
At SeptemberJune 30, 2020,2021, there was $641.4$636.4 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 at Septemberas of June 30, 20202021 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed above.
Cinemark USA, Inc. 5.125%5.875% Senior Notes
On December 18, 2012,March 16, 2021, Cinemark USA, Inc. issued $400.0$405 million aggregate principal amount of 5.125% Senior Notes5.875% senior notes due 2022,2026, 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 5.125%5.875% Senior Notes is payable on JuneMarch 15 and DecemberSeptember 15 of each year.year, beginning September 15, 2021. The 5.125%5.875% Senior Notes mature on DecemberMarch 15, 2022.2026. 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.
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.
The indenture to the 5.125%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. As of SeptemberJune 30, 2020,2021, Cinemark USA, Inc. could have distributed up to approximately $3,014.7 million$2.9 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 5.125%4.875% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control, as defined in the indenture, governing the 5.125% Senior Notes, Cinemark USA, Inc.Company would be required to make an offer to repurchase the 5.125%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 5.125%5.875% Senior Notes allows 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 SeptemberJune 30, 20202021 was approximately 0.3below zero.
Prior to 1.
March 15, 2023, Cinemark USA, Inc. 4.875%may redeem all or any part of the 5.875% Senior Notes
On May 24, 2013, 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. issued $530.0 million aggregate principal amount of 4.875%may redeem the 5.875% Senior Notes duein whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, at par value (the “4.875% Senior Notes”). On March 21, 2016, Cinemark USA, Inc. issued an additional $225.0 millionmay redeem up to 40% of the aggregate principal amount of the 4.875%5.875% Senior Notes from the net proceeds of certain equity offerings at 99.0%the redemption price set forth in the indenture.
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 from December 1, 2015. These additional 4.875%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 have identical terms, other than the issue date, the issue pricewas fully satisfied and the first interestdischarged.
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 date, and constitute part of the same series as the Company’s existingfees, were used to redeem all of Cinemark USA’s 4.875% $755 million aggregate principal amount of Senior Notes.Notes due 2023 (the “4.875% Senior Notes”). Interest on the 4.875%5.25% Senior Notes is payable on June 1January 15 and December 1July 15 of each year.year, beginning January 15, 2022. The 4.875%5.25% Senior Notes mature on June 1, 2023.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.
The indenture to the 4.875%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. As of SeptemberJune 30, 2020,2021, Cinemark USA, Inc. could have distributed up to approximately $3,008.9 million$2.9 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 4.875%5.25% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control, as defined in the indenture, governing the 4.875% Senior Notes, Cinemark USA, Inc.Company would be required to make an offer to repurchase the 4.875%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 4.875%5.25% Senior Notes allows 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 SeptemberJune 30, 20202021 was approximately 0.3below zero.
Prior to 1.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.
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.
8.750% Secured Notes
On April 20, 2020, the CompanyCinemark USA, Inc. issued $250,000$250 million 8.750% senior secured notes (the “8.750% Secured Notes”). The 8.750% SecuredSenior 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 $50,000,$50 million, the 8.750% SecuredSenior Notes s 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 $50,000,$50 million, the 8.750% SecuredSenior Notes will mature on February 28, 2023. Interest on the 8.750% SecuredSenior 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.
The 8.750% Secured Notes and the guarantees will be the Company’s and its guarantors’ senior obligations and they will:
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The indenture to the 8.750% Secured 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. As of SeptemberJune 30, 2020,2021, Cinemark USA, Inc. could have distributed up to approximately
$3,295.3 million $2.9 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 8.750% Secured Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control, as defined in the indenture governing the 8.750% Secured Notes, Cinemark USA, Inc. would be required to make an offer to repurchase 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 repurchase. The indenture governing the 8.750% Secured Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies a 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 2.02 to 1 and our actual ratio as of SeptemberJune 30, 20202021 was approximately 0.2 to 1. below zero.
Additional Borrowings of International Subsidiaries
During May 2020,the six months ended June 30, 2021, certain of our subsidiary in Peruinternational subsidiaries borrowed the USD equivalentan aggregate of $2.8$9.0 million under various local bank loans. Below is a loan that bears interest at approximately 1%. Principal payments are due monthly beginning in Julysummary of these loans:
Loan Amounts | ||||||||||||
Loan Description | (in USD) | Interest Rates | Covenants | Maturity | ||||||||
Peru bank loan | $ | 3.3 million | 4.8% | Negative covenants | January 2024 | |||||||
Brazil bank loan | $ | 5.7 million | 4.0% | Negative covenants | January 2029 |
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 six months ended June 30, 2021 throughwas $7.3 million. Total deposits made 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 June 2023. Accrued and unpaid interest is to be paid when principal payments are due. We are subject to certain customary negative covenants30, 2021. These restricted cash amounts do not impact the Applicable Amount as defined under the loan.
During May, June and September 2020, our subsidiaryCredit Agreement or the restricted payments as defined in Colombia borrowed the USD equivalent of $4.4 million under three variable rate loans. Monthly principal payments due underindentures to the notes borrowed in May and June are due beginning in December 2020 over 30 months and monthly principal payments due under the notes borrowed in September are due beginning in October 2021 over 48 months. Accrued and unpaid interest is to be paid when principal payments are due. The variable interest rates on the loans ranged from approximately 7.0% to 9.0% as of September 30, 2020. We are subject to certain customary negative covenants and ratio covenants under the loans.described above.
Covenant Compliance
As of SeptemberJune 30, 2020,2021, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have exposure to financial market risks, including changes in interest rates, foreign currency exchange rates and other relevant market prices.
Interest Rate Risk
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 SeptemberJune 30, 2020,2021, we had an aggregate of approximately $48.8$67.8 million of variable rate debt outstanding. Based on the interest rates in effect on the variable rate debt outstanding at SeptemberJune 30, 2020,2021, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $0.5$0.7 million.
The table below provides information about our fixed rate and variable rate long-term debt agreements as of SeptemberJune 30, 2020:2021:
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| Expected Maturity for the Twelve-Month Periods Ending September 30, |
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| Average |
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| Expected Maturity for the Twelve-Month Periods Ending June 30, |
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| Interest |
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| 2021 |
| 2022 |
| 2023 |
| 2024 |
| 2025 |
| Thereafter |
| Total |
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| Fair Value |
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| Rate |
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| 2022 |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
| Thereafter |
| Total |
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| �� | Rate |
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Fixed rate |
| $ | — |
| $ | — |
| $ | 1,155.0 |
| $ | — |
| $ | 850.0 |
| $ | — |
| $ | 2,005.0 |
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| $ | 1,795.8 |
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| 5.3 | % |
| $ | — |
| $ | — |
| $ | — |
| $ | 850.0 |
| $ | 405.0 |
| $ | 765.0 |
| $ | 2,020.0 |
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| $ | 2,060.6 |
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| 5.3 | % |
Variable rate (1) |
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| 8.0 |
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| 9.5 |
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| 8.7 |
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| 6.9 |
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| 15.3 |
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| — |
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| 48.4 |
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| 43.9 |
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| 2.3 | % |
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| 20.9 |
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| 14.4 |
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| 9.2 |
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| 16.9 |
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| 0.1 |
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| 6.3 |
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| 67.8 |
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| 66.7 |
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| 2.9 | % |
Total debt |
| $ | 8.0 |
| $ | 9.5 |
| $ | 1,163.7 |
| $ | 6.9 |
| $ | 865.3 |
| $ | — |
| $ | 2,053.4 |
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| $ | 1,839.7 |
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| $ | 20.9 |
| $ | 14.4 |
| $ | 9.2 |
| $ | 866.9 |
| $ | 405.1 |
| $ | 771.3 |
| $ | 2,087.8 |
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| $ | 2,127.3 |
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(1) | Amounts are presented before adjusting for unamortized debt issuance costs and debt discounts. |
Interest Rate Swap Agreements
All of our interest rate swap agreements qualify for cash flow hedge accounting. The fair values of the interest 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 6 to the condensed consolidated financial statements for 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, 20192020 filed February 21, 2020.March 3, 2021.
Item 4. Controls and Procedures
Evaluation of the Effectiveness of Disclosure Controls and Procedures
As of SeptemberJune 30, 2020,2021, 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 SeptemberJune 30, 2020,2021, 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 SeptemberJune 30, 20202021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Other than the discussion at Note 18, 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, 20192020 filed February 21, 2020March 3, 2021.
Item 1A. Risk Factors
See discussion in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20192020 filed February 21, 2020,March 3, 2021, as updated by the risk factors below.
Our substantial indebtedness could adversely affect our financial condition.
We currently have a substantial amount of indebtedness. This substantial amount of indebtedness could limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements, stock repurchases or other purposes. It may also increase our vulnerability to adverse economic, market and industry conditions (including the impact of COVID-19), limit our flexibility in planning for, or reacting to, changes in our business operations or to our industry overall, and place us at a disadvantage in relation to our competitors that have lower debt levels.
A lowering or withdrawal of the ratings assigned or a change in outlook to our outstanding debt securities by
rating agencies may increase our future borrowing costs and reduce our access to capital.
Our debt currently has a non-investment grade rating, and any rating assigned could be lowered (or outlook thereof could be changed) or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes in our business or industry, including as a result of COVID-19, so warrant. Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing. In particular, our access to the capital markets may be impacted, our other funding sources may decrease, the cost of debt may increase as a result of increased interest rates or fees, and we may be required to provide additional credit assurances, including collateral, under certain contracts or arrangements.
The COVID-19 pandemic has disrupted and is expected to continue to disrupt our industry and our business and could continue to materially affect our financial condition and results of operations for an extended period of time.
The outbreak of the COVID-19 pandemic has disrupted, and we expect it will continue to disrupt, our industry and our business for an extended period of time. While we have reopened 252 of our domestic theatres and 15 of our international theatres as of September 30, 2020, our business, results of operations, liquidity, cash flows and financial conditions continue to be severely impacted by the COVID-19 pandemic. One of the key factors that have materially affected our business is the availability of new films for exhibition at our theatres. Due to the COVID-19 pandemic, production of films has been temporarily halted or delayed and new film releases have been postponed, resultingincluded in a drastic reduction in the volume of new films available for theatrical exhibition. Even when new films are available, studios have reduced the window for video and digital releases or have released directly to alternative film distribution channels such as streaming services and bypassed a theatrical release.
In addition to the impactForm 8-K that was filed on film product availability for theatrical exhibition, governmental restrictions such as limitations on capacity and food and beverage sales continue to hurt our results of operations, liquidity and cash flows. As the COVID-19 pandemic continues to spike, there could be additional federal, state or local responses that further restrict in-person gathering and/or movement of guests or otherwise impact our business.March 4, 2021.
We cannot predict when the effects of the COVID-19 pandemic will subside or if business will return to normal levels of operation.
Our results of operations may be impacted by shrinking video and digital release windows.
The average video and digital release window, which represents the time that elapses from the date of a film’s theatrical release to the date a film is available for DVD, has been approximately ninety days and digital purchase for ownership (also known as electronic sell-through) has been approximately seventy-four days for the past several years. During the COVID-19 pandemic, certain studios have reduced the release windows further than ninety days or eliminated them altogether. If our patrons continue to choose to wait for an in-home release rather than attend a theatre to view the film, it may continue to adversely impact our business and results of operations, financial condition and cash flows. The release windows, which are determined by the studios, may be reduced further or be eliminated altogether, which could have an adverse impact on our business and results of operation.
We may not be able to generate additional revenues or continue to realize value from our investment in NCM.
As of September 30, 2020, we owned 40,850,068 common units of NCM, which represented an ownership interest in NCM of approximately 25%. We receive monthly theatre access and advertising fees under our Exhibitor Services Agreement with NCM and we are entitled to receive mandatory quarterly distributions of excess cash from NCM. During the nine months ended September 30, 2020 and 2019, the Company received approximately $27.7 million and $35.5 million in other revenues from NCM, respectively, $14.2 million and $18.5 million in cash distributions recorded as a reduction of our investment in NCM, respectively, and $7.0 million and $9.2 million in cash distributions in excess of our investment in NCM, respectively. Cinema advertising is a small component of the U.S. advertising market and therefore, NCM competes with larger, more established and well known media platforms such as broadcast radio and television, cable and satellite television, outdoor advertising and Internet portals. In-theatre advertising may not continue to attract advertisers or NCM’s in-theatre advertising format may not continue to be received favorably by theatre patrons. If NCM is unable to continue to generate consistent advertising revenues, its results of operations may be adversely affected and our investment in and distributions and revenues from NCM may be adversely impacted. NCM revenues and excess cash distributions have been significantly impacted by the COVID-19 pandemic and resulting temporary theatre closures. Future NCM revenues and excess cash distributions from NCM to the Company will depend on the reopening of theatres.
Each of our common units in NCM is convertible into one share of NCM, Inc. common stock. The market value of NCM, Inc.’s stock price may vary due to the performance of the business, industry trends, general and economic conditions and other factors. If NCM, Inc.’s stock price declines below our carrying value for an extended period of time, we may record an impairment in our investment. As a result of the COVID-19 pandemic, the stock price of NCM, Inc. has remained below the Company’s book value for approximately seven months.
Item 5. Other Information
Supplemental Schedules Specified by the Senior Notes Indentures
As required by the indentures governing the Company’s 5.125%5.875% Senior Notes, 4.875%5.25% Senior Notes and 8.750% Senior Secured Notes, collectively “the senior notes”, the Company has included in this filing, interim financial information for its subsidiaries that have been designated as unrestricted subsidiaries, as defined by the indentures. As required by these indentures, the Company has included an unaudited condensed consolidating balance sheet and unaudited condensed consolidating statements of income (loss),loss, comprehensive income (loss)loss and cash flows for the Company and its subsidiaries. See Liquidity and Capital Resources at Part I - Item 2 for discussion of the senior notes, including relevant covenants and restrictions. The following supplementary schedules separately identify the Company’s restricted subsidiaries and unrestricted subsidiaries as required by the indentures.
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| Page |
Unaudited Condensed Consolidating Balance Sheet Information as of |
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| |
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CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
SEPTEMBERJUNE 30, 20202021
(In thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
| ||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 334,903 |
|
| $ | 96,053 |
|
| $ | — |
|
| $ | 430,956 |
|
| $ | 233,048 |
|
| $ | 88,049 |
|
| $ | — |
|
| $ | 321,097 |
|
Other current assets |
|
| 342,521 |
|
|
| (104,355 | ) |
|
| (52,114 | ) |
|
| 186,052 |
|
|
| 278,628 |
|
|
| (111,700 | ) |
|
| (4,286 | ) |
|
| 162,642 |
|
Total current assets |
|
| 677,424 |
|
|
| (8,302 | ) |
|
| (52,114 | ) |
|
| 617,008 |
|
|
| 511,676 |
|
|
| (23,651 | ) |
|
| (4,286 | ) |
|
| 483,739 |
|
Theatre properties and equipment, net |
|
| 1,545,823 |
|
|
| — |
|
|
| — |
|
|
| 1,545,823 |
|
|
| 1,492,564 |
|
|
| — |
|
|
| — |
|
|
| 1,492,564 |
|
Operating lease right-of-use assets, net |
|
| 1,286,224 |
|
|
| — |
|
|
| — |
|
|
| 1,286,224 |
|
|
| 1,229,587 |
|
|
| — |
|
|
| — |
|
|
| 1,229,587 |
|
Other assets |
|
| 1,860,839 |
|
|
| 488,175 |
|
|
| (362,457 | ) |
|
| 1,986,557 |
|
|
| 1,820,176 |
|
|
| 321,352 |
|
|
| (370,542 | ) |
|
| 1,770,986 |
|
Total assets |
| $ | 5,370,310 |
|
| $ | 479,873 |
|
| $ | (414,571 | ) |
| $ | 5,435,612 |
|
| $ | 5,054,003 |
|
| $ | 297,701 |
|
| $ | (374,828 | ) |
| $ | 4,976,876 |
|
Liabilities and equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
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Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
| $ | 7,965 |
|
| $ | — |
|
| $ | — |
|
| $ | 7,965 |
|
| $ | 20,910 |
|
| $ | — |
|
| $ | — |
|
| $ | 20,910 |
|
Current portion of operating lease obligations |
|
| 216,382 |
|
|
| — |
|
|
| — |
|
|
| 216,382 |
|
|
| 211,468 |
|
|
| — |
|
|
| — |
|
|
| 211,468 |
|
Current portion of finance and capital lease obligations |
|
| 16,224 |
|
|
| — |
|
|
| — |
|
|
| 16,224 |
|
|
| 14,439 |
|
|
| — |
|
|
| — |
|
|
| 14,439 |
|
Accounts payable and accrued expenses |
|
| 378,947 |
|
|
| 20 |
|
|
| (2,114 | ) |
|
| 376,853 |
|
|
| 400,843 |
|
|
| 18 |
|
|
| (4,286 | ) |
|
| 396,575 |
|
Total current liabilities |
|
| 619,518 |
|
|
| 20 |
|
|
| (2,114 | ) |
|
| 617,424 |
|
|
| 647,660 |
|
|
| 18 |
|
|
| (4,286 | ) |
|
| 643,392 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion |
|
| 2,274,257 |
|
|
| — |
|
|
| (255,438 | ) |
|
| 2,018,819 |
|
|
| 2,296,307 |
|
|
| — |
|
|
| (263,523 | ) |
|
| 2,032,784 |
|
Operating lease obligations, less current portion |
|
| 1,137,822 |
|
|
| — |
|
|
| — |
|
|
| 1,137,822 |
|
|
| 1,085,539 |
|
|
| — |
|
|
| — |
|
|
| 1,085,539 |
|
Finance and capital lease obligations, less current portion |
|
| 128,727 |
|
|
| — |
|
|
| — |
|
|
| 128,727 |
|
|
| 109,327 |
|
|
| — |
|
|
| — |
|
|
| 109,327 |
|
Other long-term liabilities and deferrals |
|
| 478,543 |
|
|
| 58,928 |
|
|
| — |
|
|
| 537,471 |
|
|
| 505,122 |
|
|
| 18,680 |
|
|
| — |
|
|
| 523,802 |
|
Total long-term liabilities |
|
| 4,019,349 |
|
|
| 58,928 |
|
|
| (255,438 | ) |
|
| 3,822,839 |
|
|
| 3,996,295 |
|
|
| 18,680 |
|
|
| (263,523 | ) |
|
| 3,751,452 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 731,443 |
|
|
| 420,925 |
|
|
| (157,019 | ) |
|
| 995,349 |
|
|
| 410,048 |
|
|
| 279,003 |
|
|
| (107,019 | ) |
|
| 582,032 |
|
Total liabilities and equity |
| $ | 5,370,310 |
|
| $ | 479,873 |
|
| $ | (414,571 | ) |
| $ | 5,435,612 |
|
| $ | 5,054,003 |
|
| $ | 297,701 |
|
| $ | (374,828 | ) |
| $ | 4,976,876 |
|
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)LOSS INFORMATION
NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021
(In thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
| ||||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
|
| Group |
|
| Group |
|
|
| Eliminations |
|
| Consolidated |
| |||||||||
Revenues |
| $ | 588,068 |
|
| $ | — |
|
| $ | — |
|
| $ | 588,068 |
|
| $ | 409,013 |
|
| $ | — |
| $ | — |
|
| $ | 409,013 |
| |||
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| — |
| ||||
Theatre operating costs |
|
| 715,026 |
|
|
| — |
|
|
| — |
|
|
| 715,026 |
|
|
| 449,723 |
|
|
| — |
| — |
|
|
| 449,723 |
| ||||
General and administrative expenses |
|
| 97,643 |
|
|
| 2 |
|
|
| — |
|
|
| 97,645 |
|
|
| 71,776 |
|
|
| 18 |
| — |
|
|
| 71,794 |
| ||||
Depreciation and amortization |
|
| 191,380 |
|
|
| — |
|
|
| — |
|
|
| 191,380 |
|
|
| 135,080 |
|
|
| — |
|
|
| — |
|
|
| 135,080 |
| ||
Impairment of long-lived assets |
|
| 38,714 |
|
|
| 2,500 |
|
|
| — |
|
|
| 41,214 |
| ||||||||||||||||||
Restructurring costs |
|
| 20,062 |
|
|
| — |
|
|
| — |
|
|
| 20,062 |
| ||||||||||||||||||
Restructuring costs |
|
| (948 | ) |
|
| — |
|
|
| — |
|
|
| (948 | ) | ||||||||||||||||||
Loss on disposal of assets and other |
|
| (10,997 | ) |
|
| — |
|
|
| — |
|
|
| (10,997 | ) |
|
| 6,863 |
|
|
| — |
|
|
|
| — |
|
|
| 6,863 |
| |
Total cost of operations |
|
| 1,051,828 |
|
|
| 2,502 |
|
|
| — |
|
|
| 1,054,330 |
|
|
| 662,494 |
|
|
| 18 |
|
| — |
|
|
| 662,512 |
| |||
Operating loss |
|
| (463,760 | ) |
|
| (2,502 | ) |
|
| — |
|
|
| (466,262 | ) |
|
| (253,481 | ) |
|
| (18 | ) |
|
| — |
|
|
| (253,499 | ) | ||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (96,807 | ) |
|
| (3 | ) |
|
| 8,868 |
|
|
| (87,942 | ) |
|
| (62,976 | ) |
|
| (1 | ) |
| 1,399 |
|
|
| (61,578 | ) | |||
Loss on extinguishment of debt |
|
| (6,527 | ) |
|
| — |
| — |
|
|
| (6,527 | ) | ||||||||||||||||||||
Equity in loss of affiliates |
|
| (4,036 | ) |
|
| (23,675 | ) |
|
| — |
|
|
| (27,711 | ) |
|
| (8,377 | ) |
|
| (6,538 | ) |
| — |
|
|
| (14,915 | ) | |||
Dividend income from affiliates |
|
| 50,000 |
|
|
| — |
|
|
| (50,000 | ) |
|
| — |
| ||||||||||||||||||
Distributions from NCM |
|
| — |
|
|
| 6,975 |
|
|
| — |
|
|
| 6,975 |
|
|
| — |
|
|
| 77 |
| — |
|
|
| 77 |
| ||||
Interest expense - NCM |
|
| (17,726 | ) |
|
| — |
|
|
| — |
|
|
| (17,726 | ) |
|
| (11,797 | ) |
|
| — |
| — |
|
|
| (11,797 | ) | ||||
Other income (expense) |
|
| (2,408 | ) |
|
| 9,301 |
|
|
| (8,868 | ) |
|
| (1,975 | ) | ||||||||||||||||||
Other income |
|
| 3,770 |
|
|
| 1,411 |
|
| (1,399 | ) |
|
| 3,782 |
| |||||||||||||||||||
Total other income (expense) |
|
| (70,977 | ) |
|
| (7,402 | ) |
|
| (50,000 | ) |
|
| (128,379 | ) |
|
| (85,907 | ) |
|
| (5,051 | ) |
|
| — |
|
|
| (90,958 | ) | ||
Income (loss) before income taxes |
|
| (534,737 | ) |
|
| (9,904 | ) |
|
| (50,000 | ) |
|
| (594,641 | ) | ||||||||||||||||||
Loss before income taxes |
|
| (339,388 | ) |
|
| (5,069 | ) |
|
| — |
|
|
| (344,457 | ) | ||||||||||||||||||
Income taxes |
|
| (206,400 | ) |
|
| (13,887 | ) |
|
| — |
|
|
| (220,287 | ) |
|
| (3,041 | ) |
|
| (847 | ) |
|
| — |
|
|
| (3,888 | ) | ||
Net income (loss) |
|
| (328,337 | ) |
|
| 3,983 |
|
|
| (50,000 | ) |
|
| (374,354 | ) | ||||||||||||||||||
Net loss |
|
| (336,347 | ) |
|
| (4,222 | ) |
|
| — |
|
|
| (340,569 | ) | ||||||||||||||||||
Less: Net loss attributable to noncontrolling interests |
|
| (702 | ) |
|
| — |
|
|
| — |
|
|
| (702 | ) |
|
| (416 | ) |
|
| — |
|
| — |
|
|
| (416 | ) | |||
Net income (loss) attributable to Cinemark USA, Inc. |
| $ | (327,635 | ) |
| $ | 3,983 |
|
| $ | (50,000 | ) |
| $ | (373,652 | ) | ||||||||||||||||||
Net loss attributable to Cinemark USA, Inc. |
| $ | (335,931 | ) |
| $ | (4,222 | ) |
| $ | — |
|
| $ | (340,153 | ) |
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF
COMPREHENSIVE INCOME (LOSS)LOSS INFORMATION
NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021
(In thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
| ||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||||||
Net income (loss) |
| $ | (328,337 | ) |
| $ | 3,983 |
|
| $ | (50,000 | ) |
| $ | (374,354 | ) | ||||||||||||||||
Net loss |
| $ | (336,347 | ) |
| $ | (4,222 | ) |
| $ | — |
|
| $ | (340,569 | ) | ||||||||||||||||
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes of $3,696, net of settlements |
|
| (16,794 | ) |
|
| — |
|
|
| — |
|
|
| (16,794 | ) | ||||||||||||||||
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes of $2,847, net of settlements |
|
| 6,450 |
|
|
| — |
|
|
| — |
|
|
| 6,450 |
| ||||||||||||||||
Foreign currency translation adjustments |
|
| (62,830 | ) |
|
| — |
|
|
| — |
|
|
| (62,830 | ) |
|
| (1,206 | ) |
|
| — |
|
|
| — |
|
|
| (1,206 | ) |
Total other comprehensive loss, net of tax |
|
| (79,624 | ) |
|
| — |
|
|
| — |
|
|
| (79,624 | ) |
|
| 5,244 |
|
|
| — |
|
|
| — |
|
|
| 5,244 |
|
Total comprehensive income (loss), net of tax |
|
| (407,961 | ) |
|
| 3,983 |
|
|
| (50,000 | ) |
|
| (453,978 | ) | ||||||||||||||||
Total comprehensive loss, net of tax |
|
| (331,103 | ) |
|
| (4,222 | ) |
|
| — |
|
|
| (335,325 | ) | ||||||||||||||||
Comprehensive loss attributable to noncontrolling interests |
|
| 702 |
|
|
| — |
|
|
| — |
|
|
| 702 |
|
|
| 416 |
|
|
| — |
|
|
| — |
|
|
| 416 |
|
Comprehensive income (loss) attributable to Cinemark USA, Inc. |
| $ | (407,259 | ) |
| $ | 3,983 |
|
| $ | (50,000 | ) |
| $ | (453,276 | ) | ||||||||||||||||
Comprehensive loss attributable to Cinemark USA, Inc. |
| $ | (330,687 | ) |
| $ | (4,222 | ) |
| $ | — |
|
| $ | (334,909 | ) |
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021
(In thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
| ||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | (328,337 | ) |
| $ | 3,983 |
|
| $ | (50,000 | ) |
| $ | (374,354 | ) | ||||||||||||||||
Adjustments to reconcile net income to cash provided by operating activities |
|
| 211,568 |
|
|
| 54,105 |
|
|
| — |
|
|
| 265,673 |
| ||||||||||||||||
Net loss |
| $ | (336,347 | ) |
| $ | (4,222 | ) |
| $ | — |
|
| $ | (340,569 | ) | ||||||||||||||||
Adjustments to reconcile net loss to cash used for operating activities |
|
| 154,285 |
|
|
| 6,602 |
|
|
| — |
|
|
| 160,887 |
| ||||||||||||||||
Changes in assets and liabilities |
|
| (85,983 | ) |
|
| (27,744 | ) |
|
| 50,000 |
|
|
| (63,727 | ) |
|
| 160,584 |
|
|
| (2,306 | ) |
|
| — |
|
|
| 158,278 |
|
Net cash (used for) provided by operating activities |
|
| (202,752 | ) |
|
| 30,344 |
|
|
| — |
|
|
| (172,408 | ) | ||||||||||||||||
Net cash used for operating activities |
|
| (21,478 | ) |
|
| 74 |
|
|
| — |
|
|
| (21,404 | ) | ||||||||||||||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to theatre properties and equipment |
|
| (67,618 | ) |
|
| — |
|
|
| — |
|
|
| (67,618 | ) |
|
| (32,819 | ) |
|
| — |
|
|
| — |
|
|
| (32,819 | ) |
Proceeds from sale of theatre properties and equipment and other |
|
| 212 |
|
|
| — |
|
|
| — |
|
|
| 212 |
|
|
| 1,995 |
|
|
| — |
|
|
| — |
|
|
| 1,995 |
|
Dividends received from subsidiary |
|
| 50,000 |
|
|
| — |
|
|
| (50,000 | ) |
|
| — |
| ||||||||||||||||
Loan to parent/subsidiaries |
|
| — |
|
|
| (8,288 | ) |
|
| 8,238 |
|
|
| (50 | ) | ||||||||||||||||
Investments and loans to affliates |
|
| — |
|
|
| (6,785 | ) |
|
| 6,785 |
|
|
| — |
| ||||||||||||||||
Net cash used for investing activities |
|
| (17,406 | ) |
|
| (8,288 | ) |
|
| (41,762 | ) |
|
| (67,456 | ) |
|
| (30,824 | ) |
|
| (6,785 | ) |
|
| 6,785 |
|
|
| (30,824 | ) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to parent |
|
| (42,000 | ) |
|
| (50,000 | ) |
|
| 50,000 |
|
|
| (42,000 | ) | ||||||||||||||||
Contributions from parent |
|
| 120,000 |
|
|
| — |
|
|
| — |
|
|
| 120,000 |
| ||||||||||||||||
Borrowings from parent/subsidiary |
|
| 8,238 |
|
|
| — |
|
|
| (8,238 | ) |
|
| — |
|
|
| 6,785 |
|
|
| — |
|
|
| (6,785 | ) |
|
| — |
|
Proceeds from other borrowings |
|
| 257,167 |
|
|
| — |
|
|
| — |
|
|
| 257,167 |
| ||||||||||||||||
Proceeds from issuance of senior notes and other borrowings |
|
| 1,179,012 |
|
|
| — |
|
|
| — |
|
|
| 1,179,012 |
| ||||||||||||||||
Redemption of senior notes |
|
| (1,155,000 | ) |
|
| — |
|
|
| — |
|
|
| (1,155,000 | ) | ||||||||||||||||
Repayments on long-term debt |
|
| (4,947 | ) |
|
| — |
|
|
| — |
|
|
| (4,947 | ) |
|
| (4,204 | ) |
|
| — |
|
|
| — |
|
|
| (4,204 | ) |
Payment of debt issue costs |
|
| (7,859 | ) |
|
| — |
|
|
| — |
|
|
| (7,859 | ) |
|
| (17,272 | ) |
|
| — |
|
|
| — |
|
|
| (17,272 | ) |
Payments on finance leases |
|
| (11,497 | ) |
|
| — |
|
|
| — |
|
|
| (11,497 | ) |
|
| (7,373 | ) |
|
| — |
|
|
| — |
|
|
| (7,373 | ) |
Other |
|
| (3,257 | ) |
|
| — |
|
|
| — |
|
|
| (3,257 | ) |
|
| (2,070 | ) |
|
| — |
|
|
| — |
|
|
| (2,070 | ) |
Net cash used for financing activities |
|
| 195,845 |
|
|
| (50,000 | ) |
|
| 41,762 |
|
|
| 187,607 |
|
|
| 119,878 |
|
|
| — |
|
|
| (6,785 | ) |
|
| 113,093 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (5,002 | ) |
|
| — |
|
|
| — |
|
|
| (5,002 | ) |
|
| (306 | ) |
|
| — |
|
|
| — |
|
|
| (306 | ) |
Decrease in cash and cash equivalents |
|
| (29,315 | ) |
|
| (27,944 | ) |
|
| — |
|
|
| (57,259 | ) |
|
| 67,270 |
|
|
| (6,711 | ) |
|
| — |
|
|
| 60,559 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
| 364,218 |
|
|
| 123,997 |
|
|
| — |
|
|
| 488,215 |
|
|
| 165,778 |
|
|
| 94,760 |
|
|
| — |
|
|
| 260,538 |
|
End of year |
| $ | 334,903 |
|
| $ | 96,053 |
|
| $ | — |
|
| $ | 430,956 |
|
| $ | 233,048 |
|
| $ | 88,049 |
|
| $ | — |
|
| $ | 321,097 |
|
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
Item 6. Exhibits
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
*31.1 |
| |
|
|
|
*31.2 |
| |
|
|
|
*32.1 |
| |
|
|
|
*32.2 |
| |
|
|
|
* 101 |
| The following material from Cinemark USA, Inc.’s Form 10-Q for the quarter ended |
|
|
|
* 104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* | filed herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
| CINEMARK USA, INC. |
|
|
|
| Registrant |
|
|
|
|
|
DATE: |
|
|
|
|
|
|
|
|
|
|
|
|
| /s/Mark Zoradi |
|
|
|
| Mark Zoradi |
|
|
|
| Chief Executive Officer |
|
|
|
|
|
|
|
|
| /s/Sean Gamble |
|
|
|
| Sean Gamble |
|
|
|
| Chief Financial Officer |
5449