UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20212022
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) (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 |
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| Accelerated filer |
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Non-accelerated filer |
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| ☒ | 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 August 5, 2021, 4, 2022, 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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| Item 1. |
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| Condensed Consolidated Balance Sheets as of June 30, |
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| Condensed Consolidated Statements of Equity for the six months ended June 30, 2022 and 2021 | 7 | ||
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| Notes to Condensed Consolidated Financial Statements |
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| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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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 27Athe safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.1995. 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 to:
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 notneither historical facts nor guarantees of future performanceperformance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions and are, therefore, subject to risks, inherent uncertainties and other factors, some of which are beyond our control and difficult to predict, including, among others, the impacts of COVID-19.the COVID-19 pandemic. Such risks and uncertainties could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. For a description of the risk factors, please review the “Risk Factors” section or other sections of, or incorporated by reference to, the Company’sCinemark USA, Inc.'s Annual Report on Form 10-K filed March 3, 2021 and the Current Report on Form 8-K filed March 4, 2021.9, 2022. All forward-looking statements are expressly qualified in their entirety by such risk factors. We undertake no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Unless the context otherwise requires, all references to “we,” “our,” “us,” “the issuer,” “the Company” or “Cinemark” relate to Cinemark USA, Inc. and its consolidated subsidiaries. All references to Latin America are to Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay.
3
PART I - FINANCIAL INFORMATION
Item 1. Financ Financial Statementsial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands,millions, except share data, unaudited)
|
| June 30, |
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| December 31, |
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|
| 2021 |
|
| 2020 |
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Assets |
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Current assets |
|
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Cash and cash equivalents |
| $ | 321,097 |
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| $ | 260,538 |
|
Inventories |
|
| 14,440 |
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|
| 12,593 |
|
Accounts receivable |
|
| 35,306 |
|
|
| 25,257 |
|
Current income tax receivable |
|
| 39,381 |
|
|
| 158,932 |
|
Prepaid expenses and other |
|
| 34,664 |
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| 34,400 |
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Accounts receivable from parent |
|
| 38,851 |
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| 36,775 |
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Total current assets |
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| 483,739 |
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| 528,495 |
|
Theatre properties and equipment |
|
| 3,387,203 |
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| 3,403,103 |
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Less: accumulated depreciation and amortization |
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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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| 1,492,564 |
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| 1,615,062 |
|
Operating lease right-of-use assets, net |
|
| 1,229,587 |
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| 1,278,191 |
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Other assets |
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Goodwill |
|
| 1,255,150 |
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| 1,253,840 |
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Intangible assets, net |
|
| 312,986 |
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| 314,195 |
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Investment in NCM |
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| 147,629 |
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| 151,962 |
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Investments in affiliates |
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| 23,629 |
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| 23,726 |
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Deferred charges and other assets, net |
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| 31,592 |
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| 33,199 |
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Total other assets |
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| 1,770,986 |
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| 1,776,922 |
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Total assets |
| $ | 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 |
| $ | 20,910 |
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| $ | 18,056 |
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Current portion of operating lease obligations |
|
| 211,468 |
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| 208,593 |
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Current portion of finance lease obligations |
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| 14,439 |
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| 16,407 |
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Current income tax payable |
|
| — |
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| 5,632 |
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Accounts payable and accrued expenses |
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| 396,575 |
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| 350,094 |
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Total current liabilities |
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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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| 2,032,784 |
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| 2,024,956 |
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Operating lease obligations, less current portion |
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| 1,085,539 |
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| 1,138,142 |
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Finance lease obligations, less current portion |
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| 109,327 |
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| 124,609 |
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Long-term deferred tax liability |
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| 79,492 |
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| 89,961 |
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Long-term liability for uncertain tax positions |
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| 42,085 |
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| 19,225 |
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NCM screen advertising advances |
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| 350,362 |
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| 344,255 |
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Other long-term liabilities |
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| 51,863 |
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| 73,746 |
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Total long-term liabilities |
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| 3,751,452 |
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| 3,814,894 |
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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 |
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| 0 |
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| 0 |
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Class B common stock, no par value: 1,000,000 shares authorized, 239,893 shares issued and 182,648 shares outstanding |
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| 49,543 |
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| 49,543 |
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Treasury stock, 57,245 Class B shares at cost |
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| (24,233 | ) |
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| (24,233 | ) |
Additional paid-in-capital |
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| 1,440,741 |
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| 1,310,625 |
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Retained earnings |
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| (503,437 | ) |
|
| (163,284 | ) |
Accumulated other comprehensive loss |
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| (391,162 | ) |
|
| (398,653 | ) |
Total Cinemark USA, Inc.'s stockholder's equity |
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| 571,450 |
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| 773,998 |
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Noncontrolling interests |
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| 10,580 |
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| 10,996 |
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Total equity |
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| 582,032 |
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| 784,994 |
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Total liabilities and equity |
| $ | 4,976,876 |
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| $ | 5,198,670 |
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|
| June 30, |
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| December 31, |
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| 2022 |
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| 2021 |
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Assets |
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Current assets |
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Cash and cash equivalents |
| $ | 440.6 |
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| $ | 442.7 |
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Inventories |
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| 20.3 |
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| 15.5 |
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Accounts receivable |
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| 67.1 |
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| 68.8 |
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Current income tax receivable |
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| 45.0 |
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| 46.6 |
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Prepaid expenses and other |
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| 45.3 |
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| 36.2 |
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Accounts receivable from parent |
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| 58.1 |
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| 46.7 |
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Total current assets |
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| 676.4 |
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| 656.5 |
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Theatre properties and equipment, net of accumulated depreciation of $2,093.8 and $1,985.9 |
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| 1,296.0 |
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| 1,382.9 |
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Operating lease right-of-use assets, net |
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| 1,180.6 |
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| 1,230.8 |
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Other assets |
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Goodwill |
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| 1,251.3 |
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| 1,248.8 |
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Intangible assets, net |
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| 309.8 |
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| 310.8 |
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Investment in NCM |
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| 40.2 |
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| 135.4 |
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Investments in affiliates |
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| 25.6 |
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| 25.2 |
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Deferred charges and other assets, net |
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| 27.5 |
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| 22.3 |
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Total other assets |
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| 1,654.4 |
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| 1,742.5 |
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Total assets |
| $ | 4,807.4 |
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| $ | 5,012.7 |
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Liabilities and equity |
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Current liabilities |
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Current portion of long-term debt |
| $ | 25.7 |
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| $ | 24.3 |
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Current portion of operating lease obligations |
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| 219.4 |
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| 217.1 |
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Current portion of finance lease obligations |
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| 14.7 |
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| 14.6 |
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Current income tax payable |
|
| 0.2 |
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| 0 |
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Accounts payable and accrued expenses |
|
| 457.6 |
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|
| 504.6 |
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Total current liabilities |
|
| 717.6 |
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| 760.6 |
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Long-term liabilities |
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Long-term debt, less current portion |
|
| 2,025.6 |
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| 2,028.7 |
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Operating lease obligations, less current portion |
|
| 1,023.2 |
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|
| 1,078.3 |
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Finance lease obligations, less current portion |
|
| 95.3 |
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| 102.6 |
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Long-term deferred tax liability |
|
| 62.2 |
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|
| 57.8 |
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Long-term liability for uncertain tax positions |
|
| 46.8 |
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|
| 45.9 |
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NCM screen advertising advances |
|
| 342.8 |
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|
| 346.0 |
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Other long-term liabilities |
|
| 35.2 |
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|
| 37.9 |
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Total long-term liabilities |
|
| 3,631.1 |
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|
| 3,697.2 |
|
Equity |
|
|
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Cinemark USA, Inc.'s stockholder's equity: |
|
|
|
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|
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Class A common stock, $0.01 par value: 10,000,000 shares authorized, 1,500 shares issued and outstanding |
|
| 0 |
|
|
| 0 |
|
Class B common stock, 0 par value: 1,000,000 shares authorized, 239,893 shares issued and 182,648 shares outstanding |
|
| 49.5 |
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|
| 49.5 |
|
Treasury stock, 57,245 Class B shares at cost |
|
| (24.2 | ) |
|
| (24.2 | ) |
Additional paid-in-capital |
|
| 1,469.6 |
|
|
| 1,459.0 |
|
Retained deficit |
|
| (672.4 | ) |
|
| (544.0 | ) |
Accumulated other comprehensive loss |
|
| (374.5 | ) |
|
| (397.0 | ) |
Total Cinemark USA, Inc.'s stockholder's equity |
|
| 448.0 |
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|
| 543.3 |
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Noncontrolling interests |
|
| 10.7 |
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|
| 11.6 |
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Total equity |
|
| 458.7 |
|
|
| 554.9 |
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Total liabilities and equity |
| $ | 4,807.4 |
|
| $ | 5,012.7 |
|
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)LOSS
(in thousands, except per share data,millions, unaudited)
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
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| 2021 |
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| 2020 |
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Revenues |
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Admissions |
| $ | 153,479 |
|
| $ | 37 |
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| $ | 209,600 |
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| $ | 292,499 |
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Concession |
|
| 109,814 |
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|
| 124 |
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|
| 149,302 |
|
|
| 190,480 |
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Other |
|
| 31,359 |
|
|
| 8,813 |
|
|
| 50,111 |
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|
| 69,611 |
|
Total revenues |
|
| 294,652 |
|
|
| 8,974 |
|
|
| 409,013 |
|
|
| 552,590 |
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Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Film rentals and advertising |
|
| 76,587 |
|
|
| 388 |
|
|
| 99,792 |
|
|
| 157,005 |
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Concession supplies |
|
| 18,847 |
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|
| 2,379 |
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|
| 25,987 |
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|
| 37,191 |
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Salaries and wages |
|
| 50,407 |
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|
| 8,864 |
|
|
| 81,573 |
|
|
| 96,408 |
|
Facility lease expense |
|
| 67,213 |
|
|
| 65,202 |
|
|
| 132,042 |
|
|
| 147,443 |
|
Utilities and other |
|
| 61,185 |
|
|
| 34,871 |
|
|
| 110,329 |
|
|
| 135,394 |
|
General and administrative expenses |
|
| 36,680 |
|
|
| 27,425 |
|
|
| 71,794 |
|
|
| 68,020 |
|
Depreciation and amortization |
|
| 66,920 |
|
|
| 63,581 |
|
|
| 135,080 |
|
|
| 128,837 |
|
Impairment of long-lived assets |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,619 |
|
Restructuring costs |
|
| (740 | ) |
|
| 19,538 |
|
|
| (948 | ) |
|
| 19,538 |
|
Loss on disposal of assets and other |
|
| 2,358 |
|
|
| 425 |
|
|
| 6,863 |
|
|
| 2,330 |
|
Total cost of operations |
|
| 379,457 |
|
|
| 222,673 |
|
|
| 662,512 |
|
|
| 808,785 |
|
Operating loss |
|
| (84,805 | ) |
|
| (213,699 | ) |
|
| (253,499 | ) |
|
| (256,195 | ) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest expense |
|
| (31,058 | ) |
|
| (31,041 | ) |
|
| (61,578 | ) |
|
| (55,707 | ) |
Interest income |
|
| 3,809 |
|
|
| 803 |
|
|
| 4,429 |
|
|
| 2,886 |
|
Loss on extinguishment of debt |
|
| (3,924 | ) |
|
| — |
|
|
| (6,527 | ) |
|
| — |
|
Foreign currency exchange gain (loss) |
|
| 2,327 |
|
|
| 916 |
|
|
| (647 | ) |
|
| (3,932 | ) |
Distributions from NCM |
|
| — |
|
|
| 690 |
|
|
| 77 |
|
|
| 5,914 |
|
Interest expense - NCM |
|
| (5,962 | ) |
|
| (5,934 | ) |
|
| (11,797 | ) |
|
| (11,825 | ) |
Equity in loss of affiliates |
|
| (8,109 | ) |
|
| (20,120 | ) |
|
| (14,915 | ) |
|
| (11,634 | ) |
Total other expense |
|
| (42,917 | ) |
|
| (54,686 | ) |
|
| (90,958 | ) |
|
| (74,298 | ) |
Loss before income taxes |
|
| (127,722 | ) |
|
| (268,385 | ) |
|
| (344,457 | ) |
|
| (330,493 | ) |
Income taxes |
|
| 9,337 |
|
|
| (98,007 | ) |
|
| (3,888 | ) |
|
| (101,014 | ) |
Net loss |
| $ | (137,059 | ) |
| $ | (170,378 | ) |
| $ | (340,569 | ) |
| $ | (229,479 | ) |
Less: Net income (loss) attributable to noncontrolling interests |
|
| 186 |
|
|
| (427 | ) |
|
| (416 | ) |
|
| (258 | ) |
Net loss attributable to Cinemark USA, Inc. |
| $ | (137,245 | ) |
| $ | (169,951 | ) |
| $ | (340,153 | ) |
| $ | (229,221 | ) |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Admissions |
| $ | 381.9 |
|
| $ | 153.5 |
|
| $ | 617.7 |
|
| $ | 209.6 |
|
Concession |
|
| 286.0 |
|
|
| 109.8 |
|
|
| 459.0 |
|
|
| 149.3 |
|
Other |
|
| 76.2 |
|
|
| 31.3 |
|
|
| 127.9 |
|
|
| 50.1 |
|
Total revenue |
|
| 744.1 |
|
|
| 294.6 |
|
|
| 1,204.6 |
|
|
| 409.0 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Film rentals and advertising |
|
| 222.6 |
|
|
| 76.6 |
|
|
| 350.2 |
|
|
| 99.8 |
|
Concession supplies |
|
| 52.5 |
|
|
| 18.8 |
|
|
| 82.5 |
|
|
| 26.0 |
|
Salaries and wages |
|
| 100.2 |
|
|
| 50.4 |
|
|
| 180.0 |
|
|
| 81.6 |
|
Facility lease expense |
|
| 80.3 |
|
|
| 67.2 |
|
|
| 154.0 |
|
|
| 132.0 |
|
Utilities and other |
|
| 106.5 |
|
|
| 61.2 |
|
|
| 193.4 |
|
|
| 110.3 |
|
General and administrative expense |
|
| 47.5 |
|
|
| 36.7 |
|
|
| 87.4 |
|
|
| 71.8 |
|
Depreciation and amortization |
|
| 61.0 |
|
|
| 66.9 |
|
|
| 122.7 |
|
|
| 135.1 |
|
Impairment of long-lived and other assets |
|
| 92.3 |
|
|
| 0 |
|
|
| 92.3 |
|
|
| 0 |
|
Restructuring costs |
|
| (0.2 | ) |
|
| (0.7 | ) |
|
| (0.2 | ) |
|
| (0.9 | ) |
(Gain) loss on disposal of assets and other |
|
| (0.7 | ) |
|
| 2.3 |
|
|
| (7.6 | ) |
|
| 6.8 |
|
Total cost of operations |
|
| 762.0 |
|
|
| 379.4 |
|
|
| 1,254.7 |
|
|
| 662.5 |
|
Operating loss |
|
| (17.9 | ) |
|
| (84.8 | ) |
|
| (50.1 | ) |
|
| (253.5 | ) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (32.0 | ) |
|
| (31.1 | ) |
|
| (64.1 | ) |
|
| (61.6 | ) |
Interest income |
|
| 2.7 |
|
|
| 3.8 |
|
|
| 4.3 |
|
|
| 4.4 |
|
Loss on extinguishment of debt |
|
| 0 |
|
|
| (3.9 | ) |
|
| 0 |
|
|
| (6.5 | ) |
Foreign currency exchange gain (loss) |
|
| (3.1 | ) |
|
| 2.3 |
|
|
| 0.1 |
|
|
| (0.7 | ) |
Distributions from NCM |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0.1 |
|
Interest expense - NCM |
|
| (5.9 | ) |
|
| (6.0 | ) |
|
| (11.7 | ) |
|
| (11.8 | ) |
Equity in loss of affiliates |
|
| (5.5 | ) |
|
| (8.1 | ) |
|
| (7.7 | ) |
|
| (14.9 | ) |
Total other expense |
|
| (43.8 | ) |
|
| (43.0 | ) |
|
| (79.1 | ) |
|
| (91.0 | ) |
Loss before income taxes |
|
| (61.7 | ) |
|
| (127.8 | ) |
|
| (129.2 | ) |
|
| (344.5 | ) |
Income tax expense (benefit) |
|
| 3.6 |
|
|
| 9.3 |
|
|
| (2.9 | ) |
|
| (3.9 | ) |
Net loss |
| $ | (65.3 | ) |
| $ | (137.1 | ) |
| $ | (126.3 | ) |
| $ | (340.6 | ) |
Less: Net income (loss) attributable to noncontrolling interests |
|
| 0.6 |
|
|
| 0.2 |
|
|
| 2.1 |
|
|
| (0.4 | ) |
Net loss attributable to Cinemark USA, Inc. |
| $ | (65.9 | ) |
| $ | (137.3 | ) |
| $ | (128.4 | ) |
| $ | (340.2 | ) |
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)LOSS
(In thousands,in millions, unaudited)
|
| 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 | ) |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net loss |
| $ | (65.3 | ) |
| $ | (137.1 | ) |
| $ | (126.3 | ) |
| $ | (340.6 | ) |
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements |
|
| 7.0 |
|
|
| 0.8 |
|
|
| 21.6 |
|
|
| 6.5 |
|
Foreign currency translation adjustments |
|
| (15.7 | ) |
|
| 8.3 |
|
|
| (1.3 | ) |
|
| (1.2 | ) |
Total other comprehensive income (loss), net of tax |
|
| (8.7 | ) |
|
| 9.1 |
|
|
| 20.3 |
|
|
| 5.3 |
|
Total comprehensive loss, net of tax |
|
| (74.0 | ) |
|
| (128.0 | ) |
|
| (106.0 | ) |
|
| (335.3 | ) |
Comprehensive (income) loss attributable to noncontrolling interests |
|
| (0.6 | ) |
|
| (0.2 | ) |
|
| (2.1 | ) |
|
| 0.4 |
|
Comprehensive loss attributable to Cinemark USA, Inc. |
| $ | (74.6 | ) |
| $ | (128.2 | ) |
| $ | (108.1 | ) |
| $ | (334.9 | ) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSEQUITY
(in thousands,millions, unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Operating activities |
|
|
|
|
|
|
|
|
Net loss |
| $ | (340,569 | ) |
| $ | (229,479 | ) |
Adjustments to reconcile net loss to cash used for operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 133,733 |
|
|
| 126,387 |
|
Amortization of intangible and other assets |
|
| 1,347 |
|
|
| 2,450 |
|
Amortization of debt issue costs |
|
| 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 |
|
| (16,094 | ) |
|
| (15,795 | ) |
Amortization of accumulated losses for amended swap agreements |
|
| 2,247 |
|
|
| 2,669 |
|
Impairment of long-lived assets |
|
| — |
|
|
| 16,619 |
|
Share based awards compensation expense |
|
| 10,116 |
|
|
| 7,974 |
|
Loss on disposal of assets and other |
|
| 6,863 |
|
|
| 2,330 |
|
Loss on extinguishment of debt |
|
| 6,527 |
|
|
| — |
|
Non-cash rent expense |
|
| (679 | ) |
|
| 833 |
|
Equity in loss of affiliates |
|
| 14,915 |
|
|
| 11,634 |
|
Deferred income tax expenses |
|
| (13,597 | ) |
|
| 3,380 |
|
Distributions from equity investees |
|
| 156 |
|
|
| 23,284 |
|
Changes in assets and liabilities and other |
|
| 158,278 |
|
|
| (121,174 | ) |
Net cash used for operating activities |
|
| (21,404 | ) |
|
| (154,146 | ) |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Additions to theatre properties and equipment |
|
| (32,819 | ) |
|
| (46,959 | ) |
Proceeds from sale of theatre properties and equipment and other |
|
| 1,995 |
|
|
| 198 |
|
Investment in joint ventures and other, net |
|
| — |
|
|
| (50 | ) |
Net cash used for investing activities |
|
| (30,824 | ) |
|
| (46,811 | ) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Contributions received from parent |
|
| 120,000 |
|
|
| — |
|
Dividends paid to parent |
|
| — |
|
|
| (42,000 | ) |
Payroll taxes paid as a result of stock withholdings |
|
| (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 |
|
| 9,012 |
|
|
| 6,136 |
|
Redemption of senior notes |
|
| (1,155,000 | ) |
|
| — |
|
Repayments of long-term debt |
|
| (4,204 | ) |
|
| (3,298 | ) |
Payment of debt issue costs |
|
| (17,272 | ) |
|
| (7,858 | ) |
Fees paid related to debt refinancing |
|
| (2,058 | ) |
|
| — |
|
Payments on finance leases |
|
| (7,373 | ) |
|
| (7,620 | ) |
Other |
|
| — |
|
|
| (392 | ) |
Net cash provided by (used for) financing activities |
|
| 113,093 |
|
|
| 290,970 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (306 | ) |
|
| (6,536 | ) |
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
| 60,559 |
|
|
| 83,477 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
|
| 260,538 |
|
|
| 488,215 |
|
End of period |
| $ | 321,097 |
|
| $ | 571,692 |
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
| Treasury Stock |
| Additional Paid-In-Capital |
| Retained Earnings (Deficit) |
| Accumulated Other Comprehensive Loss |
| Total Cinemark USA, Inc. Stockholder's Equity |
| Noncontrolling Interests |
| Total Equity |
| ||||||||
Balance at January 1, 2022 |
| $ | 49.5 |
| $ | (24.2 | ) | $ | 1,459.0 |
| $ | (544.0 | ) | $ | (397.0 | ) | $ | 543.3 |
| $ | 11.6 |
| $ | 554.9 |
|
Issuance of share based awards and share based awards compensation expense |
|
| — |
|
| — |
|
| 4.9 |
|
| — |
|
| — |
|
| 4.9 |
|
| — |
|
| 4.9 |
|
Net income (loss) |
|
| — |
|
| — |
|
| — |
|
| (62.5 | ) |
| — |
|
| (62.5 | ) |
| 1.5 |
|
| (61.0 | ) |
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 14.6 |
|
| 14.6 |
|
| — |
|
| 14.6 |
|
Amortization of accumulated losses for amended swap agreements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1.1 |
|
| 1.1 |
|
| — |
|
| 1.1 |
|
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 14.4 |
|
| 14.4 |
|
| — |
|
| 14.4 |
|
Balance at March 31, 2022 |
| $ | 49.5 |
| $ | (24.2 | ) | $ | 1,463.9 |
| $ | (606.5 | ) | $ | (366.9 | ) | $ | 515.8 |
| $ | 13.1 |
| $ | 528.9 |
|
Issuance of share based awards and share based awards compensation expense |
|
| — |
|
| — |
|
| 5.7 |
|
| — |
|
| — |
|
| 5.7 |
|
| — |
|
| 5.7 |
|
Net income (loss) |
|
| — |
|
| — |
|
| — |
|
| (65.9 | ) |
| — |
|
| (65.9 | ) |
| 0.6 |
|
| (65.3 | ) |
Distributions to noncontrolling interests |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3.0 | ) |
| (3.0 | ) |
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7.0 |
|
| 7.0 |
|
| — |
|
| 7.0 |
|
Amortization of accumulated losses for amended swap agreements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1.1 |
|
| 1.1 |
|
| — |
|
| 1.1 |
|
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (15.7 | ) |
| (15.7 | ) |
| — |
|
| (15.7 | ) |
Balance at June 30, 2022 |
| $ | 49.5 |
| $ | (24.2 | ) | $ | 1,469.6 |
| $ | (672.4 | ) | $ | (374.5 | ) | $ | 448.0 |
| $ | 10.7 |
| $ | 458.7 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
7
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)
(in millions, unaudited)
|
| Common Stock |
| Treasury Stock |
| Additional Paid-In-Capital |
| Retained Earnings (Deficit) |
| Accumulated Other Comprehensive Loss |
| Total Cinemark USA, Inc. Stockholder's Equity |
| Noncontrolling Interests |
| Total Equity |
| ||||||||
Balance at January 1, 2021 |
| $ | 49.5 |
| $ | (24.2 | ) | $ | 1,310.6 |
| $ | (163.3 | ) | $ | (398.6 | ) | $ | 774.0 |
| $ | 11.0 |
| $ | 785.0 |
|
Issuance of share based awards and share based awards compensation expense |
|
| — |
|
| — |
|
| 4.4 |
|
| — |
|
| — |
|
| 4.4 |
|
| — |
|
| 4.4 |
|
Contributions from parent |
|
| — |
|
| — |
|
| 120.0 |
|
| — |
|
| — |
|
| 120.0 |
|
| — |
|
| 120.0 |
|
Net loss |
| — |
| — |
| — |
|
| (202.9 | ) |
| — |
|
| (202.9 | ) |
| (0.6 | ) |
| (203.5 | ) | |||
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements |
| — |
| — |
| — |
| — |
|
| 5.7 |
|
| 5.7 |
|
| — |
|
| 5.7 |
| ||||
Amortization of accumulated losses for amended swap agreements |
| — |
| — |
| — |
| — |
|
| 1.1 |
|
| 1.1 |
|
| — |
|
| 1.1 |
| ||||
Foreign currency translation adjustments |
| — |
| — |
| — |
| — |
|
| (9.5 | ) |
| (9.5 | ) |
| — |
|
| (9.5 | ) | ||||
Balance at March 31, 2021 |
| $ | 49.5 |
| $ | (24.2 | ) | $ | 1,435.0 |
| $ | (366.2 | ) | $ | (401.3 | ) | $ | 692.8 |
| $ | 10.4 |
| $ | 703.2 |
|
Issuance of share based awards and share based awards compensation expense |
|
| — |
|
| — |
|
| 5.7 |
|
| — |
|
| — |
|
| 5.7 |
|
| — |
|
| 5.7 |
|
Net income (loss) |
|
| — |
|
| — |
|
| — |
|
| (137.3 | ) |
| — |
|
| (137.3 | ) |
| 0.2 |
|
| (137.1 | ) |
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 0.8 |
|
| 0.8 |
|
| — |
|
| 0.8 |
|
Amortization of accumulated losses for amended swap agreements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1.1 |
|
| 1.1 |
|
| — |
|
| 1.1 |
|
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 8.3 |
|
| 8.3 |
|
| — |
|
| 8.3 |
|
Balance at June 30, 2021 |
| $ | 49.5 |
| $ | (24.2 | ) | $ | 1,440.7 |
| $ | (503.5 | ) | $ | (391.1 | ) | $ | 571.4 |
| $ | 10.6 |
| $ | 582.0 |
|
8
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Operating activities |
|
|
|
|
|
| ||
Net loss |
| $ | (126.3 | ) |
| $ | (340.6 | ) |
Adjustments to reconcile net loss to cash used for operating activities: |
|
|
|
|
|
| ||
Depreciation |
|
| 121.4 |
|
|
| 133.7 |
|
Amortization of intangible and other assets |
|
| 1.3 |
|
|
| 1.4 |
|
Amortization of debt issuance costs |
|
| 3.7 |
|
|
| 3.6 |
|
Interest accrued on NCM screen advertising advances |
|
| 11.7 |
|
|
| 11.8 |
|
Amortization of NCM screen advertising advances and other deferred revenues |
|
| (16.3 | ) |
|
| (16.1 | ) |
Amortization of accumulated losses for amended swap agreements |
|
| 2.2 |
|
|
| 2.3 |
|
Share based awards compensation expense |
|
| 10.6 |
|
|
| 10.1 |
|
Impairment of long-lived and other assets |
|
| 92.3 |
|
|
| 0 |
|
(Gain) loss on disposal of assets and other |
|
| (7.6 | ) |
|
| 6.8 |
|
Loss on extinguishment of debt |
|
| 0 |
|
|
| 6.5 |
|
Non-cash rent expense |
|
| (4.7 | ) |
|
| (0.7 | ) |
Equity in loss of affiliates |
|
| 7.7 |
|
|
| 14.9 |
|
Deferred income tax expense (benefit) |
|
| 1.0 |
|
|
| (13.6 | ) |
Distributions from equity investees |
|
| 1.5 |
|
|
| 0.2 |
|
Changes in assets and liabilities and other |
|
| (42.3 | ) |
|
| 158.3 |
|
Net cash provided by (used for) operating activities |
|
| 56.2 |
|
|
| (21.4 | ) |
|
|
|
|
|
|
| ||
Investing activities |
|
|
|
|
|
| ||
Additions to theatre properties and equipment |
|
| (40.6 | ) |
|
| (32.8 | ) |
Proceeds from sale of theatre properties and equipment and other |
|
| 11.8 |
|
|
| 2.0 |
|
Net cash used for investing activities |
|
| (28.8 | ) |
|
| (30.8 | ) |
|
|
|
|
|
|
| ||
Financing activities |
|
|
|
|
|
| ||
Restricted stock withholdings for payroll taxes |
|
| (2.1 | ) |
|
| 0 |
|
Contributions received from parent |
|
| 0 |
|
|
| 120.0 |
|
Proceeds from issuance of senior notes |
|
| 0 |
|
|
| 1,170.0 |
|
Proceeds from other borrowings |
|
| 0 |
|
|
| 9.0 |
|
Redemption of senior notes |
|
| 0 |
|
|
| (1,155.0 | ) |
Repayments of long-term debt |
|
| (6.9 | ) |
|
| (4.2 | ) |
Payment of debt issuance costs |
|
| 0 |
|
|
| (17.3 | ) |
Fees paid related to debt refinancing |
|
| 0 |
|
|
| (2.1 | ) |
Payments on finance leases |
|
| (7.2 | ) |
|
| (7.3 | ) |
Other financing activities |
|
| (3.0 | ) |
|
| 0 |
|
Net cash provided by (used for) financing activities |
|
| (19.2 | ) |
|
| 113.1 |
|
|
|
|
|
|
|
| ||
Effect of exchange rate changes on cash and cash equivalents |
|
| (10.3 | ) |
|
| (0.3 | ) |
|
|
|
|
|
|
| ||
Increase (decrease) in cash and cash equivalents |
|
| (2.1 | ) |
|
| 60.6 |
|
|
|
|
|
|
|
| ||
Cash and cash equivalents: |
|
|
|
|
|
| ||
Beginning of period |
|
| 442.7 |
|
|
| 260.6 |
|
End of period |
| $ | 440.6 |
|
| $ | 321.2 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
9
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share(in millions, unaudited)
1. The Company and per share dataBasis 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, 2020,2021, 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 ofover which the Company has control are consolidated while those affiliatesinvestments in entities of which the Company owns between 20%20% and 50%50% and does not control are accounted for under the equity method. Those affiliatesInvestments in entities of which the Company owns less than 20%20% are generally accounted for under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate,entities, in which case the Company would account for its investment under the equity method. TheThe results of these subsidiaries and affiliatesentities 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, 2020,2021, included in the Annual Report on Form 10-K filed March 3, 20219, 2022 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three and six months ended June 30, 20212022 are not necessarily indicative of the results to be achieved for the full year.
|
|
AsAmounts included in the Company has previously disclosed,condensed consolidated financial statements of this Quarterly Report on Form 10-Q are rounded in millions. The amounts reported in the consolidated financial statements, and the notes thereto, of the Annual Report on Form 10-K for the year ended December 31, 2021 filed March 9, 2022 are rounded in thousands.
2. Impact of the COVID-19 Pandemic
The COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. Theindustry with widespread social and economic effects have been widespread. As a movie exhibitor that operates spaces where patrons gather in close proximity, the Company continues to be significantly impacted by the pandemic. To comply with government mandates at the initial outbreak of the COVID-19 pandemic, theeffects. The Company temporarily closed all of its theatres in the U.S. and Latin America induring March of 2020 at the onset of the COVID-19 outbreak. During that time, the Company implemented various cash preservation strategies, including, but not limited to, temporary personnel and salary reductions, haltedhalting non-essential operating and capital expenditures, and negotiatednegotiating modified timing and/or abatement of contractual payments with landlords and other major suppliers until its theatres reopened. In addition,and the Company suspended its quarterly dividend.suspension of dividends to Cinemark Holdings, Inc.
As of June 30,Throughout 2020 and 2021 the Company had reopened all 323 of its domestic theatres and 152 of its 198 international theatres. During the three months ended June 30, 2021, the Company showed many new releases along with some library content. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours in certain locationslocal restrictions and the Company’s focus on initiatives to enhance productivity. The Company also continues to limit capital expenditures to essential activities and projects. The Company continued to work with landlords and other vendors during the six months ended June 30, 2021 to extend payment terms as it reopened theatres and continues to recover from the impactsstatus of the COVID-19 pandemic.
Based onpandemic would allow. All of the Company’s current estimatesCompany's domestic and international theatres were reopened by the end of the fourth quarter of 2021. The industry’s recovery it believes it has, and will generate, sufficient cash to sustain operations. Nonetheless,from the COVID-19 pandemic has had,is still underway and continuesis contingent upon the volume of new film content available, as well as the box office performance of new film content released, consumer sentiment in returning to have, adverse effects onmovie theaters and government restrictions. The industry is also adjusting to the Company’s business, resultsevolution of operations, cash flowsthe exclusive theatrical window, competition from streaming platforms, supply chain constraints, inflationary impacts and financial condition.other economic factors.
8
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Restructuring Charges
During June 2020, Company management approved and announced a restructuring plan to realign its operations to create a more efficient cost structure (referred to herein as the “Restructuring Plan”). in response to the COVID-19 pandemic. The Restructuring Plan primarily included a permanent headcount reduction at its domestic corporate office and the permanent closure of certain domestic and international theatres. The following table summarizes activity recordedCompany paid approximately $0.4 related to previously accrued restructuring costs during the threesix months ended June 30, 2021:
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Consolidated |
| |||||||||||||||||||||
|
| Employee-related Costs |
| Facility Closure Costs |
| Total Charges |
|
| Employee-related Costs |
| Facility Closure Costs |
| Total Charges |
|
| Employee-related Costs |
| Facility Closure Costs |
| Total Charges |
| |||||||||
Balance at December 31, 2020 |
| $ | 840 |
| $ | 5,740 |
| $ | 6,580 |
|
| $ | — |
| $ | 161 |
| $ | 161 |
|
| $ | 840 |
| $ | 5,901 |
| $ | 6,741 |
|
Amounts paid |
|
| (350 | ) |
| — |
|
| (350 | ) |
|
| — |
|
| — |
|
| — |
|
|
| (350 | ) |
| — |
|
| (350 | ) |
Reserve adjustments |
|
| — |
|
| (208 | ) |
| (208 | ) |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| (208 | ) |
| (208 | ) |
Balance at March 31, 2021 |
| $ | 490 |
| $ | 5,532 |
| $ | 6,022 |
|
| $ | — |
| $ | 161 |
| $ | 161 |
|
| $ | 490 |
| $ | 5,693 |
| $ | 6,183 |
|
Amounts paid |
|
| — |
|
| (200 | ) |
| (200 | ) |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| (200 | ) |
| (200 | ) |
Reserve adjustments |
|
| (60 | ) |
| (680 | ) |
| (740 | ) |
|
| — |
|
| — |
|
| — |
|
|
| (60 | ) |
| (680 | ) |
| (740 | ) |
Balance at June 30, 2021 |
| $ | 430 |
| $ | 4,652 |
| $ | 5,082 |
|
| $ | — |
| $ | 161 |
| $ | 161 |
|
| $ | 430 |
| $ | 4,813 |
| $ | 5,243 |
|
2022. The Company recorded a $0.2 reduction to previously accrued restructuring costs during the six months ended June 30, 2022 related to the settlement of facility closure costs for certain theatres. The remaining accrued restructuring costs of $5,243$0.8, which are
10
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
primarily related to facility closure costs, are reflected in accounts payable and accrued expenses on the condensed consolidated balance sheet as of June 30, 2021.2022.
3. New Accounting Pronouncements
|
|
Accounting Standards Update (“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 ofdoes not expect ASU 2020-04 and ASU 2021-01 and theirto have a material impact on its condensed consolidated financial statements.
ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, (“ASU 2021-10”). The purpose of ASU 2021-10 is to provide annual disclosure guidance about transactions with a government for which the entity is applying a grant or contribution accounting model by analogy. More specifically, the amendments in ASU 2021-10 require disclosure of a) the nature of the transactions and the related accounting policy used to account for the transactions, b) the line items on the balance sheet and statement of loss, including the amounts applicable to each line item, that are affected by the transactions and c) significant terms and conditions of the transactions, including commitments and contingencies. The amendments in ASU 2021-10 are effective for annual periods beginning after December 15, 2021. The amendments in ASU 2021-10 should be applied either a) prospectively to all transactions at the date of initial application and new transactions that are entered into after the date of initial application or b) retrospectively to those transactions. The Company will provide the disclosures required by ASU 2021-10 in its Form 10-K for the year ended December 31, 2022.
4. Lease Accounting
|
|
Lease Deferrals and Abatements
Upon the temporary closure of theatres in March 2020, the Company initiated discussions with landlords to negotiatebegan negotiating the deferral of rent and other lease-related payments with certain of its landlords. Thelandlords while theatres remained closed. These negotiations resulted in amendments signed withto the landlordsleases that 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 remaining deferred payments deferred as of June 30, 2022 and December 31, 2021 were $56,022, of which $45,573 is$13.3 and $31.9, respectively, and are included in accounts payable and accrued expenses and $10,449 is included in other long-term liabilities in the condensed consolidated balance sheet.sheets.
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.
9
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
Lease Cost | Classification | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Operating lease costs |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Equipment (1) | Utilities and other | $ | 1.0 |
|
| $ | 0.5 |
|
| $ | 1.6 |
|
| $ | 0.9 |
|
Real Estate (2)(3) | Facility lease expense |
| 81.9 |
|
|
| 67.6 |
|
|
| 156.9 |
|
|
| 131.4 |
|
Total operating lease costs |
| $ | 82.9 |
|
| $ | 68.1 |
|
| $ | 158.5 |
|
| $ | 132.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Finance lease costs |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of leased assets | Depreciation and amortization | $ | 3.2 |
|
| $ | 3.2 |
|
| $ | 6.3 |
|
| $ | 6.4 |
|
Interest on lease liabilities | Interest expense |
| 1.3 |
|
|
| 1.5 |
|
|
| 2.7 |
|
|
| 3.1 |
|
Total finance lease costs |
| $ | 4.5 |
|
| $ | 4.7 |
|
| $ | 9.0 |
|
| $ | 9.5 |
|
11
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30 |
|
| June 30 |
| ||||||||||
Lease Cost | Classification | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Operating lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment (1) | Utilities and other | $ | 423 |
|
| $ | 131 |
|
| $ | 868 |
|
| $ | 1,672 |
|
Real Estate (2)(3) | Facility lease expense |
| 67,679 |
|
|
| 63,460 |
|
|
| 131,438 |
|
|
| 145,118 |
|
Total operating lease costs |
| $ | 68,102 |
|
| $ | 63,591 |
|
| $ | 132,306 |
|
| $ | 146,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of leased assets | Depreciation and amortization | $ | 3,141 |
|
| $ | 3,680 |
|
| $ | 6,391 |
|
| $ | 7,387 |
|
Interest on lease liabilities | Interest expense |
| 1,491 |
|
|
| 1,757 |
|
|
| 3,061 |
|
|
| 3,608 |
|
Total finance lease costs |
| $ | 4,632 |
|
| $ | 5,437 |
|
| $ | 9,452 |
|
| $ | 10,995 |
|
|
|
|
|
|
|
The following table represents the minimum cash lease payments recorded as lease expense, interest expense and a reductionincluded in the measurement of lease liabilities as well asand the non-cash addition of lease right-of-use assets for the periods indicated.presented.
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
Other Information |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Contractual cash payments included in the measurement of lease liabilities(1) |
|
|
|
|
|
|
|
| ||||||||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
| ||||||||||
Cash outflows for operating leases |
| $ | 133,621 |
|
| $ | 138,025 |
|
| $ | 139.1 |
|
| $ | 133.6 |
|
Cash outflows for finance leases - operating activities |
| $ | 3,056 |
|
| $ | 3,579 |
|
| $ | 2.7 |
|
| $ | 3.1 |
|
Cash outflows for finance leases - financing activities |
| $ | 7,373 |
|
| $ | 7,620 |
|
| $ | 7.2 |
|
| $ | 7.3 |
|
Non-cash amount of leased assets obtained in exchange for: |
|
|
|
|
|
|
|
| ||||||||
Operating lease liabilities |
| $ | 55,227 |
|
| $ | 60,844 |
| ||||||||
Finance lease liabilities |
| $ | — |
|
| $ | — |
| ||||||||
Non-cash amount of right-of-use assets obtained in exchange for: |
|
|
|
|
|
| ||||||||||
Operating lease liability additions, net of write-offs |
| $ | 57.0 |
|
| $ | 55.2 |
|
|
|
As of June 30, 2021,2022, the Company had signed lease agreements with total contractual minimumnoncancelable lease payments of approximately $158,149$69.8 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 theatre leases which havetheatres are not yet commenced are excluded fromincluded in the right-of-use assets and lease liabilities as of June 30, 2021.2022.
5. Revenue Recognition
10
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
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 revenuesrevenue when the showtime for a purchased movie ticket has passed. Concession revenues arerevenue is recognized when products are sold to the consumer. Other revenuesrevenue primarily consistconsists of screen advertising and screen rental revenues,revenue, promotional income, studio trailer placements and transactional fees. Except for National CineMedia, LLC. ("NCM") screen advertising advances discussed below in Note 7, these revenues are generally recognized when the Company has performed the related services. The Company sells gift cards and discount ticket vouchers, the proceeds from which are recorded as deferred revenues.revenue. Deferred revenuesrevenue for gift cards and discount ticket vouchers areis recognized when they are redeemed for concession items or, if redeemed for movie tickets, when the showtime has passed. The Company generally records breakage revenue on gift cards and discount ticket vouchers based on redemption activity and historical experience with unused balances. The Company offers a subscription program in the U.S. whereby patrons can pay a monthly or annual fee to receive a monthly credit for use towards a future movie ticket purchase. The Company records the monthly subscription program fees as deferred revenuesrevenue and records admissions revenuesrevenue 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 ana prepaid annual membership fee, the Company recognizes the fee collected as other revenuesrevenue on a straight-line basis over the term of the membership.basis. 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 revenuesrevenue based on the number of reward points issued to customers and recognizes the deferred revenuesrevenue 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 cardsits loyalty and discount ticket vouchers based on redemption activity and historical experience with unused balances. The Company also records breakage revenuesubscription programs generally upon the expiration of loyalty points andor 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.
12
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
Accounts receivable as of June 30, 20212022 and December 31, 20202021 included approximately $12,338$22.0 and $6,232$23.5, respectively, of receivables respectively, related to contracts with customers. The Company did 0t0t record any assets related to the costs to obtain or fulfill a contract with customers during the six months ended June 30, 2021 or June 30, 2020.2022.
Disaggregation of Revenue
The following tables present revenues for the three and six months ended June 30, 2021 and 2020,revenue, disaggregated based on major type of good or service and by reportable operating segment.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
|
| June 30, 2022 |
|
| June 30, 2022 |
| ||||||||||||||
|
| U.S. |
| International |
|
|
|
| U.S. |
| International |
|
|
| ||||||
|
| Operating |
| Operating |
|
|
|
| Operating |
| Operating |
|
|
| ||||||
|
| Segment (1) |
| Segment |
| Consolidated |
|
| Segment (1) |
| Segment |
| Consolidated |
| ||||||
Admissions revenue |
| $ | 309.7 |
| $ | 72.2 |
| $ | 381.9 |
|
| $ | 501.5 |
| $ | 116.2 |
| $ | 617.7 |
|
Concession revenue |
|
| 234.6 |
|
| 51.4 |
|
| 286.0 |
|
|
| 375.7 |
|
| 83.3 |
|
| 459.0 |
|
Screen advertising, screen rental and promotional revenue (2) |
|
| 21.4 |
|
| 11.3 |
|
| 32.7 |
|
|
| 40.1 |
|
| 19.4 |
|
| 59.5 |
|
Other revenue |
|
| 35.1 |
|
| 8.4 |
|
| 43.5 |
|
|
| 55.5 |
|
| 12.9 |
|
| 68.4 |
|
Total revenue |
| $ | 600.8 |
| $ | 143.3 |
| $ | 744.1 |
|
| $ | 972.8 |
| $ | 231.8 |
| $ | 1,204.6 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
|
| June 30, 2021 |
|
| June 30, 2021 |
| ||||||||||||||
|
| U.S. |
| International |
|
|
|
| U.S. |
| International |
|
|
| ||||||
|
| Operating |
| Operating |
|
|
|
| Operating |
| Operating |
|
|
| ||||||
|
| Segment (1) |
| Segment |
| Consolidated |
|
| Segment (1) |
| Segment |
| Consolidated |
| ||||||
Admissions revenue |
| $ | 140.6 |
| $ | 12.9 |
| $ | 153.5 |
|
| $ | 189.1 |
| $ | 20.5 |
| $ | 209.6 |
|
Concession revenue |
|
| 99.4 |
|
| 10.4 |
|
| 109.8 |
|
|
| 132.4 |
|
| 16.9 |
|
| 149.3 |
|
Screen advertising, screen rental and promotional revenue (2) |
|
| 15.3 |
|
| 0.6 |
|
| 15.9 |
|
|
| 26.5 |
|
| 2.8 |
|
| 29.3 |
|
Other revenue |
|
| 14.0 |
|
| 1.4 |
|
| 15.4 |
|
|
| 18.4 |
|
| 2.4 |
|
| 20.8 |
|
Total revenue |
| $ | 269.3 |
| $ | 25.3 |
| $ | 294.6 |
|
| $ | 366.4 |
| $ | 42.6 |
| $ | 409.0 |
|
The following tables present revenue, disaggregated based on timing of recognition and by reportable operating segment.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
|
| June 30, 2022 |
|
| June 30, 2022 |
| ||||||||||||||
|
| U.S. |
| International |
|
|
|
| U.S. |
| International |
|
|
| ||||||
|
| Operating |
| Operating |
|
|
|
| Operating |
| Operating |
|
|
| ||||||
|
| Segment (1) |
| Segment |
| Consolidated |
|
| Segment (1) |
| Segment |
| Consolidated |
| ||||||
Goods and services transferred at a point in time |
| $ | 573.8 |
| $ | 129.8 |
| $ | 703.6 |
|
| $ | 922.1 |
| $ | 208.4 |
| $ | 1,130.5 |
|
Goods and services transferred over time (2) |
|
| 27.0 |
|
| 13.5 |
|
| 40.5 |
|
|
| 50.7 |
|
| 23.4 |
|
| 74.1 |
|
Total |
| $ | 600.8 |
| $ | 143.3 |
| $ | 744.1 |
|
| $ | 972.8 |
| $ | 231.8 |
| $ | 1,204.6 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
|
| June 30, 2021 |
|
| June 30, 2021 |
| ||||||||||||||
|
| U.S. |
| International |
|
|
|
| U.S. |
| International |
|
|
| ||||||
|
| Operating |
| Operating |
|
|
|
| Operating |
| Operating |
|
|
| ||||||
|
| Segment (1) |
| Segment |
| Consolidated |
|
| Segment (1) |
| Segment |
| Consolidated |
| ||||||
Goods and services transferred at a point in time |
| $ | 249.5 |
| $ | 23.9 |
| $ | 273.4 |
|
| $ | 330.0 |
| $ | 38.2 |
| $ | 368.2 |
|
Goods and services transferred over time (2) |
|
| 19.8 |
|
| 1.4 |
|
| 21.2 |
|
|
| 36.4 |
|
| 4.4 |
|
| 40.8 |
|
Total |
| $ | 269.3 |
| $ | 25.3 |
| $ | 294.6 |
|
| $ | 366.4 |
| $ | 42.6 |
| $ | 409.0 |
|
| 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 |
|
| 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 |
|
1113
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share(in millions, unaudited)
NCM Screen Advertising Advances and per share data
Other Deferred Revenue
|
| 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 |
|
| 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 |
|
|
|
|
|
Deferred Revenues
The following table presents changes in the Company’s NCM screen advertising advances and other deferred revenuesrevenue for the six months ended June 30, 2021. 2022.
|
| NCM screen advertising advances (1) |
|
| Other |
| ||
Balance at January 1, 2022 |
| $ | 346.0 |
|
| $ | 160.3 |
|
Amounts recognized as accounts receivable |
|
| 0 |
|
|
| 1.4 |
|
Cash received from customers in advance |
|
| 0 |
|
|
| 109.6 |
|
Common units received from NCM |
|
| 1.3 |
|
|
| 0 |
|
Interest accrued related to significant financing component |
|
| 11.7 |
|
|
| 0 |
|
Revenue recognized during period |
|
| (16.2 | ) |
|
| (98.4 | ) |
Foreign currency translation adjustments |
|
| 0 |
|
|
| (0.1 | ) |
Balance at June 30, 2022 |
| $ | 342.8 |
|
| $ | 172.8 |
|
|
| NCM screen advertising advances (1) |
|
| Other Deferred Revenues (2) |
| ||
Balance at January 1, 2021 |
| $ | 344,255 |
|
| $ | 138,830 |
|
Amounts recognized as accounts receivable |
|
| — |
|
|
| 2,993 |
|
Cash received from customers in advance |
|
| — |
|
|
| 21,964 |
|
Common units received from NCM (see Note 8) |
|
| 10,237 |
|
|
| — |
|
Interest accrued related to significant financing component |
|
| 11,797 |
|
|
| — |
|
Revenue recognized during period |
|
| (15,927 | ) |
|
| (29,661 | ) |
Foreign currency translation adjustments |
|
| — |
|
|
| (56 | ) |
Balance at June 30, 2021 |
| $ | 350,362 |
|
| $ | 134,070 |
|
(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 revenue collected but not yet earned for screen advertising, screen rental and other promotional activities. Amounts are 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 June 30, 20212022 and when the Company expects to recognize this revenue.
|
| Twelve Months Ended June 30, |
|
|
|
|
|
|
| |||||||
Remaining Performance Obligations |
| 2023 |
|
| 2024 |
|
| Thereafter |
|
| Total |
| ||||
Other deferred revenue |
| $ | 153.4 |
|
| $ | 19.4 |
|
| $ | — |
|
| $ | 172.8 |
|
|
| Twelve Months Ended June 30, |
|
|
|
|
|
|
|
|
| |||||||||||||||||
Remaining Performance Obligations |
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
| |||||||
Other deferred revenues |
| $ | 120,589 |
|
| $ | 13,481 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 134,070 |
|
6. Long Term Debt
Long-term debt consisted of the following for the periods presented:
| June 30, |
|
| December 31, |
| ||
| 2022 |
|
| 2021 |
| ||
Cinemark USA, Inc. term loan due 2025 | $ | 629.8 |
|
| $ | 633.1 |
|
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 |
|
|
| 405.0 |
|
Cinemark USA, Inc. 5.250% senior notes due 2028 |
| 765.0 |
|
|
| 765.0 |
|
Other |
| 28.2 |
|
|
| 30.2 |
|
Total carrying value of long-term debt | $ | 2,078.0 |
|
| $ | 2,083.3 |
|
Less: Current portion |
| 25.7 |
|
|
| 24.3 |
|
Less: Debt issuance costs, net of accumulated amortization |
| 26.7 |
|
|
| 30.3 |
|
Long-term debt, less current portion, net of unamortized debt issuance costs | $ | 2,025.6 |
|
| $ | 2,028.7 |
|
|
|
Senior Secured Credit Facility
Cinemark USA, Inc. has a senior secured credit facility that includes a $700,000$700.0 term loan and a $100,000$100.0 revolving credit line (the “Credit Agreement”). As of June 30, 2021,2022, there was $636,434$629.8 outstanding under the term loan and 0 borrowings were outstanding under the revolving credit line. As of June 30, 2021, $100,0002022, $100.0 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$1.6 are due on the term loan through December 31, 2024, with a final principal payment of $613,351$613.4 due on March 29, 2025. As a result of the June 15, 2021 amendment to the Credit Agreement discussed below, the2025. The revolving credit line matures on November 28, 2024.2024. The average interest rate applicable to outstanding term loan borrowings under the Credit Agreement atas of June 30, 20212022 was approximately 3.4%3.7% per annum, after giving effect to the interest rate swap agreements discussed below.
On April 17, 2020, in conjunction with the issuance of the 8.750% Secured Notes discussed below, the Company obtained a waiver of the leverage covenant from the majority of revolving lenders under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020. The waiver is subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.
On August 21, 2020, the Company further amended the waiver of the leverage covenant to extend through the fiscal quarter ending September 30, 2021. The amendment also (i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, (ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits the Company to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver, and (iv) makes such other changes to permit the issuance of Cinemark Holdings, Inc.’s 4.50% convertible senior notes.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from November 28, 2022 to November 28, 2024. 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 the consolidated balance sheet. An additional $83 of related costs were expensed during the three and six months ended June 30, 2021.
5.875% Senior Notes
On March 16, 2021, Cinemark USA, Inc. issued $405,000 aggregate principal amount of 5.875% senior notes due 2026, at par value (the “5.875% Senior Notes”). Proceeds, after payment of fees, were used to fund a cash tender offer to purchase any and all of Cinemark USA’s 5.125% Senior Notes (the “5.125% Senior Notes”) and to redeem any of the 5.125% Senior Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on March 15, 2026. The Company incurred debt issue costs of approximately $5,980 in connection with the issuance, which are recorded as a reduction of long-term debt, less current on the consolidated balance sheet.
The 5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior debt and are senior in right of payment to all of Cinemark USA, Inc.’s and its guarantors’ existing and future senior subordinated debt. The 5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the collateral securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 5.875% Senior Notes.
The indenture to the 5.875% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. Upon a change of control, as defined in the indenture, the Company would be required to make an offer to repurchase the 5.875% Senior Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 5.875% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if we satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.
Prior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of the 5.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.875% Senior Notes to the date of redemption. After March 15, 2023, Cinemark USA, Inc. may redeem the 5.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
13
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:
|
| 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, which are designated as cash flow hedges, as of June 30, 2021:2022:
14
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
Notional |
|
|
|
|
|
|
|
|
|
| Estimated |
| ||
Amount |
|
| Effective Date |
| Pay Rate |
| Receive Rate |
| Expiration Date |
| Fair Value (1) |
| ||
$ | 137.5 |
|
| December 31, 2018 |
| 2.12% |
| 1-Month LIBOR |
| December 31, 2024 |
| $ | 3.0 |
|
$ | 175.0 |
|
| December 31, 2018 |
| 2.12% |
| 1-Month LIBOR |
| December 31, 2024 |
|
| 3.8 |
|
$ | 137.5 |
|
| December 31, 2018 |
| 2.19% |
| 1-Month LIBOR |
| December 31, 2024 |
|
| 2.7 |
|
|
|
|
|
|
|
|
|
| Total |
| $ | 9.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
|
Effective March 31, 2020, the Company amended and extended its 3 then existing interest rate swap agreements, all of which are used to hedge a portion 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. Upon amending the interest rate swap agreements effective March 31,2020,31, 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$29.4 is being amortized to interest expense through December 31, 2022, the original maturity dates of the swaps. Approximately $1,124 and $2,248$1.1 was recorded in interest expense in the condensed consolidated income statementstatements of loss for the three months ended June 30, 2022 and 2021 and $2.2 was recorded in interest expense in the condensed consolidated statements of loss for the six months ended June 30, 2021, respectively.2022 and 2021.
The fair values of the amended interest rate swaps and the new interest rate swap are recorded on the Company’s condensed consolidated balance sheetsheets 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. Underapproach and, 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.agreement. Therefore, the Company’s measurements use significant unobservable inputs, which fall in Level 2 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35. The Company is assessing the impact of reference rate reform, as well as the impact of ASU 2020-04 and ASU 2021-01, on the Company's interest rate swaps. See further discussion at Note 3.
Fair Value of Long-Term Debt
The Company estimates the fair value of its long-term debt primarily using the market approach, which utilizes quoted market prices, thatwhich fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC 820, Fair Value Measurement (“ASC Topic 820”).The table below presents the carrying value of the Company’s long-term debt, excluding unamortized debt discounts and debt issue 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’sCompany's long-term debt was $2,127,341 and $1,978,322 as of June 30, 2021 and December 31, 2020, respectively.
15
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
the periods presented:
(1) The carrying value excludes unamortized debt issuance costs. 7. Investment in National CineMedia LLC
|
|
Below is a summary of changes in stockholders’ equity attributable to Cinemark USA, Inc., noncontrolling interests and total equity for the three and six months ended June 30, 2021 and 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 |
| |||||||||
Balance at January 1, 2020 |
| $ | — |
| $ | 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 |
|
Dividends paid to parent |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (42,000 | ) |
| — |
|
| (42,000 | ) |
| — |
|
| (42,000 | ) |
Dividends paid to noncontrolling interests |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (392 | ) |
| (392 | ) |
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 | ) |
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (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 |
|
Share based awards compensation expense |
|
| — |
|
| — |
|
| — |
|
| 4,092 |
|
| — |
|
| — |
|
| 4,092 |
|
| — |
|
| 4,092 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (169,951 | ) |
| — |
|
| (169,951 | ) |
| (427 | ) |
| (170,378 | ) |
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 849 |
|
| 849 |
|
| — |
|
| 849 |
|
Amortization of accumulated losses for amended swap agreements |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,669 |
|
| 2,669 |
|
| — |
|
| 2,669 |
|
Foreign currency translation adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3,702 | ) |
| (3,702 | ) |
| — |
|
| (3,702 | ) |
Balance at June 30, 2020 |
| $ | — |
| $ | 49,543 |
| $ | (24,233 | ) | $ | 1,299,593 |
| $ | 213,662 |
| $ | (422,092 | ) | $ | 1,116,473 |
| $ | 11,859 |
| $ | 1,128,332 |
|
16
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:
|
| Investment |
| NCM Screen Advertising Advances |
| Equity in |
| Other |
| Interest |
| Cash |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance as of January 1, 2022 |
| $ | 135.4 |
| $ | (346.0 | ) |
|
|
|
|
|
|
|
| ||||
Receipt of common units due to annual common unit adjustment ("CUA") |
|
| 1.3 |
|
| (1.3 | ) |
|
|
|
|
|
|
|
| ||||
Screen rental revenue earned under ESA (1) |
|
| — |
|
| — |
| $ | — |
| $ | (9.8 | ) | $ | — |
| $ | 9.8 |
|
Interest accrued related to significant financing component |
|
| — |
|
| (11.7 | ) |
| — |
|
| — |
|
| 11.7 |
|
| — |
|
Equity in loss |
|
| (9.7 | ) |
| — |
|
| 9.7 |
|
| — |
|
| — |
|
| — |
|
Impairment of investment in NCM |
|
| (86.8 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Amortization of screen advertising advances |
|
| — |
|
| 16.2 |
|
| — |
|
| (16.2 | ) |
| — |
|
| — |
|
Balance as of and for the six months ended June 30, 2022 |
| $ | 40.2 |
| $ | (342.8 | ) | $ | 9.7 |
| $ | (26.0 | ) | $ | 11.7 |
| $ | 9.8 |
|
15
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
|
| Investment in NCM |
| NCM Screen Advertising Advances |
| Distributions from NCM |
| Equity in Loss |
| Other Revenue |
| Interest Expense - NCM |
| Cash Received |
| |||||||
Balance as of January 1, 2021 |
| $ | 151,962 |
| $ | (344,255 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receipt of common units due to annual common unit adjustment ("CUA") |
|
| 10,237 |
|
| (10,237 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Screen rental revenues earned under ESA (1) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3,790 | ) |
| — |
|
| 3,790 |
|
Interest accrued related to significant financing component |
|
| — |
|
| (11,797 | ) |
| — |
|
| — |
|
| — |
|
| 11,797 |
|
| — |
|
Receipt under tax receivable agreement |
|
| (156 | ) |
| — |
|
| (77 | ) |
| — |
|
| — |
|
| — |
|
| 233 |
|
Equity in loss |
|
| (14,414 | ) |
| — |
|
| — |
|
| 14,414 |
|
| — |
|
| — |
|
| — |
|
Amortization of screen advertising advances |
|
| — |
|
| 15,927 |
|
| — |
|
| — |
|
| (15,927 | ) |
| — |
|
| — |
|
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 |
|
|
|
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. The Company does not recognize undistributed equity See Note 6 to the Company's Annual Report on Form 10-K filed March 9, 2022 for additional discussion of the Company's investment in NCM as well as the earnings onaccounting for 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 incomeand subsequent to recognizing an excess distribution.common unit adjustments.
Common Unit Adjustments
The Company also periodically receives consideration in the form of common units from NCM. Annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated. The common units received are recorded at estimated fair value as an increase in the Company’s investment in NCM with an offset to NCM screen advertising advances.
During March 2021,2022, 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 2,311,4820.5 common units of NCM onduring April 14, 2021. The Company2022 and recorded thesethe additional common units received at antheir estimated fair value of $10,237$1.3 with a corresponding adjustment to NCM screen advertising advances. The fair value of the common units received was estimated based on the market price of NCMINational Cinemedia, Inc. ("NCMI") common stock (Level 1 input as defined in FASB ASC Topic 820) at the time the common units were determined, adjusted for volatility associated with the estimated time period it would take to convert the common units and register the respective shares.
17
CINEMARK USA, INC. AND SUBSIDIARIESImpairment of NCM Investment
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of June 30, 2021,2022, the Company owned a total of 43,161,55043.7 common units of NCM representing an ownership interest of approximately 26%25.5%. Each of the Company’s common units in NCM is convertible into 1one share of NCM, Inc.NCMI common stock. As of June 30, 2021,2022, the estimated fair value of the Company’s investment in NCM was approximately $218,829$40.2 based on NCM, Inc.’sNCMI's stock price as of June 30, 20212022 of $5.07$0.92 per share (Level 1 input as defined in FASB ASC Topic 820). Because the share price of NCMI was significantly below the Company’s carrying value of NCM per common unit and, due to the prolonged recovery of NCM's business, the Company wrote down its investment in NCM to its estimated fair value, in accordance with ASC 323-10-35, recording $86.8 charge to impairment expense during the six months ended June 30, 2022.
Exhibitor Services Agreement
As discussed above, the Company’s domestic theatres are part of the in-theatre digital network operated by NCM, underthe terms of which are defined in the ESA. NCM provides advertising to the Company’sits 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 NCM network and also earns screen advertising or screen rental revenue on a per patron basis. The screen advertising revenuesSee Note 6 to the Company's Annual Report on Form 10-K filed March 9, 2022 for further discussion of the accounting for revenue earned under the ESA are reflected in other revenue onas well as 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 timeaccounting related to NCM and has extended the term through February 2041. Since the agreement was amended, the Company was required to evaluate the revised contract under ASC Topic 842, Leases, and as a result, determined that the ESA met the definition of a lease. screen advertising advances.
The Company leases nonconsecutive periods of use of its domestic theatre screens to NCM for purposes of showing third party advertising content. The lease, which is classified as an operating lease, generally requires variable lease payments based on the number of patrons attending the showtimes during which such advertising is shown. The lease agreement is considered short-term due to the fact that the nonconsecutive periods of use, or advertising time slots, are set on a weekly basis. The revenues earned under the ESA, both before and after the amendment, are reflected in other revenue on the consolidated income statement.
The recognition of revenue related to thedeferred NCM screen advertising advances are recorded through February 2041.
|
| Twelve Months Ended June 30, |
|
|
|
|
|
|
|
|
| |||||||||||||||||
Remaining Maturity |
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
| |||||||
NCM screen advertising advances (1) |
| $ | 8,819 |
|
| $ | 9,428 |
|
| $ | 10,081 |
|
| $ | 10,780 |
|
| $ | 11,528 |
|
| $ | 299,726 |
|
| $ | 350,362 |
|
|
|
Significant Financing Component
In connection with the completion of the NCMI initial public offering, the Company amended and restated its ESA with NCM and received approximately $174,000 in cash consideration from NCM. The proceeds were recorded as deferred revenue and are being amortizedon a straight-line basis over the term of the modifiedamended ESA or through February 2041. In additionThe table below summarizes when the Company expects to recognize this revenue:
|
| Twelve Months Ended June 30, |
|
|
|
|
|
|
| |||||||||||||||||||
Remaining Maturity |
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
| |||||||
NCM screen advertising advances (1) |
| $ | 9.5 |
|
| $ | 10.1 |
|
| $ | 10.8 |
|
| $ | 11.6 |
|
| $ | 12.4 |
|
| $ | 288.4 |
|
| $ | 342.8 |
|
Significant Financing Component
As discussed in Note 6 to the consideration received uponCompany's Annual Report on Form 10-K filed March 9, 2022, the Company's ESA modification during 2007, the Company also receives consideration in the form of common units fromwith 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 rental revenue and interest expense of $15,927$16.2 and $11,797,$11.7, respectively, during the six months ended June 30, 20212022 and incremental screen rental revenue and interest expense of $15,612$15.9 and $11,825,$11.8, respectively, during the six months ended June 30, 2020.2021. The interest expense was calculated using the Company’s incremental borrowing rates at the time when the cash was received from the NCMINCM, Inc. IPO and each tranche of common units was received from NCM, which ranged from 4.4%4.4% to 8.3%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.
1816
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data(in millions, unaudited)
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 |
| ||||
|
| June 30, 2022 |
|
| July 1, 2021 |
|
| June 30, 2022 |
|
| July 1, 2021 |
| ||||
Gross revenue |
| $ | 67.1 |
|
| $ | 14.0 |
|
| $ | 103.0 |
|
| $ | 19.4 |
|
Operating income (loss) |
| $ | 5.6 |
|
| $ | (29.7 | ) |
| $ | (16.9 | ) |
| $ | (57.9 | ) |
Net loss |
| $ | (15.1 | ) |
| $ | (46.9 | ) |
| $ | (54.6 | ) |
| $ | (90.4 | ) |
|
| As of |
|
| As of |
| ||
|
| June 30, 2022 |
|
| December 30, 2021 |
| ||
Current assets |
| $ | 127.0 |
|
| $ | 115.4 |
|
Noncurrent assets |
| $ | 646.6 |
|
| $ | 658.0 |
|
Current liabilities |
| $ | 279.3 |
|
| $ | 67.2 |
|
Noncurrent liabilities |
| $ | 945.4 |
|
| $ | 1,114.7 |
|
Members deficit |
| $ | (451.1 | ) |
| $ | (408.5 | ) |
8. Other Investments
|
| 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 | ) |
|
|
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, 2021,2022, the Company had a 33%33% voting interest in DCIP and a 24.3%24.3% economic interest in DCIP. The Company accounts for its investment in DCIP and its subsidiaries under the equity method of accounting. 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 6six major motion picture studios pursuant to which Kasima LLC, one of DCIP’s subsidiaries, receivesreceived a virtual print fee ("VPF") each time the studio booksbooked a film or certain other content on the leased digital projection systems. Other content distributors entered into similar DCDAs that provideprovided 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 definedexpired 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 lateOctober 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 generated from their operations to the Exhibitors uponduring 2019. As the payoffDCDAs have expired and the MELA between the Company and Kasima has been terminated, as discussed below, DCIP and its subsidiaries no longer have regular operations, and final distributions are expected to be made to the Company in the third quarter of its outstanding debt, which occurred during the year ended December 31, 2019. 2022.
Effective November 1, 2020, the Company amended the master equipment lease agreement (“MELA”) with Kasima LLC, which is an indirect subsidiary of DCIP, resulting in the termination of the MELA. Upon termination of the MELA, the Company received a distribution of the digital projection equipment that it previously leased. As the fair value of the distributed projectors was greater than the Company’s investment in DCIP at the time of the distribution, the investment in DCIP was reduced to zero at the time of the distribution. The Company does not recognize undistributed equity in the earnings or loss of its investment in DCIP until such time that future net earnings, less distributions received, surpass the amount of the excess distribution. The investment in DCIP on the condensed consolidated balance sheets as of December 31, 2021 and June 30, 2022 was $0.
Below is summary financial information for DCIP for the periods indicated:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, 2022 |
|
| June 30, 2021 |
|
| June 30, 2022 |
|
| June 30, 2021 |
| ||||
Gross revenues |
| $ | 0.4 |
|
| $ | 14.1 |
|
| $ | 0.9 |
|
| $ | 19.7 |
|
Operating income (loss) |
| $ | (0.3 | ) |
| $ | 19.4 |
|
| $ | (0.8 | ) |
| $ | 23.4 |
|
Net income (loss) |
| $ | (0.3 | ) |
| $ | 20.1 |
|
| $ | (0.9 | ) |
| $ | 24.0 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Gross revenues |
| $ | 14,098 |
|
| $ | 23 |
|
| $ | 19,722 |
|
| $ | 32,533 |
|
Operating income (loss) |
| $ | 19,461 |
|
| $ | (37,305 | ) |
| $ | 23,441 |
|
| $ | (42,544 | ) |
Net income (loss) |
| $ | 20,056 |
|
| $ | (37,966 | ) |
| $ | 23,957 |
|
| $ | (49,106 | ) |
|
| As of |
| |||||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Current assets |
| $ | 21.8 |
|
| $ | 22.9 |
|
Current liabilities |
| $ | 11.4 |
|
| $ | 11.6 |
|
Members' equity |
| $ | 10.4 |
|
| $ | 11.3 |
|
19
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| 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 six months ended June 30, 2021 and 2020:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Equipment lease payments (1) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1,038 |
|
Warranty reimbursements from DCIP |
| $ | (434 | ) |
| $ | — |
|
| $ | (700 | ) |
| $ | (3,123 | ) |
Management service fees |
| $ | 4 |
|
| $ | — |
|
| $ | 15 |
|
| $ | 84 |
|
|
|
Other Investment Activity
Below is a summary of activity for each of the Company’s other investments forinvestees and corresponding changes to the Company's investment balances during the six months ended June 30, 2021:2022:
17
|
| 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 |
|
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
|
| AC JV, |
| DCDC |
| FE Concepts |
| Other |
| Total |
| |||||
Balance at January 1, 2022 |
| $ | 3.7 |
| $ | 1.8 |
| $ | 19.3 |
| $ | 0.4 |
| $ | 25.2 |
|
Cash distributions received |
|
| (1.5 | ) |
| — |
|
| — |
|
| — |
|
| (1.5 | ) |
Equity income |
|
| 1.3 |
|
| 0.1 |
|
| 0.6 |
|
| — |
|
| 2.0 |
|
Other |
|
| — |
|
| — |
|
| — |
|
| (0.1 | ) |
| (0.1 | ) |
Balance at June 30, 2022 |
| $ | 3.5 |
| $ | 1.9 |
| $ | 19.9 |
| $ | 0.3 |
| $ | 25.6 |
|
Transactions with Other Investees
Below is a summary of transactions with each of the Company’s other investees for the three and six months ended June 30, 2022 and 2021:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
Investee | Transactions | June 30, 2022 |
|
| June 30, 2021 |
|
| June 30, 2022 |
|
| June 30, 2021 |
| ||||
DCIP | Equipment lease payments (1) | $ | — |
|
| $ | 1.0 |
|
| $ | — |
|
| $ | 2.0 |
|
DCIP | Warranty reimbursements (2) | $ | — |
|
| $ | (0.4 | ) |
| $ | — |
|
| $ | (0.7 | ) |
AC JV, LLC | Event fees paid (3) | $ | 2.7 |
|
| $ | 0.4 |
|
| $ | 4.5 |
|
| $ | 0.6 |
|
DCDC | Content delivery fees paid (3) | $ | 0.1 |
|
| $ | 0.1 |
|
| $ | 0.3 |
|
| $ | 0.2 |
|
9. Share Based Awards
Restricted Stock
|
|
| 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 | ) |
Below is a summary of restricted stock activity for the six months ended June 30, 2022:
|
| Shares of |
|
| Weighted |
| ||
|
| Restricted |
|
| Grant Date |
| ||
|
| Stock |
|
| Fair Value |
| ||
Outstanding at January 1, 2022 |
|
| 2.00 |
|
| $ | 21.73 |
|
Granted |
|
| 0.87 |
|
| $ | 16.40 |
|
Vested |
|
| (0.47 | ) |
| $ | 26.24 |
|
Forfeited |
|
| (0.04 | ) |
| $ | 18.91 |
|
Outstanding at June 30, 2022 |
|
| 2.36 |
|
| $ | 18.91 |
|
Unvested restricted stock at June 30, 2022 |
|
| 2.36 |
|
| $ | 18.91 |
|
Six Months Ended 2022 2021 Compensation expense recognized by the Company during the period $ 8.0 $ 8.5 Additional compensation expense recognized by Cinemark Holdings, Inc. during the period $ 0.5 $ 0.5 Fair value of restricted stock held by Company employees that vested during the period $ 7.2 $ 1.2 Fair value of restricted stock held by Cinemark Holdings, Inc.’s directors that vested during the period $ 0.6 $ 1.3 Income tax benefit (cost) related to restricted stock held by Company employees $ 1.0 $ (0.2 ) Additional income tax benefit related to restricted stock held by Cinemark Holdings, Inc.'s directors $ 0.1 $ 0.3 18 |
|
|
|
20
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data(in millions, unaudited)
|
|
Restricted Stock – During the six months ended June 30, 2021,2022, Cinemark Holdings, Inc. granted 1,050,3480.87 shares of restricted stock to its directors and certain employees of the Company. The fair value of the restricted stock granted was determined based on the closing price of the Cinemark Holdings, Inc.’s common stock on the day preceding the grant date, which ranged from $21.01$14.87 to $23.98$17.07 per share. The Company assumed forfeiture rates for the restricted stock awards that ranged from 0%0% to 10%12%. Certain of theThe restricted stock awards vested immediately ongranted during the grant date while others vestsix months ended June 30, 2022 vests over periods ranging from one to four years.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 six months ended June 30, 2021:
|
| Shares of |
|
| Weighted Average |
| ||
|
| Restricted |
|
| Grant Date |
| ||
|
| Stock |
|
| Fair Value |
| ||
Outstanding at January 1, 2021 |
|
| 1,431,975 |
|
| $ | 21.11 |
|
Granted |
|
| 1,050,348 |
|
| $ | 21.38 |
|
Vested |
|
| (115,072 | ) |
| $ | 23.81 |
|
Forfeited |
|
| (41,482 | ) |
| $ | 18.19 |
|
Outstanding at June 30, 2021 |
|
| 2,325,769 |
|
| $ | 21.15 |
|
Unvested restricted stock at June 30, 2021 |
|
| 2,325,769 |
|
| $ | 21.15 |
|
|
| Six Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Compensation expense recognized by the Company during the period |
| $ | 8,487 |
|
| $ | 4,945 |
|
Additional compensation expense recognized by Cinemark Holdings, Inc. during the period |
| $ | 459 |
|
| $ | 458 |
|
Fair value of restricted shares held by Company employees that vested during the period |
| $ | 1,148 |
|
| $ | 8,323 |
|
Fair value of restricted shares held by Cinemark Holdings, Inc.’s directors that vested during the period |
| $ | 1,329 |
|
| $ | 377 |
|
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 |
| $ | 279 |
|
| $ | 146 |
|
As of June 30, 2021,2022, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $32,908,$27.8, of which $32,029$26.7 will be recognized by the Company and $880$1.1 will be recognized by Cinemark Holdings, Inc. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.years.
Restricted Stock Units
– Cinemark Holdings, Inc. did not grant anyBelow is a summary of restricted stock units duringunit activity for the six months ended June 30, 2021. periods presented:
21
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Number of restricted stock units that vested during the period |
|
| 0.10 |
|
|
| 0.01 |
|
Fair value of restricted stock units that vested during the period |
| $ | 1.7 |
|
| $ | 0.3 |
|
Accumulated dividends paid upon vesting of restricted stock units |
| $ | 0.3 |
|
| $ | 0.1 |
|
Compensation expense recognized during the period |
| $ | 2.6 |
|
| $ | 1.6 |
|
Income tax benefit (cost) related to restricted stock units |
| $ | 0.1 |
|
| $ | (0.3 | ) |
During the six months ended June 30, 20212022, the Company granted performance awards in the form of restricted stock units. The maximum number of shares issuable under the performance awards is ,0.76 the Compensation Committeeshares of Cinemark Holdings, Inc.’s Board's common stock. The performance metrics for these awards are based upon the achievement of Directors evaluatedpre-established criteria that consists of revenue and consolidated cash flows as defined in the impactaward agreement. The performance measurement period for these performance awards is one year with an additional service requirement to the third anniversary of the COVID-19 pandemicdate of grant. Each performance target underlying the performance award has a threshold, target and maximum level, with the maximum level equal to 175% of the target award. If the performance metrics meet the threshold level, approximately 29% of the maximum restricted stock units vest. If the performance metrics for the one-year period are at target, approximately 57% of the maximum restricted stock units vest. If the performance metrics are at 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 achievement of the performance goals is within the targets previously noted. All restricted stock units granted during 2022 will be paid in the form of Cinemark Holdings, Inc.'s common stock if the participant continues to provide services through the third anniversary of the grant date. Restricted stock unit award participants are eligible to receive dividend equivalent payments from the grant date to the extent declared by Cinemark Holdings, Inc. if, and at the time that, the restricted stock unit awards vest.
When the performance awards were issued, the Company estimated that the most likely outcome is the achievement of the target level. The fair value of the restricted stock unit awards was determined based on the performance metric usedclosing price of Cinemark Holdings, Inc.'s common stock on the date of grant, which was $16.65 per share. The Company assumed a forfeiture rate of 5% for the restricted stock unit awards granted during February 2019 and February 2020 andawards. During the three months ended June 30, 2022, based on updated performance expectations, the Company determined that the COVID-19 pandemic significantly impacted the Company’s abilitymaximum performance level was more likely to meet the performance metric.be achieved. The Compensation Committee made a discretionary decision to certify the vestCompany recorded incremental compensation expense of the 2019 and 2020 restricted stock unit awards at target based upon the unforeseen, external circumstances beyond management’s control, the projected macroeconomic conditions through 2021 and beyond, and the uncertain timing asapproximately $0.6 related to the recovery of the Company’s industry.change in estimated performance level.
|
| Six Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Number of restricted stock unit awards that vested during the period |
|
| 15,230 |
|
|
| 117,500 |
|
Fair value of restricted stock unit awards that vested during the period |
| $ | 314 |
|
| $ | 3,634 |
|
Accumulated dividends paid upon vesting of restricted stock unit awards |
| $ | 62 |
|
| $ | 563 |
|
Compensation expense recognized during the period |
| $ | 1,629 |
|
| $ | 3,029 |
|
Income tax benefit (cost) related to stock unit awards |
| $ | (306 | ) |
| $ | 526 |
|
As of June 30, 2021,2022, the estimated remaining unrecognized compensation expense related to outstanding restricted stock unit awardsunits was $8,388.$13.6. The weighted average period over which this remaining compensation expense will be recognized is approximately 2 years.two years. As of June 30, 2021,2022, the Company had restricted stock units outstanding that represented a total of 561,0411.0 hypothetical shares of common stock, net of forfeitures, reflecting actual certified performance levels for all grants outstanding.restricted stock units granted during 2019 and 2020 and the maximum performance level for the 2022 grant as discussed above.
19
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
10. Goodwill and Other Intangible Assets
|
|
A summary of the Company’s goodwill is as follows:
|
| U.S. |
|
| International |
|
| Total |
| |||
Balance at January 1, 2022 (1) |
| $ | 1,182.9 |
|
| $ | 65.9 |
|
| $ | 1,248.8 |
|
Foreign currency translation adjustments |
|
| — |
|
|
| 2.5 |
|
|
| 2.5 |
|
Balance at June 30, 2022 (1) |
| $ | 1,182.9 |
|
| $ | 68.4 |
|
| $ | 1,251.3 |
|
|
| 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 |
|
|
|
A summary of the Company’s intangible assets is as follows:
|
| Balance at |
| Amortization |
| Foreign Currency Translation Adjustments |
| Other (1) |
| Balance at June 30, 2022 |
| |||||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|
| |||||
Gross carrying amount |
| $ | 81.8 |
| $ | — |
| $ | 0.1 |
| $ | (0.2 | ) | $ | 81.7 |
|
Accumulated amortization |
|
| (71.1 | ) |
| (1.2 | ) |
| — |
|
| 0.2 |
|
| (72.1 | ) |
Total net intangible assets with finite lives |
| $ | 10.7 |
| $ | (1.2 | ) | $ | 0.1 |
| $ | — |
| $ | 9.6 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
| |||||
Tradename and other |
|
| 300.1 |
|
| — |
|
| 0.1 |
|
| — |
|
| 300.2 |
|
Total intangible assets, net |
| $ | 310.8 |
| $ | (1.2 | ) | $ | 0.2 |
| $ | — |
| $ | 309.8 |
|
|
| 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 |
|
|
|
22
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The estimated aggregate future amortization expense for intangible assets is as follows:
|
| Estimated |
| |
|
| Amortization |
| |
For the six months ended December 31, 2022 |
| $ | 1.2 |
|
For the twelve months ended December 31, 2023 |
|
| 2.5 |
|
For the twelve months ended December 31, 2024 |
|
| 2.5 |
|
For the twelve months ended December 31, 2025 |
|
| 1.9 |
|
For the twelve months ended December 31, 2026 |
|
| 1.5 |
|
Thereafter |
|
| 0 |
|
Total |
| $ | 9.6 |
|
11. Impairment of Long-Lived Assets
For the six months ended December 31, 2021 |
| $ | 1,377 |
|
For the twelve months ended December 31, 2022 |
|
| 2,581 |
|
For the twelve months ended December 31, 2023 |
|
| 2,485 |
|
For the twelve months ended December 31, 2024 |
|
| 2,485 |
|
For the twelve months ended December 31, 2025 |
|
| 2,363 |
|
Thereafter |
|
| 1,516 |
|
Total |
| $ | 12,807 |
|
|
|
The Company performed a qualitative impairment analysis on its long-livedgoodwill and tradename intangible assets as of March 31, 2021 and June 30, 2021.2022. As a result of the qualitative assessment, the Company noted no impairment indicators related to its goodwill and tradename intangible assets as of June 30, 2022.
The Company's qualitative impairment analysis, by asset class, is described below:
20
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
The Company performed a qualitative impairment analysis on its other long-lived assets, including theatre properties and right-of-use assets, as of June 30, 2022 to determine whether indicators of potential impairment existed at the theatre level, which is the level at which the Company tests its other long-lived assets. The Company then performed a quantitative impairment analysis for those theatres for which indicators of potential impairment were identified.
The Company’s quantitative evaluation at the theatre level uses estimated undiscounted cash flows from continuing use through the remainder of 2021 for potential impairment exposure.
the theatre’s useful life. The following table is a summaryremainder of the impairment recorded as a resulttheatre’s useful life correlates with the remaining lease period, which includes the probability of the evaluations performed duringexercise of available renewal periods for leased properties, and the lesser of twenty years or the building’s remaining useful life for owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, the Company then compares the carrying value of the asset group (theatre) with its estimated fair value. Significant judgment is involved in estimating fair value, including management’s estimate of future theatre level cash flows for each of the Company's theatres based on projected box office. Fair value is estimated based on a multiple of cash flows. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy, as defined by FASB ASC Topic 820-10-35, are based on projected operating performance, market transactions and industry trading multiples.
The Company's impairment charges were as follows for the six months ended June 30, 2020:2022:
|
| Six Months Ended |
| |
|
| June 30, |
| |
|
| 2022 |
| |
U.S. Segment |
|
|
| |
Theatre properties |
| $ | 2.5 |
|
Theatre operating lease right-of-use assets |
|
| 2.0 |
|
Investment in NCM (1) |
|
| 86.8 |
|
U.S. total |
|
| 91.3 |
|
|
|
|
| |
International segment |
|
|
| |
Theatre properties |
|
| 0.7 |
|
Theatre operating lease right-of-use assets |
|
| 0.3 |
|
International total |
|
| 1.0 |
|
|
|
|
| |
Total Impairment |
| $ | 92.3 |
|
|
| Six Months Ended |
| |
|
| June 30, |
| |
|
| 2020 |
| |
U.S. Segment |
|
|
|
|
Theatre properties |
| $ | 3,643 |
|
Theatre operating lease right-of-use assets |
|
| 5,952 |
|
U.S. total |
|
| 9,595 |
|
|
|
|
|
|
International segment |
|
|
|
|
Theatre properties |
|
| 4,484 |
|
Theatre operating lease right-of-use assets |
|
| 2,540 |
|
International total |
|
| 7,024 |
|
|
|
|
|
|
Total Impairment |
| $ | 16,619 |
|
12.. 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 assets and liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of June 30, 20212022 and December 31, 2020:2021:
23
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
|
| Carrying |
|
| Fair Value Hierarchy |
| ||||||||||
Description |
| As of, |
| Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Interest rate swap assets (1) |
| June 30, 2022 |
| $ | 9.5 |
|
| $ | — |
|
| $ | 9.5 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap liabilities (1) |
| December 31, 2021 |
| $ | 14.6 |
|
| $ | — |
|
| $ | 14.6 |
|
| $ | — |
|
|
|
|
| Carrying |
|
| Fair Value Hierarchy |
| ||||||||||
Description |
| As of, |
| Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Interest rate swap liabilities (1) |
| June 30, 2021 |
| $ | 24,550 |
|
| $ | — |
|
| $ | 24,550 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap liabilities (1) |
| December 31, 2020 |
| $ | 33,847 |
|
| $ | — |
|
| $ | 33,847 |
|
| $ | — |
|
|
|
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 1110 and Note 12)11). See additional explanation of fair value measurement techniques used for long-lived assets, goodwill and intangible assets in “Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, filed March 3, 2021.9, 2022. 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 six months ended June 30, 2021. There were 0 transfers in tointo or out of Level 1, Level 2 or Level 3 during the six months ended June 30, 2021. 2022.
21
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
13. Foreign Currency Translation
|
|
The accumulated other comprehensive loss account in stockholders’ equity of $391,162$374.5 and $398,653$397.0 as of June 30, 20212022 and December 31, 2020,2021, respectively, primarily includes cumulative foreign currency net losses of $376,850$395.8 and $375,644,$394.5, 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 June 30, 2021,2022, all foreign countries where the Company has operations other than Argentina, are non-highly inflationary, andother than Argentina. In non-highly inflationary countries, the local currency is the same as the functional currency in all of the locations. Thus,and 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 was remeasured in U.S. dollars in accordance with ASC Topic 830, Foreign Currency Matters, effective July 1, 2018.
Below is a summary of the impact of translating the June 30, 20212022 and 2020June 30, 2021 financial statements of the Company’s international subsidiaries:
|
|
|
|
|
|
|
|
|
| Other Comprehensive Loss for |
|
|
|
|
|
| Other Comprehensive Income (Loss) for |
| ||||||||||||
|
| Exchange Rate as of |
|
| Six Months Ended |
|
| Exchange Rate as of |
|
| Six Months Ended |
| ||||||||||||||||||
Country |
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2021 |
| June 30, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2022 |
| June 30, 2021 |
| ||||||||
Brazil |
|
| 4.97 |
|
|
| 5.20 |
|
| $ | 2,766 |
| $ | (49,478 | ) |
|
| 5.2 |
|
|
| 5.6 |
|
| $ | 2.4 |
| $ | 2.8 |
|
Chile |
|
| 729.44 |
|
|
| 714.14 |
|
|
| (1,401 | ) |
| (8,233 | ) |
|
| 926.1 |
|
|
| 852.0 |
|
|
| (5.2 | ) |
| (1.4 | ) |
Colombia |
|
| 3,756.67 |
|
|
| 3,432.50 |
|
|
| (134 | ) |
| (2,523 | ) | |||||||||||||||
Peru |
|
| 3.90 |
|
|
| 3.65 |
|
|
| (1,959 | ) |
| (2,480 | ) |
|
| 3.9 |
|
|
| 4.0 |
|
|
| 1.0 |
| (2.0 | ) | |
All other |
|
|
|
|
|
|
|
|
|
| (478 | ) |
| 1,387 |
|
|
|
|
|
|
|
|
| 0.5 |
|
| (0.6 | ) | ||
|
|
|
|
|
|
|
|
|
| $ | (1,206 | ) | $ | (61,327 | ) |
|
|
|
|
| $ | (1.3 | ) | $ | (1.2 | ) |
24
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
(1) BeginningAs noted above, beginning July 1, 2018, Argentina was deemed highly inflationary. A foreign currency exchange loss of $2.0 and gain of $425 and $633$0.4 was recorded for the six months ended June 30, 2022 and 2021, and 2020, respectively, is reflected as foreign currency exchange loss on the Company’s condensed consolidated statement of income as a result of translating ArgentinaArgentina's financial results to U.S. dollars.
14. Supplemental Cash Flow Information
|
|
The following is provided as supplemental information to the condensed consolidated statements of cash flows:
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash paid for interest |
| $ | 60.6 |
|
| $ | 59.9 |
|
Cash paid (refunds received) for income taxes, net |
| $ | 1.0 |
|
| $ | (136.4 | ) |
Cash deposited in restricted accounts (1) |
| $ | 0 |
|
| $ | 7.3 |
|
Noncash operating activities: |
|
|
|
|
|
| ||
Interest expense - NCM (see Note 7) |
| $ | (11.7 | ) |
| $ | (11.8 | ) |
Noncash investing activities: |
|
|
|
|
|
| ||
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment(2) |
| $ | 0.4 |
|
| $ | (3.5 | ) |
Investment in NCM – receipt of common units (see Note 7) |
| $ | 1.3 |
|
| $ | 10.2 |
|
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Cash paid for interest |
| $ | 59,890 |
|
| $ | 47,014 |
|
Cash paid (refunds received) for income taxes, net |
| $ | (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 (2) |
| $ | (3,536 | ) |
| $ | 1,043 |
|
Interest expense - NCM (see Note 8) |
| $ | (11,797 | ) |
| $ | (11,825 | ) |
Investment in NCM – receipt of common units (see Note 8) |
| $ | 10,237 |
|
| $ | 3,620 |
|
(2) Additions to theatre properties and equipment included in accounts payable as of June 30, 2022 and December 31, 2021 were $8.6 and $8.2, respectively. 15. Segments |
|
|
|
|
|
|
The Company manages its international market and its U.S. market as separate reportable operating segments, with the international segment consisting of operations in Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues.revenue. 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.
22
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
Below is a breakdown of selected financial information by reportable operating segment:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. |
| $ | 603.5 |
|
| $ | 269.4 |
|
| $ | 977.2 |
|
| $ | 366.7 |
|
International |
|
| 143.3 |
|
|
| 25.4 |
|
|
| 231.8 |
|
|
| 42.7 |
|
Eliminations |
|
| (2.7 | ) |
|
| (0.2 | ) |
|
| (4.4 | ) |
|
| (0.4 | ) |
Total revenue |
| $ | 744.1 |
|
| $ | 294.6 |
|
| $ | 1,204.6 |
|
| $ | 409.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. |
| $ | 111.5 |
|
| $ | 0.9 |
|
| $ | 126.5 |
|
| $ | (75.6 | ) |
International |
|
| 27.2 |
|
|
| (12.3 | ) |
|
| 38.0 |
|
|
| (27.3 | ) |
Total Adjusted EBITDA |
| $ | 138.7 |
|
| $ | (11.4 | ) |
| $ | 164.5 |
|
| $ | (102.9 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. |
| $ | 16.5 |
|
| $ | 11.4 |
|
| $ | 30.5 |
|
| $ | 25.1 |
|
International |
|
| 5.4 |
|
|
| 3.7 |
|
|
| 10.1 |
|
|
| 7.7 |
|
Total capital expenditures |
| $ | 21.9 |
|
| $ | 15.1 |
|
| $ | 40.6 |
|
| $ | 32.8 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 269,437 |
|
| $ | 8,155 |
|
| $ | 366,704 |
|
| $ | 437,457 |
|
International |
|
| 25,391 |
|
|
| 819 |
|
|
| 42,663 |
|
|
| 116,992 |
|
Eliminations |
|
| (176 | ) |
|
| — |
|
|
| (354 | ) |
|
| (1,859 | ) |
Total revenues |
| $ | 294,652 |
|
| $ | 8,974 |
|
| $ | 409,013 |
|
| $ | 552,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 946 |
|
| $ | (95,905 | ) |
| $ | (75,539 | ) |
| $ | (39,639 | ) |
International |
|
| (12,340 | ) |
|
| (21,366 | ) |
|
| (27,293 | ) |
|
| (11,227 | ) |
Total Adjusted EBITDA |
| $ | (11,394 | ) |
| $ | (117,271 | ) |
| $ | (102,832 | ) |
| $ | (50,866 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 11,483 |
|
| $ | 11,028 |
|
| $ | 25,124 |
|
| $ | 36,701 |
|
International |
|
| 3,656 |
|
|
| 1,788 |
|
|
| 7,695 |
|
|
| 10,258 |
|
Total capital expenditures |
| $ | 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 loss to Adjusted EBITDA:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net loss |
| $ | (65.3 | ) |
| $ | (137.1 | ) |
| $ | (126.3 | ) |
| $ | (340.6 | ) |
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense (benefit) |
|
| 3.6 |
|
|
| 9.3 |
|
|
| (2.9 | ) |
|
| (3.9 | ) |
Interest expense (1) |
|
| 32.0 |
|
|
| 31.1 |
|
|
| 64.1 |
|
|
| 61.6 |
|
Other expense, net (2) |
|
| 11.8 |
|
|
| 8.0 |
|
|
| 15.0 |
|
|
| 23.0 |
|
Cash distributions from other equity investees (3) |
|
| 0.9 |
|
|
| 0 |
|
|
| 1.5 |
|
|
| 0.1 |
|
Depreciation and amortization |
|
| 61.0 |
|
|
| 66.9 |
|
|
| 122.7 |
|
|
| 135.1 |
|
Impairment of long-lived and other assets |
|
| 92.3 |
|
|
| 0 |
|
|
| 92.3 |
|
|
| 0 |
|
Restructuring costs |
|
| (0.2 | ) |
|
| (0.7 | ) |
|
| (0.2 | ) |
|
| (0.9 | ) |
(Gain) loss on disposal of assets and other |
|
| (0.7 | ) |
|
| 2.3 |
|
|
| (7.6 | ) |
|
| 6.8 |
|
Loss on extinguishment of debt |
|
| 0 |
|
|
| 3.9 |
|
|
| 0 |
|
|
| 6.5 |
|
Non-cash rent expense |
|
| (2.4 | ) |
|
| (0.8 | ) |
|
| (4.7 | ) |
|
| (0.7 | ) |
Share based awards compensation expense |
|
| 5.7 |
|
|
| 5.7 |
|
|
| 10.6 |
|
|
| 10.1 |
|
Adjusted EBITDA |
| $ | 138.7 |
|
| $ | (11.4 | ) |
| $ | 164.5 |
|
| $ | (102.9 | ) |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net loss |
| $ | (137,059 | ) |
| $ | (170,378 | ) |
| $ | (340,569 | ) |
| $ | (229,479 | ) |
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
| 9,337 |
|
|
| (98,007 | ) |
|
| (3,888 | ) |
|
| (101,014 | ) |
Interest expense (1) |
|
| 31,058 |
|
|
| 31,041 |
|
|
| 61,578 |
|
|
| 55,707 |
|
Other expense, net (2) |
|
| 7,935 |
|
|
| 24,335 |
|
|
| 22,932 |
|
|
| 24,505 |
|
Cash distributions from DCIP (3) |
|
| — |
|
|
| 5,222 |
|
|
| — |
|
|
| 10,383 |
|
Cash distributions from other equity investees (4) |
|
| — |
|
|
| 1,456 |
|
|
| 156 |
|
|
| 12,901 |
|
Depreciation and amortization |
|
| 66,920 |
|
|
| 63,581 |
|
|
| 135,080 |
|
|
| 128,837 |
|
Impairment of long-lived assets |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,619 |
|
Restructuring costs |
|
| (740 | ) |
|
| 19,538 |
|
|
| (948 | ) |
|
| 19,538 |
|
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 |
|
| (807 | ) |
|
| 1,424 |
|
|
| (679 | ) |
|
| 833 |
|
Share based awards compensation expense |
|
| 5,680 |
|
|
| 4,092 |
|
|
| 10,116 |
|
|
| 7,974 |
|
Adjusted EBITDA |
| $ | (11,394 | ) |
| $ | (117,271 | ) |
| $ | (102,832 | ) |
| $ | (50,866 | ) |
|
|
|
|
|
|
|
|
Financial Information About Geographic Areas
Below is a breakdown of selected financial information by geographic area:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
Revenue |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
U.S. |
| $ | 603.5 |
|
| $ | 269.4 |
|
| $ | 977.2 |
|
| $ | 366.7 |
|
Brazil |
|
| 54.8 |
|
|
| 5.5 |
|
|
| 87.9 |
|
|
| 9.9 |
|
Other international countries |
|
| 88.5 |
|
|
| 19.9 |
|
|
| 143.9 |
|
|
| 32.8 |
|
Eliminations |
|
| (2.7 | ) |
|
| (0.2 | ) |
|
| (4.4 | ) |
|
| (0.4 | ) |
Total |
| $ | 744.1 |
|
| $ | 294.6 |
|
| $ | 1,204.6 |
|
| $ | 409.0 |
|
23
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
|
| As of |
|
| As of |
| ||
Theatre Properties and Equipment, net |
| June 30, 2022 |
|
| December 31, 2021 |
| ||
U.S. |
| $ | 1,131.1 |
|
| $ | 1,208.7 |
|
Brazil |
|
| 53.8 |
|
|
| 56.8 |
|
Other international countries |
|
| 111.1 |
|
|
| 117.4 |
|
Total |
| $ | 1,296.0 |
|
| $ | 1,382.9 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
Revenues |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
U.S. |
| $ | 269,437 |
|
| $ | 8,155 |
|
| $ | 366,704 |
|
| $ | 437,457 |
|
Brazil |
|
| 5,463 |
|
|
| 348 |
|
|
| 9,901 |
|
|
| 53,316 |
|
Other international countries |
|
| 19,928 |
|
|
| 471 |
|
|
| 32,762 |
|
|
| 63,676 |
|
Eliminations |
|
| (176 | ) |
|
| — |
|
|
| (354 | ) |
|
| (1,859 | ) |
Total |
| $ | 294,652 |
|
| $ | 8,974 |
|
| $ | 409,013 |
|
| $ | 552,590 |
|
16. Related Party Transactions
|
| As of |
|
| As of |
| ||
Theatre Properties and Equipment-net |
| June 30, 2021 |
|
| December 31, 2020 |
| ||
U.S. |
| $ | 1,286,878 |
|
| $ | 1,392,780 |
|
Brazil |
|
| 69,486 |
|
|
| 72,080 |
|
Other international countries |
|
| 136,200 |
|
|
| 150,202 |
|
Total |
| $ | 1,492,564 |
|
| $ | 1,615,062 |
|
|
|
The Company manages a theatre for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns 75%75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25%25% of the limited partnership interests in Laredo and is 100%100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Lee Roy Mitchell, isthe Company's founder and a member of Cinemark Holdings, Inc.’s Chairman of the Board of Directors, andowns, both directly and indirectly, owns approximately 8%8.5% 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%5% of annual theatre revenues.revenue. The Company recorded $116 $0.3and $114$0.1 of management fee revenuesrevenue during the six months ended June 30, 20212022 and 2020,2021, respectively. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation. During the six months ended June 30, 2022, the Company paid an excess cash distribution of $2.0 to Laredo as required by the partnership agreement, which was recorded as a reduction of noncontrolling interest on the condensed consolidating balance sheet.
Walter Hebert, Mr. Mitchell’s brother-in-law, previously served as the Executive Vice President – Purchasing of the Company and retired in July 2021. Mr. Hebert served as a consultant to the Company until July 2022. During the six months ended June 30, 2022, the Company paid Mr. Hebert $0.1 related to consulting services.
The Company has an Aircraft Time Sharing Agreement with Copper Beech Capital, LLC (“Copper Beech”) to use, on occasion, a private aircraft owned by Copper Beech. 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 six months ended June 30, 2022 and 2021, and 2020, the aggregate amounts paidCompany did 0t make any payments to Copper Beech for the use of the aircraft was $0 and $12, respectively.aircraft.
The Company leases 1413 theatres and 1 parking facility from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy. Raymond Syufy is one of the directors 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 six months ended June 30, 20212022 and 2020,2021, the Company paid total rent of approximately $12,042$11.1 and $10,542,$12.0, respectively, to Syufy. The Company provides digital equipment support to drive-in theatres owned by Syufy. The Company recorded management fees of $0.1 related to these services during each of the six months ended June 30, 2022 and 2021.
The Company has a 50%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.amenities. See Note 98 for further discussion. The Company has a theatre services agreement with FE Concepts under which the Company receives service fees for providing film booking and equipment monitoring services for the facility.
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 June 30, 20212022 and December 31, 20202021 was $38,851$58.1 and $36,775,$46.7, respectively. The Company received contributions from Cinemark Holdings, Inc. of $120,000 during the three months ended March 31, 2021 and paid dividends of $42,000 to Cinemark Holdings, Inc.$120.0 during the six months ended June 30, 2020.2021.
17. 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, 471st471st 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 pursuantdue to orders issued by various government agencies.the COVID-19 pandemic. Factory Mutual Insurance Company (“FM”) denied the Company’s claim. The Company is seeking damages
24
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
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.
Lakeenya Neal, et al v. Cinemark Holdings, Inc., et al. This class action lawsuit was filed against the Company on December 10, 2021, in the Central District of Los Angeles County Superior Court of the State of California alleging certain violations of the Fair and Accurate Credit Transactions Act. We firmly maintain that the allegations are without merit and will vigorously defend this lawsuit. The Company cannot predict the outcome of this litigation.
25
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
As we have previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and our industry. The social and economic effects have 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 the COVID-19 pandemic. At the initial outbreak of the COVID-19 pandemic, to comply with government mandates, we temporarily closed all of our theatres Amounts included in the U.S.following discussion, except for screens, average screens, average ticket price and Latin America effective March 17, 2020 and March 18, 2020, respectively. In conjunction with the temporary closure of our theatresconcessions revenue per patron, are rounded 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.millions.
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 June 30, 2021, we had reopened all 323 of our domestic theatres and 152 of our 198 international theatres. During the three months ended June 30, 2021, we showed many new releases along with some library content. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours in certain locations and our focus on initiatives to enhance productivity. We also continue to limit capital expenditures to essential activities and projects. We continued to work with landlords and other vendors during the six months ended June 30, 2021 to extend payment terms as we reopened theatres and continue to recover from the impacts of the COVID-19 pandemic.
Based on our current estimates of recovery, we believe we have and will generate sufficient cash to sustain operations for the foreseeable future as we work to return to historical working capital levels. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on our business, results of operations, cash flows and financial condition.
General Information
We are a leader in the motion picture exhibition industry, with theatres in the U.S., Brazil, Argentina, Chile, Colombia, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. As of June 30, 2021,2022, we managed our business under two reportable operating segments – U.S. markets and international markets. See Note 1615 to our condensed consolidated financial statements.
Impact of COVID-19 Pandemic
The COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry with widespread social and economic effects. We temporarily closed our theatres in the U.S. and Latin America during March of 2020 at the onset of the COVID-19 outbreak. During that time, we implemented various cash preservation strategies, including, but not limited to, temporary personnel and salary reductions, halting non-essential operating and capital expenditures, negotiating modified timing and/or abatement of contractual payments with landlords and other major suppliers, and the suspension of dividends to Cinemark Holdings, Inc.
Throughout 2020 and 2021 we reopened theatres as local restrictions and the status of the COVID-19 pandemic would allow. All of our domestic and international theatres were reopened by the end of the fourth quarter of 2021. The industry’s recovery from the COVID-19 pandemic is still underway and is contingent upon the volume of new film content available, as well as the box office performance of new film content released, consumer sentiment in returning to movie theaters and government restrictions. The industry is also adjusting to the evolution of the exclusive theatrical window, competition from streaming platforms, supply chain constraints, inflationary impacts and other economic factors.
Revenue and Expense
We generate revenuesrevenue primarily from filmed entertainment box office receipts and concession sales with additional revenuesrevenue from screen advertising, salesscreen rental 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 the Metropolitan Opera, concert events, in-theatre gaming, live and pre-recorded sports programs concert events, the Metropolitan Opera, in-theatre gaming and other special events in our theatres. In-theatre advertising fortheatres through Fathom Entertainment (operated by AC JV, LLC). NCM provides our domestic theatres is provided by National CineMedia. In our international locations, ourwith various forms of in-theatre advertising. 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 six months ended June 30, 20212022 included the carryover from of The Croods: A New AgeSpider-Man: No Way Home and Wonder Woman 1984, andas well as new releases Tom & Jerry, Godzilla vs. Kong,including A Quiet Place Part II, Cruella,Top Gun: Maverick, Doctor Strange in the Multiverse of Madness, The Conjuring:Batman, Jurassic World: Dominion, Sonic the Hedgehog 2, Uncharted, The Devil Made Me Do It, Peter Rabbit 2, F9:Lost City, Lightyear, The Fast Saga, Mortal KombatBad Guys and Demon Slayer: Kimetsu no YaibaElvis. .Films currently scheduled for release during the remainder of 2021 2022 include Black Widow,Panther: Wakanda Forever, Minions: The Boss Baby: Family Business, Suicide Squad, Venom: Let There Be Carnage, No Time to Die, Eternals, Top Gun Maverick, EncantoRise of Gru, Thor: Love and Thunder, Black Adam, Puss in Boots: The Last Wish, Shazam! Fury of the Gods, Nope, Bullet Train, Halloween Ends and the Marvelhighly anticipated sequel, Spider-man; NoAvatar: The Way Home,of Water, among other films. There are several key factors impacting the industry box office's recovery from the COVID-19 pandemic, including the availability and quality of new films released, the duration of the exclusive theatrical windows and evolving consumer behavior with competition from streaming platforms and other forms of entertainment.
Film rental and advertising costs are variable in nature and fluctuate with our admissions revenues.revenue. Film rental costs as a percentage of revenuesrevenue are generally higher for periods in which more blockbuster films are released. The Company also receivesreceived virtual print fees from studios for certain of its international locations, which are included as a contra-expense in film rentalsrental and advertising costs. Promotional expenses are generally variablecosts on the condensed consolidated statements of loss. However, these costs were fully recovered during 2021. Virtual print fees were not received during 2022 and will not be received in nature and primarily include the placement of film-specific social and digital media spots promoting film content currently playing in our theatres.future periods. Advertising costs, which are expensed as incurred, are primarily related to campaigns for newreigniting theatrical moviegoing, increasing loyalty to Cinemark and renovated theatres, loyalty and membership programs and brand advertising thatbuilding our audiences. These expenses vary depending on the timing and length of such campaigns.
Concession supplies expenses areexpense is variable in nature and fluctuatefluctuates with our concession revenuesrevenue and product mix. Supply chain interruptions and inflationary pressures have impacted, and may continue to impact, product costs and product availability in the near term. We negotiate prices for concession supplies directly with concession vendorssource products from a variety of partners around the world to minimize supply chain interruptions and manufacturers to obtain volume rates.price increases, wherever possible.
SalariesAlthough salaries and wages for our theatres generallyinclude a fixed cost component (i.e., the minimum staffing costs to operate a theatre facility during non-peak periods), salaries and wages tend to move in relation to revenuesrevenue as theatre staffing is adjusted to respond to changes in attendanceattendance. Staffing levels may vary based on the amenities offered at a location, such as full-service restaurants, bars or expanded food and also include a fixed cost component (i.e. the minimum staffing costs to operate a theatre during non-peak periods).beverage options. In somecertain international locations, staffing levels are also subject to local regulations. Labor market conditions and inflationary pressures have driven increases in wages across our labor base and increases may continue in the future.
26
Facility lease expenses areexpense is primarily a fixed costscost at the theatre level as most of our facility leases require a fixed monthly minimum rent payments.payment. 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 expensesexpense as a percentage of revenues arerevenue is also affected by the number of theatres under operating leases, the number of theatres under 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,property taxes, janitorial costs, credit card fees, third party ticket sales commissions, property taxes, janitorial costs, repairs and maintenance expenses, security services and expenses for the maintenance and security services.monitoring of projection and sound equipment.
General and administrative expenses are primarily fixed in nature and consist of the costsexpense to support the overall management of the Company including base, incentive compensationis primarily fixed in nature with certain variable expenses. Fixed expenses include salaries and wages and benefits costs for our corporate office personnel, facility expenses for our corporate and other offices, software maintenance costs and audit fees. Some variable expenses may include incentive compensation, consulting and legal fees, professional fees, cloud-based software licensing fees, travel expenses, supplies and other costs that are not specifically associated with the operations of our theatres.
27
Results of Operations
The following table sets forth, for the periods indicated, certain operating data and the percentage of revenues represented byamounts for certain items reflected in our condensed consolidated statements of income.loss along with each of those items as a percentage of revenue.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Operating data (in millions): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Admissions |
| $ | 381.9 |
|
| $ | 153.5 |
|
| $ | 617.7 |
|
| $ | 209.6 |
|
Concession |
|
| 286.0 |
|
|
| 109.8 |
|
|
| 459.0 |
|
|
| 149.3 |
|
Other |
|
| 76.2 |
|
|
| 31.3 |
|
|
| 127.9 |
|
|
| 50.1 |
|
Total revenue |
| $ | 744.1 |
|
| $ | 294.6 |
|
| $ | 1,204.6 |
|
| $ | 409.0 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Film rentals and advertising |
|
| 222.6 |
|
|
| 76.6 |
|
|
| 350.2 |
|
|
| 99.8 |
|
Concession supplies |
|
| 52.5 |
|
|
| 18.8 |
|
|
| 82.5 |
|
|
| 26.0 |
|
Salaries and wages |
|
| 100.2 |
|
|
| 50.4 |
|
|
| 180.0 |
|
|
| 81.6 |
|
Facility lease expense |
|
| 80.3 |
|
|
| 67.2 |
|
|
| 154.0 |
|
|
| 132.0 |
|
Utilities and other |
|
| 106.5 |
|
|
| 61.2 |
|
|
| 193.4 |
|
|
| 110.3 |
|
General and administrative expense |
|
| 47.5 |
|
|
| 36.7 |
|
|
| 87.4 |
|
|
| 71.8 |
|
Depreciation and amortization |
|
| 61.0 |
|
|
| 66.9 |
|
|
| 122.7 |
|
|
| 135.1 |
|
Impairment of long-lived and other assets |
|
| 92.3 |
|
|
| — |
|
|
| 92.3 |
|
|
| — |
|
Restructuring costs |
|
| (0.2 | ) |
|
| (0.7 | ) |
|
| (0.2 | ) |
|
| (0.9 | ) |
(Gain) loss on disposal of assets and other |
|
| (0.7 | ) |
|
| 2.3 |
|
|
| (7.6 | ) |
|
| 6.8 |
|
Total cost of operations |
|
| 762.0 |
|
|
| 379.4 |
|
|
| 1,254.7 |
|
|
| 662.5 |
|
Operating loss |
| $ | (17.9 | ) |
| $ | (84.8 | ) |
| $ | (50.1 | ) |
| $ | (253.5 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating data as a percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Admissions |
|
| 51.3 | % |
|
| 52.1 | % |
|
| 51.3 | % |
|
| 51.2 | % |
Concession |
|
| 38.4 | % |
|
| 37.3 | % |
|
| 38.1 | % |
|
| 36.5 | % |
Other |
|
| 10.3 | % |
|
| 10.6 | % |
|
| 10.6 | % |
|
| 12.3 | % |
Total revenue |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of operations (1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Film rentals and advertising |
|
| 58.3 | % |
|
| 49.9 | % |
|
| 56.7 | % |
|
| 47.6 | % |
Concession supplies |
|
| 18.4 | % |
|
| 17.1 | % |
|
| 18.0 | % |
|
| 17.4 | % |
Salaries and wages |
|
| 13.5 | % |
|
| 17.1 | % |
|
| 14.9 | % |
|
| 20.0 | % |
Facility lease expense |
|
| 10.8 | % |
|
| 22.8 | % |
|
| 12.8 | % |
|
| 32.3 | % |
Utilities and other |
|
| 14.3 | % |
|
| 20.8 | % |
|
| 16.1 | % |
|
| 27.0 | % |
General and administrative expense |
|
| 6.4 | % |
|
| 12.5 | % |
|
| 7.3 | % |
|
| 17.6 | % |
Depreciation and amortization |
|
| 8.2 | % |
|
| 22.7 | % |
|
| 10.2 | % |
|
| 33.0 | % |
Impairment of long-lived and other assets |
|
| 12.4 | % |
|
| — | % |
|
| 7.7 | % |
|
| — | % |
Restructuring costs |
|
| — | % |
|
| (0.2 | )% |
|
| — | % |
|
| (0.2 | )% |
(Gain) loss on disposal of assets and other |
|
| (0.1 | )% |
|
| 0.8 | % |
|
| (0.6 | )% |
|
| 1.7 | % |
Total cost of operations |
|
| 102.4 | % |
|
| 128.8 | % |
|
| 104.2 | % |
|
| 162.0 | % |
Operating loss |
|
| (2.4 | )% |
|
| (28.8 | )% |
|
| (4.2 | )% |
|
| (62.0 | )% |
28
|
| Three Months Ended |
|
|
|
| Six Months Ended |
| ||||||||||||
|
| June 30, |
|
|
|
| June 30, |
| ||||||||||||
|
| 2021 |
|
| 2020 |
|
|
|
| 2021 |
|
|
|
| 2020 |
| ||||
Operating data (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions |
| $ | 153.5 |
|
| $ | — |
|
|
|
| $ | 209.6 |
|
|
|
| $ | 292.5 |
|
Concession |
|
| 109.8 |
|
|
| 0.1 |
|
|
|
|
| 149.3 |
|
|
|
|
| 190.5 |
|
Other |
|
| 31.3 |
|
|
| 8.9 |
|
|
|
|
| 50.1 |
|
|
|
|
| 69.6 |
|
Total revenues |
| $ | 294.6 |
|
| $ | 9.0 |
|
|
|
| $ | 409.0 |
|
|
|
| $ | 552.6 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Film rentals and advertising |
|
| 76.6 |
|
|
| 0.4 |
|
|
|
|
| 99.8 |
|
|
|
|
| 157.0 |
|
Concession supplies |
|
| 18.8 |
|
|
| 2.4 |
|
|
|
|
| 26.0 |
|
|
|
|
| 37.2 |
|
Salaries and wages |
|
| 50.4 |
|
|
| 8.8 |
|
|
|
|
| 81.6 |
|
|
|
|
| 96.4 |
|
Facility lease expense |
|
| 67.2 |
|
|
| 65.2 |
|
|
|
|
| 132.0 |
|
|
|
|
| 147.4 |
|
Utilities and other |
|
| 61.2 |
|
|
| 34.9 |
|
|
|
|
| 110.3 |
|
|
|
|
| 135.4 |
|
General and administrative expenses |
|
| 36.7 |
|
|
| 27.4 |
|
|
|
|
| 71.8 |
|
|
|
|
| 68.0 |
|
Depreciation and amortization |
|
| 66.9 |
|
|
| 63.5 |
|
|
|
|
| 135.1 |
|
|
|
|
| 128.8 |
|
Impairment of long-lived assets |
|
| — |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 16.6 |
|
Restructuring costs |
|
| (0.7 | ) |
|
| 19.5 |
|
|
|
|
| (0.9 | ) |
|
|
|
| 19.5 |
|
Loss on disposal of assets and other |
|
| 2.4 |
|
|
| 0.4 |
|
|
|
|
| 6.9 |
|
|
|
|
| 2.3 |
|
Total cost of operations |
|
| 379.5 |
|
|
| 222.5 |
|
|
|
|
| 662.6 |
|
|
|
|
| 808.6 |
|
Operating loss |
| $ | (84.9 | ) |
| $ | (213.5 | ) |
|
|
| $ | (253.6 | ) |
|
|
| $ | (256.0 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating data as a percentage of total revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions |
|
| 52.1 | % |
|
| 0.0 | % |
|
|
|
| 51.2 | % |
|
|
|
| 52.9 | % |
Concession |
|
| 37.3 | % |
|
| 1.1 | % |
|
|
|
| 36.5 | % |
|
|
|
| 34.5 | % |
Other |
|
| 10.6 | % |
|
| 98.9 | % |
|
|
|
| 12.3 | % |
|
|
|
| 12.6 | % |
Total revenues |
|
| 100.0 | % |
|
| 100.0 | % |
|
|
|
| 100.0 | % |
|
|
|
| 100.0 | % |
Cost of operations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Film rentals and advertising |
|
| 49.9 | % |
| NM |
|
|
|
|
| 47.6 | % |
|
|
|
| 53.7 | % | |
Concession supplies |
|
| 17.1 | % |
| NM |
|
|
|
|
| 17.4 | % |
|
|
|
| 19.5 | % | |
Salaries and wages |
|
| 17.1 | % |
| NM |
|
|
|
|
| 20.0 | % |
|
|
|
| 17.4 | % | |
Facility lease expense |
|
| 22.8 | % |
| NM |
|
|
|
|
| 32.3 | % |
|
|
|
| 26.7 | % | |
Utilities and other |
|
| 20.8 | % |
| NM |
|
|
|
|
| 27.0 | % |
|
|
|
| 24.5 | % | |
General and administrative expenses |
|
| 12.5 | % |
| NM |
|
|
|
|
| 17.6 | % |
|
|
|
| 12.3 | % | |
Total cost of operations |
|
| 128.8 | % |
| NM |
|
|
|
|
| 162.0 | % |
|
|
|
| 146.3 | % | |
Operating loss |
|
| (28.8 | )% |
| NM |
|
|
|
|
| (62.0 | )% |
|
|
|
| (46.3 | )% |
|
|
Three months ended June 30, 20212022 (the “second quarter of 2022”) versus June 30, 2020
Threethe three months ended June 30, 20202021 (the “second quarter of 2021”).
– The COVID-19 pandemic has had an ongoing impact on the movie exhibition industry. When comparing the results for the second quarter of 2022 with the second quarter of 2021, the following should be noted:
Revenue. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenue.
|
| U.S. Operating Segment |
|
| International Operating Segment | Consolidated |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Constant |
|
|
|
|
| |||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2022 |
|
| 2021 |
| |||||||
Admissions revenue |
| $ | 309.7 |
|
| $ | 140.6 |
|
| $ | 72.2 |
|
| $ | 12.9 |
|
| $ | 76.2 |
|
| $ | 381.9 |
|
| $ | 153.5 |
|
Concession revenue |
|
| 234.6 |
|
|
| 99.4 |
|
|
| 51.4 |
|
|
| 10.4 |
|
|
| 54.9 |
|
|
| 286.0 |
|
|
| 109.8 |
|
Other revenue (1) |
|
| 56.5 |
|
|
| 29.3 |
|
|
| 19.7 |
|
|
| 2.0 |
|
|
| 20.5 |
|
|
| 76.2 |
|
|
| 31.3 |
|
Total revenue (1) |
| $ | 600.8 |
|
| $ | 269.3 |
|
| $ | 143.3 |
|
| $ | 25.3 |
|
| $ | 151.6 |
|
| $ | 744.1 |
|
| $ | 294.6 |
|
Attendance |
|
| 34.0 |
|
|
| 15.1 |
|
|
| 18.0 |
|
|
| 4.0 |
|
|
|
|
|
| 52.0 |
|
|
| 19.1 |
| |
Average ticket price (2) |
| $ | 9.11 |
|
| $ | 9.33 |
|
| $ | 4.01 |
|
| $ | 3.21 |
|
| $ | 4.23 |
|
| $ | 7.34 |
|
| $ | 8.04 |
|
Concession revenue per patron (2) |
| $ | 6.90 |
|
| $ | 6.59 |
|
| $ | 2.86 |
|
| $ | 2.60 |
|
| $ | 3.05 |
|
| $ | 5.50 |
|
| $ | 5.75 |
|
Three months ended June 31, 2021 – We had reopened all 323 of our domestic theatres and 152 of our 198 international theatres as of June 30, 2021. Certainresults of our international theatres hadoperating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to temporarily close againthe next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.
|
| U.S. Operating Segment |
|
|
| International Operating Segment |
|
|
| Consolidated |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2021 |
|
|
| 2021 |
|
|
| 2021 |
| |||
Admissions revenues (1) |
| $ | 140.6 |
|
|
| $ | 12.9 |
|
|
| $ | 153.5 |
|
Concession revenues (1) |
| $ | 99.4 |
|
|
| $ | 10.4 |
|
|
| $ | 109.8 |
|
Other revenues (1)(2) |
| $ | 29.3 |
|
|
| $ | 2.0 |
|
|
| $ | 31.3 |
|
Total revenues (1)(2) |
| $ | 269.3 |
|
|
| $ | 25.3 |
|
|
| $ | 294.6 |
|
Attendance (1) |
|
| 15.1 |
|
|
|
| 4.0 |
|
|
|
| 19.1 |
|
Average ticket price (1) |
| $ | 9.33 |
|
|
| $ | 3.21 |
|
|
| $ | 8.04 |
|
Concession revenues per patron (1) |
| $ | 6.59 |
|
|
| $ | 2.60 |
|
|
| $ | 5.75 |
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
Salaries and wages increased to $43.5 million for the second quarter of 2021 as all of our theatres reopened by the end of the quarter requiring hiring and training of employees. We also began extending operating hours2022 increased 92.8% to accommodate the release of new films while maintaining our focus on efficient staffing levels. Facility lease expense, which is primarily fixed in nature, reflects a slight increase in percentage rent expense and common area maintenance costs as volumes increased, partially offset by the impact of the permanent closure of certain theatres. Utilities and other costs increased to $52.9$56.5 million as many of these costs, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, are variable in nature and have increasedcompared with the improved attendance from new film content.
|
|
Salaries and wages increased to $6.9 million as reported for the second quarter of 2021 as many of our theatres reopened. Facility lease expense increased to $7.3 million for the second quarter of 2021 reflecting payment of rent under alternative structures, such as percentage rents in place of minimum fixed rents, as theatres recover, partially offset by the impact of the permanent closure of certain theatres. Utilities and other costs increased to $8.3 million, as many of these costs are variable in nature and have increased with the improved attendance from new film content and theatre reopenings.
General and Administrative Expenses. General and administrative expenses increased to $36.7 million for the second 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 in response to the temporary closure of all of our theatres in March 2020.
Depreciation and Amortization. Depreciation and amortization expense increased $3.4$29.3 million during the second quarter of 2021 primarily due to the digital projectors receivedattendance growth, which drove an increase in a non-cash distribution from DCIPtransaction fees, screen advertising and promotional revenue.
Restructuring Costs. Restructuring costs were $(0.7)2022 compared with 4.0 million patrons during the second quarter of 2021 compareddue to $19.5 millionthe reopening of theatres and a more consistent cadence of new film releases with broad consumer appeal during the second quarter of 2020.2022. Average ticket price was $4.01 for the second quarter of 2022 as reported, $4.23 in constant currency, compared with $3.21 for the second quarter of 2021. The increase in average ticket price in constant currency was primarily the result of strategic pricing actions and higher premium ticket mix. Concession revenue per patron was $2.86 as reported, $3.05 in constant currency, for the second quarter of 2022 compared with $2.60 in the second quarter of 2021. The increase in concession revenue per patron in constant currency was due to strategic pricing actions and higher purchase incidence. Other revenue for the second quarter of 2022 increased 885% to $19.7 million compared with $2.0 million during the second period of 2021 primarily due to the growth in attendance, which drove an increase in screen advertising, transaction fees and promotional revenue.
29
Cost of Operations. The table below, presented by reportable operating segment, summarizes our year-over-year theatre operating costs.
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Consolidated |
| |||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| Constant |
|
| 2022 |
|
| 2021 |
| |||||||
Film rentals and advertising |
| $ | 185.7 |
|
| $ | 70.3 |
|
| $ | 36.9 |
|
| $ | 6.3 |
|
| $ | 39.1 |
|
| $ | 222.6 |
|
| $ | 76.6 |
|
Concession supplies |
| $ | 41.2 |
|
| $ | 16.1 |
|
| $ | 11.3 |
|
| $ | 2.7 |
|
| $ | 12.1 |
|
| $ | 52.5 |
|
| $ | 18.8 |
|
Salaries and wages |
| $ | 84.4 |
|
| $ | 43.5 |
|
| $ | 15.8 |
|
| $ | 6.9 |
|
| $ | 16.8 |
|
| $ | 100.2 |
|
| $ | 50.4 |
|
Facility lease expense |
| $ | 63.2 |
|
| $ | 59.9 |
|
| $ | 17.1 |
|
| $ | 7.3 |
|
| $ | 17.8 |
|
| $ | 80.3 |
|
| $ | 67.2 |
|
Utilities and other |
| $ | 81.3 |
|
| $ | 52.9 |
|
| $ | 25.2 |
|
| $ | 8.3 |
|
| $ | 26.3 |
|
| $ | 106.5 |
|
| $ | 61.2 |
|
Salaries and wages increased to $84.4 million for the second quarter of 2022 compared with $43.5 million for the second quarter of 2021 as a result of significantly higher attendance, expanded operating hours and wage rate increases with average hourly rates up approximately 12% compared with the second quarter of 2021, partially offset by efficiencies and streamlined operations. Facility lease expense, which is primarily fixed in nature, increased $3.3 million due to new theatres and an increase in percentage rent expense and common area maintenance costs. Utilities and other costs increased to $81.3 million for the second quarter of 2022, as many of these costs, such as janitorial costs, utilities costs, credit recordedcard fees and repairs and maintenance, are variable in nature and increased due to the expansion of operating hours and a significant increase in attendance.
Salaries and wages increased to $15.8 million as reported for the resultsecond quarter of settlements2022 due to the significantly higher attendance, expanded operating hours and inflationary impacts. Facility lease expense increased to $17.1 million as reported due to increased percentage rent driven by higher revenue and the return of lease obligations below the original estimated amounts. Charges recordedminimum rent thresholds for certain leases that were temporarily adjusted while theatres were reopening during the second quarter of 2020 related2021. Utilities and other costs increased to a restructuring plan implemented during$25.2 million as reported as many of these costs are variable in nature, such as credit card fees, security expense, janitorial costs and repairs and maintenance, and were impacted by the significant increase in attendance in the second quarter of 2020.2022. These expenses, as reported, were also impacted by exchange rates in each of the countries in which we operate.
General and Administrative Expense. General and administrative expense increased to $47.5 million for the second quarter of 2022 compared with $36.7 million for the second quarter of 2021. The increase is primarily due to higher staffing levels, incentive-based compensation and consulting fees to support our strategic initiatives as well as higher legal fees.
Depreciation and Amortization. Depreciation and amortization expense decreased to $61.0 million for the second quarter of 2022 compared with $66.9 million for the second quarter of 2021 primarily due to the impairment of theatre assets during 2021.
Impairment of Long-Lived and Other Assets. We recorded asset impairment charges on assets held and used of $92.3 million for the second quarter of 2022. Long-lived asset impairment charges of approximately $5.5 million were recorded primarily due to the prolonged recovery of certain theatres as a result of the COVID pandemic on our operations. In addition, we recorded an impairment of $86.8 million for our investment in NCM as NCMI’s stock price was significantly below the Company’s carrying value of NCM per common unit and due to the prolonged recovery of NCM's business. See Note 211 to our condensed consolidated financial statements for further discussion.a discussion of impairment analyses performed and a summary of impairment recorded.
(Gain) Loss on Disposal of Assets and Other. We recorded a lossA gain on disposal of assets and other of $(0.7) million was recorded during the second quarter of 2022 compared with a loss of $2.4 million during the second quarter of 2021 compared to $0.4 million during2021. Activity for the second quarter of 2020.2022
30
was primarily related to the write-off of liabilities related to certain lease agreements that were either amended or terminated and insurance proceeds on property damages. Activity for the second quarter of 2021 was primarily related to the termination of certain lease agreements, partially offset by gains on sales of excess land parcels. Activity
Interest Expense. Interest expense, which includes amortization of debt issuance costs and amortization of accumulated losses for swap amendments, increased to $32.0 million during the second quarter of 2022 compared with $31.1 million for the second quarter of 20202021. The increase was primarily due to the retirementissuance of assets relatedthe 5.875% Senior Notes and 5.25% Senior Notes to theatre remodels.refinance the 5.125% Senior Notes and 4.875% Senior Notes during 2021. See further discussion at Financing Activities below.
Loss on Extinguishment of Debt. We recorded a loss on extinguishment of debt of $3.9 million during the second quarter of 2021 related to the early retirement of our 4.875% Senior Notes, including athe write-off of unamortized debt issuance costs and legal and other fees paid. See Note 6 to our condensed consolidated financial statements.
Interest expense – NCM. We recorded non-cash interest expense of $5.9 million for the second quarter of 2021 and in the second quarter of 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 Loss of Affiliates. We recorded equityEquity in loss of affiliates of $5.5 million was recorded during the second quarter of 2022 compared with $8.1 million during the second quarter of 2021 compared2021. The decrease in equity in loss of affiliates is due to $20.1 million during the second quarter of 2020. Our equity method investees have also been impacted the COVID-19 pandemic and the temporary closurecontinued overall recovery of our theatres. See Note 2equity investees’ performance as the industry continues to our condensed consolidated financial statements for additional discussion of the COVID-19 pandemic.recover. See Notes 8 and 9 to our condensed consolidated financial statements for information about our equity investments.
Income Taxes. An income tax expense of $9.3$3.6 million was recorded for the second quarter of 20212022 compared towith an income tax benefitexpense of $(98.0)$9.3 million for the second quarter of 2020.2021. The effective tax rate was approximately (5.8)% for the second quarter of 2022 compared with (7.3)% for the second quarter of 2021 compared to 36.5% for the second quarter of 2020.2021. The effective tax rate for the second quarter of 20212022 was unfavorably
impacted by valuation allowances related to certain foreign tax credits and deferred tax assets for which the ultimate realization is uncertain. For the second quarter of 2022, we utilized the annual effective tax rate (“AETR”) method to calculate our interim tax provision. However, in the prior quarter, we recorded the interim tax provision using the discrete method as allowed by ASC Topic 740-270-30-18, Income Taxes Interim Reporting. We used the discrete method rather than the AETR method due to significant variations in income tax expense relative to changes (increases or decreases) in estimated pretax earnings. Use of the AETR method would have resulted in an unreliable tax rate in the prior period. Income tax provisions for interim (quarterly) periods are generally 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.
Six months ended June 30, 2022 (the “2022 period”) versus the six months ended June 30, 2021 (the “2021 period”).
The COVID-19 pandemic has had an ongoing impact on the movie exhibition industry. When comparing the results for the 2022 period with the 2021 period, the following should be noted:
Revenue. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenue.
|
| U.S. Operating Segment | International Operating Segment | Consolidated |
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Constant |
|
|
|
|
| |||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2022 |
|
| 2021 |
| |||||||
Admissions revenue |
| $ | 501.5 |
|
| $ | 189.1 |
|
| $ | 116.2 |
|
| $ | 20.5 |
|
| $ | 122.6 |
|
| $ | 617.7 |
|
| $ | 209.6 |
|
Concession revenue |
|
| 375.7 |
|
|
| 132.4 |
|
|
| 83.3 |
|
|
| 16.9 |
|
|
| 88.8 |
|
|
| 459.0 |
|
|
| 149.3 |
|
Other revenue (1) |
|
| 95.6 |
|
|
| 44.9 |
|
|
| 32.3 |
|
|
| 5.2 |
|
|
| 33.6 |
|
|
| 127.9 |
|
|
| 50.1 |
|
Total revenue (1) |
| $ | 972.8 |
|
| $ | 366.4 |
|
| $ | 231.8 |
|
| $ | 42.6 |
|
| $ | 245.0 |
|
| $ | 1,204.6 |
|
| $ | 409.0 |
|
Attendance |
|
| 54.7 |
|
|
| 20.3 |
|
|
| 30.4 |
|
|
| 6.5 |
|
|
|
|
|
| 85.1 |
|
|
| 26.8 |
| |
Average ticket price (2) |
| $ | 9.17 |
|
| $ | 9.31 |
|
| $ | 3.82 |
|
| $ | 3.15 |
|
| $ | 4.03 |
|
| $ | 7.26 |
|
| $ | 7.81 |
|
Concession revenue per patron (2) |
| $ | 6.87 |
|
| $ | 6.52 |
|
| $ | 2.74 |
|
| $ | 2.59 |
|
| $ | 2.92 |
|
| $ | 5.39 |
|
| $ | 5.56 |
|
31
Cost of Operations. The table below, presented by reportable operating segment, summarizes our year-over-year theatre operating costs.
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Consolidated |
| |||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| Constant |
|
| 2022 |
|
| 2021 |
| |||||||
Film rentals and advertising |
| $ | 291.9 |
|
| $ | 89.6 |
|
| $ | 58.3 |
|
| $ | 10.2 |
|
| $ | 61.7 |
|
| $ | 350.2 |
|
| $ | 99.8 |
|
Concession supplies |
| $ | 64.1 |
|
| $ | 21.6 |
|
| $ | 18.4 |
|
| $ | 4.4 |
|
| $ | 19.7 |
|
| $ | 82.5 |
|
| $ | 26.0 |
|
Salaries and wages |
| $ | 151.5 |
|
| $ | 68.4 |
|
| $ | 28.5 |
|
| $ | 13.2 |
|
| $ | 30.2 |
|
| $ | 180.0 |
|
| $ | 81.6 |
|
Facility lease expense |
| $ | 125.7 |
|
| $ | 118.9 |
|
| $ | 28.3 |
|
| $ | 13.1 |
|
| $ | 29.5 |
|
| $ | 154.0 |
|
| $ | 132.0 |
|
Utilities and other |
| $ | 149.4 |
|
| $ | 92.9 |
|
| $ | 44.0 |
|
| $ | 17.4 |
|
| $ | 46.0 |
|
| $ | 193.4 |
|
| $ | 110.3 |
|
Salaries and wages increased to $151.5 million for the 2022 period compared with $68.4 million for the 2021 period as a result of significantly higher attendance, expanded operating hours and wage rate increases with average hourly rates up approximately 13% compared with the 2021 period, partially offset by efficiencies and streamlined operations. Facility lease expense increased to $125.7 million primarily due to new theatres and an increase in percentage rent expense and common area maintenance costs. Utilities and other costs increased to $149.4 million, as many of these costs, such as janitorial costs, utilities costs, credit card fees and repairs and maintenance, are variable in nature and were impacted by the expansion of operating hours and a significant increase in attendance.
Salaries and wages increased to $28.5 million as reported for the 2022 period due to the significantly higher attendance, expanded operating hours and inflationary impacts. Facility lease expense increased to $28.3 million as reported due to increased percentage rent driven by higher revenue and the return of minimum rent thresholds for certain leases that were temporarily adjusted while theatres were reopening during the 2021 period. Utilities and other costs increased to $44.0 million as reported, as many of these costs are variable in nature, such as credit card fees, security expense, janitorial costs and repairs
32
and maintenance, and were impacted by the significant increase in attendance. These expenses, as reported, were also impacted by exchange rate fluctuations in each of the countries in which we operate.
General and Administrative Expense. General and administrative expense increased to $87.4 million for the 2022 period compared with $71.8 million for the 2021 period. The increase is primarily due to higher staffing levels, incentive-based compensation and consulting fees to support our strategic initiatives as well as higher legal fees.
Depreciation and Amortization. Depreciation and amortization expense decreased to $122.7 million for the 2022 period compared with $135.1 million for the 2021 period primarily due to the impairment of theatre assets during 2021.
Impairment of Long-Lived and Other Assets. We recorded asset impairment charges on assets held and used of $92.3 million for the 2022 period. Long-lived asset impairment charges of approximately $5.5 million were recorded primarily due to the prolonged recovery of certain theatres as a result of the COVID pandemic on our operations. In addition, we recorded an impairment of $86.8 million for our investment in NCM as NCMI’s stock price was significantly below the Company’s carrying value of NCM per common unit and due to the prolonged recovery of NCM's business. See Note 11 to our condensed consolidated financial statements for a discussion of impairment analyses performed and a summary of impairment recorded.
(Gain) Loss on Disposal of Assets and Other. A gain on disposal of assets and other of $(7.6) million was recorded for the 2022 period compared with a loss of $6.8 million for the 2021 period. Activity for the 2022 period was primarily related to the sale of excess land parcels. Activity for the 2021 period was primarily related to the write-off of certain digital projectors recently received from DCIP in a non-cash distribution that were replaced with laser projectors, partially offset by gains on the sale of excess land parcels.
Interest Expense. Interest expense, which includes amortization of debt issuance costs and amortization of accumulated losses for swap amendments, increased to $64.1 million during the second quarter of 2022 compared with $61.6 million for the second quarter of 2021. The increase was primarily due to the issuance of the 5.875% Senior Notes and 5.25% Senior Notes to refinance the 5.125% Senior Notes and 4.875% Senior Notes during 2021. See further discussion at Financing Activities below.
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.
Equity in Loss of Affiliates. Equity in loss of affiliates of $7.7 million was recorded during the second quarter of 2022 compared with $14.9 million during the second quarter of 2021. The decrease in equity in loss of affiliates is due to the continued overall recovery of our equity investees’ performance as the industry continues to recover. See Notes 9 and 10 to our condensed consolidated financial statements for information about our equity investments.
Income Taxes. An income tax benefit of $(2.9) million was recorded for the second quarter of 2022 compared with an income tax benefit of $(3.9) million for the 2021 period. The effective tax rate was approximately 2.2% for the 2022 period compared with 1.1% for the 2021 period. The effective tax rate for the 2022 period was impacted by valuation allowances related to certain deferred tax assets for which the ultimate realization is uncertain. For the 2022 and 2021 periods, we utilized the annual effective tax rate method to calculate our interim tax provision. 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.
Six months ended June 30, 2021 (the “2021 period”) versus June 30, 2020 (the “2020 period”)
We had reopened all 323 of our domestic theatres and 152 of our 198 international theatres as of June 30, 2021. Certain of our international theatres had to temporarily close again for portions of the 2021 period due to the COVID-19 pandemic. We continue to monitor the status of the COVID-19 pandemic and local government regulations as we reopen theatres.
|
| U.S. Operating Segment |
|
|
| International Operating Segment |
|
|
| Consolidated |
| ||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Constant Currency (3) |
|
|
|
|
|
|
|
|
|
|
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| ||||
|
| 2021 |
| 2020 |
| % Change |
|
|
| 2021 |
| 2020 |
| % Change |
|
| 2021 |
| % Change |
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|
| 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 | % |
|
|
|
|
|
|
|
|
|
|
Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the six 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 |
| $ | 89.6 |
|
| $ | 128.2 |
|
| $ | 10.2 |
|
| $ | 28.8 |
|
| $ | 11.0 |
|
| $ | 99.8 |
|
| $ | 157.0 |
|
Concession supplies |
| $ | 21.6 |
|
| $ | 27.1 |
|
| $ | 4.4 |
|
| $ | 10.1 |
|
| $ | 4.6 |
|
| $ | 26.0 |
|
| $ | 37.2 |
|
Salaries and wages |
| $ | 68.4 |
|
| $ | 74.6 |
|
| $ | 13.2 |
|
| $ | 21.8 |
|
| $ | 14.4 |
|
| $ | 81.6 |
|
| $ | 96.4 |
|
Facility lease expense |
| $ | 118.9 |
|
| $ | 125.2 |
|
| $ | 13.1 |
|
| $ | 22.2 |
|
| $ | 13.6 |
|
| $ | 132.0 |
|
| $ | 147.4 |
|
Utilities and other |
| $ | 92.9 |
|
| $ | 103.8 |
|
| $ | 17.4 |
|
| $ | 31.6 |
|
| $ | 19.0 |
|
| $ | 110.3 |
|
| $ | 135.4 |
|
|
|
|
|
Salaries and wages decreased $6.2 million for the 2021 period as theatre operating hours 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 $6.3 million primarily due to a decline in percentage rent expense and common area maintenance costs, as well as the permanent closure of certain theatres. Utilities and other costs decreased $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 first half of the 2021 period.
|
|
Salaries and wages decreased $8.6 million as reported for the 2021 period as compared to the 2020 period, driven by the periodic and varying closures of theatres and limited operating hours for those theatres that are open. Facility lease expense decreased $9.1 million as reported due to our negotiations with certain landlords to shift from a minimum rent structure to percentage rent while we recover from the pandemic, as well as lower percentage rent at other locations. Utilities and other costs decreased $14.2 million as reported, as many of these costs are variable in nature, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, and were impacted by the limited operating hours of our theatres as well as periodic closures during the 2021 period.
General and Administrative Expenses. General and administrative expenses increased $3.8 million for the 2021 period compared to the 2020 period. The increase is primarily due to the temporary salary reductions and furloughs for our corporate workforce that occurred during the second half of the 2020 period, in response to the temporary 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 and early 2021, and increased consulting and other professional fees.
Depreciation and Amortization. Depreciation and amortization expense increased $6.3 million during the 2021 period primarily due to the digital projectors received in a non-cash distribution from DCIP during the fourth quarter of 2020. See Note 9 to the condensed consolidated financial statements for discussion of 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 of $16.6 million during the 2020 period. The asset impairment charges recorded during the 2020 period were primarily a result of the prolonged impact of the COVID pandemic on our operations, as some theatres remained closed and film content continued to shift into
future periods, both of which impacted our estimated future cash flows for theatres. Impairment charges for the 2020 period impacted eight countries. See Note 12 to our condensed consolidated financial statements.
Restructuring Costs. Restructuring costs were $(0.9) million during the 2021 period compared to $19.5 million during the 2020 period. The credit recorded during the 2021 period was primarily the result of settlements of lease obligations below the original estimated amounts. Charges recorded during the 2020 period related to a restructuring plan implemented during the second quarter of 2020. See Note 2 to our condensed consolidated financial statements for further discussion.
Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of $6.9 million during the 2021 period compared to $2.3 million during the 2020 period. Activity for the 2021 period was primarily related to the write-off of certain digital projectors recently received from DCIP in a non-cash distribution that were replaced with laser projectors, partially offset by gains on the sales of excess land parcels. See Note 9 for discussion of the distribution of digital projectors from DCIP. Activity for the 2020 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 for swap amendments, increased to $61.6 million during the 2021 period compared to $55.7 million for the 2020 period. The increase was primarily due to the issuance of 8.750% senior secured notes on April 20, 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 $0.1 million during the 2021 period compared to $5.9 million recorded during the 2020 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 $11.8 million for the 2021 and 2020 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 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. The increase in equity 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 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 $(3.9) million was recorded for the 2021 period compared to income tax benefit of $(101.0) million for the 2020 period. The effective tax rate was approximately 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 was favorably impacted by the carryback of 2020 losses to tax years that had a 35% federal tax rate under the provisions of the CARES Act. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.
Liquidity and Capital Resources
Operating Activities
We primarily collect our revenuesrevenue in cash, mainly through box office receipts and the sale of concessions. Our revenues arerevenue is generally 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 reopenedWe temporarily closed all of our theatres that were temporarily closed during March 2020 we haveand funded operating expenses with cash on hand and recent additionalnew financing discussed below under Financing Activities. while theatres were closed and as we reopened our theatres. During the latter part of 2021, as we began to show a steady stream of new film content and our theatres were returning to more consistent operating hours, we began to generate positive cash flows from operations and transition back to our historical working capital “float” position. However, our working capital position will continue to fluctuate based on seasonality, the timing and volume of new film content, the timing of interest payments on our long-term debt as well as timing of payment of other operating expenses that are paid annually or semi-annually, such as property and other taxes and incentive bonuses. We believe our existing cash and expected cash flows from operations will be sufficient to meet our working capital, capital expenditures, and expected cash requirements from known contractual obligations for the next twelve months and beyond.
Cash used forprovided by operating activities was $21.4$56.2 million for the six months ended June 30, 20212022 compared to $154.1with cash used for operating activities of $(21.4) million for the six months ended June 30, 2020.2021. The decreaseincrease in cash used forprovided by (used for) operating activities was primarily a result of $136.8 million of tax refunds received during April 2021, the timing and level of revenuesrevenue earned during each period and the timing of payments to vendors for expenses incurred during each period, partially offset by payments of previously deferred rent. period.
33
As discussed in Note 4 to our condensed consolidated financial statements, we negotiated the deferral of rent and other lease-related payments in 2020 and early 2021 with manysome of our landlords, resulting inlandlords. As of June 30, 2022, approximately $56.0$13.3 million in deferred lease payments asremain outstanding, the majority of June 30, 2021. Approximately $45.6 millionwhich will be repaid within one year andduring the remaining $10.4 million will be repaid in subsequent years. remainder of 2022.
Investing Activities
Our investing activities have been principally related to the development, remodel and acquisition of theatres. New theatre openings, remodels 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 $30.8 $28.8 million for the six months ended June 30, 20212022 compared to $46.8 with $30.8 million for the six months ended June 30, 2020. The decrease in cash used for investing activities was primarily due to reduced capital expenditures as we continue to limit spend to essential projects.2021.
Capital expenditures, fordisaggregated by new and existing theatres, during the six months ended June 30, 20212022 and 20202021 were as follows (in millions):
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 |
|
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
New theatres |
| $ | 15.8 |
|
| $ | 10.5 |
|
Existing theatres |
|
| 24.8 |
|
|
| 22.3 |
|
Total capital expenditures |
| $ | 40.6 |
|
| $ | 32.8 |
|
We operated 521 theatres with 5,8645,855 screens worldwide as of June 30, 2021.2022. Theatres and screens acquired, built and closed during the threesix months ended June 30, 20212022 were as follows:
|
| January 1, 2021 |
|
| Built |
|
| Closed |
|
| June 30, 2021 |
|
| January 1, 2022 |
|
| Built |
|
| Closed |
|
| June 30, 2022 |
| ||||||||
U.S (42 states) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Theatres |
|
| 331 |
|
|
| — |
|
|
| (8) |
|
|
| 323 |
|
|
| 321 |
|
|
| 1 |
|
|
| (2 | ) |
|
| 320 |
|
Screens |
|
| 4,507 |
|
|
| — |
|
|
| (81) |
|
|
| 4,426 |
|
|
| 4,408 |
|
|
| 7 |
|
|
| (21 | ) |
|
| 4,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
International (15 countries) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Theatres |
|
| 200 |
|
|
| 1 |
|
|
| (3) |
|
|
| 198 |
|
|
| 201 |
|
|
| 1 |
|
|
| (1 | ) |
|
| 201 |
|
Screens |
|
| 1,451 |
|
|
| 6 |
|
|
| (19) |
|
|
| 1,438 |
|
|
| 1,460 |
|
|
| 13 |
|
|
| (12 | ) |
|
| 1,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Worldwide |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Theatres |
|
| 531 |
|
|
| 1 |
|
|
| (11) |
|
|
| 521 |
|
|
| 522 |
|
|
| 2 |
|
|
| (3 | ) |
|
| 521 |
|
Screens |
|
| 5,958 |
|
|
| 6 |
|
|
| (100) |
|
|
| 5,864 |
|
|
| 5,868 |
|
|
| 20 |
|
|
| (33 | ) |
|
| 5,855 |
|
As of June 30, 2021,2022, we had the following signed commitments (costs in millions):commitments:
|
| Theatres |
| Screens |
| Estimated |
| |
Remainder of 2022 |
|
|
|
|
|
|
| |
U.S. |
| 1 |
| 21 |
| $ | 11.7 |
|
International |
| 1 |
| 11 |
|
| 1.9 |
|
Total |
| 2 |
| 32 |
| $ | 13.6 |
|
|
|
|
|
|
|
|
| |
Subsequent to 2022 |
|
|
|
|
|
|
| |
U.S. |
| 3 |
| 34 |
| $ | 23.1 |
|
International |
| 4 |
| 21 |
|
| 9.0 |
|
Total |
| 7 |
| 55 |
| $ | 32.1 |
|
|
|
|
|
|
|
|
| |
Total commitments at June 30, 2022 |
| 9 |
| 87 |
| $ | 45.7 |
|
|
| Theatres |
|
| Screens |
|
| Estimated Cost (1) |
| |||
Remainder of 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
| 3 |
|
|
| 42 |
|
| $ | 33.4 |
|
International |
|
| 2 |
|
|
| 24 |
|
|
| 3.7 |
|
Total |
|
| 5 |
|
|
| 66 |
|
| $ | 37.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent to 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
| 5 |
|
|
| 60 |
|
| $ | 37.9 |
|
International |
|
| 7 |
|
|
| 49 |
|
|
| 24.3 |
|
Total |
|
| 12 |
|
|
| 109 |
|
| $ | 62.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments at June 30, 2021 |
|
| 17 |
|
|
| 175 |
|
| $ | 99.3 |
|
|
|
Actual expenditures for continued theatre development, remodels and acquisitions are subject to change based upon the availability of attractive opportunities. We mayDuring the next twelve months and the foreseeable future, we plan to fund capital expenditures for our continued development with cash flow from operations and, if needed, borrowings under our senior secured credit facility, and proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.
34
Financing Activities
Cash used for financing activities was $(19.2) million for the six months ended June 30, 2022 compared with cash provided by financing activities wasof $113.1 million for the six months ended June 30, 2021 compared to cash provided by financing activities of $291.0 million for the six months ended June 30, 2020.2021. During the six months ended June 30, 2021, we received a contribution of $120.0 million from our parent company and 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 costs and $2.1 million in fees related to these transactions and amendments to our Senior Secured Credit Facility during the six months ended June 30, 2021. During the six months ended June 30, 2020, we borrowed $98.8 million on our revolving line-of-credit, which was repaid during the third quarter of 2020, issued the 8.750% Secured Notes discussed below and paid dividends to Cinemark Holdings, Inc., our parent company, of $42.0 million.
We may, from time to time, subjectseek to compliance withretire or repurchase our debt instruments, purchase ouroutstanding debt securities on thethrough cash purchases or exchanges for other securities, in open market depending uponpurchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on the availability and prices of such securities. debt securities, prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Long-term debt consisted of the following as of June 30, 20212022 (in millions):
Cinemark USA, Inc. term loan |
| $ | 636.4 |
|
Cinemark USA, Inc. 8.750% senior secured notes due 2025 |
|
| 250.0 |
|
Cinemark USA, Inc. 5.875% senior notes due 2026 |
|
| 405.0 |
|
Cinemark USA, Inc. 5.250% senior notes due 2028 |
|
| 765.0 |
|
Other debt |
|
| 31.4 |
|
Total long-term debt |
| $ | 2,087.8 |
|
Less current portion |
|
| 20.9 |
|
Subtotal long-term debt, less current portion |
| $ | 2,066.9 |
|
Less: Debt discounts and debt issuance costs, net of accumulated amortization |
|
| 34.1 |
|
Long-term debt, less current portion, net of debt discounts and unamortized debt issuance costs |
| $ | 2,032.8 |
|
| June 30, |
|
| December 31, |
| ||
| 2022 |
|
| 2021 |
| ||
Cinemark USA, Inc. term loan due 2025 | $ | 629.8 |
|
| $ | 633.1 |
|
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 |
|
|
| 405.0 |
|
Cinemark USA, Inc. 5.250% senior notes due 2028 |
| 765.0 |
|
|
| 765.0 |
|
Other |
| 28.2 |
|
|
| 30.2 |
|
Total long-term debt | $ | 2,078.0 |
|
| $ | 2,083.3 |
|
Less: Current portion |
| 25.7 |
|
|
| 24.3 |
|
Less: Debt issuance costs, net of accumulated amortization |
| 26.7 |
|
|
| 30.3 |
|
Long-term debt, less current portion, net of unamortized debt issuance costs | $ | 2,025.6 |
|
| $ | 2,028.7 |
|
As of June 30, 2021, $1002022, $100 million was available for borrowing under the revolving line of credit.
Contractual Obligations
During the six months ended June 30, 2021, Cinemark USA, Inc. issued the 5.875% Senior Notes and the 5.25% Senior Notes and redeemed the 5.125% Senior Notes and the 4.875% Senior Notes. Included below is an updated summary of long-term debt obligations and related estimated scheduled interest payment obligations as of June 30, 2021, reflecting these changes.
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| Payments Due by Period |
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| (in millions) |
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| Less Than |
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|
|
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|
|
| 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 |
|
|
|
|
|
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, 20202021 filed March 3, 2021.9, 2022.
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 of available borrowing capacity on the revolving credit line as of June 30, 2021.2022.
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
35
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, (collectivelyor collectively, the “Applicable Amount”).Applicable Amount. As of June 30, 2022, Cinemark USA, Inc. could have distributed up to approximately $2.8 billion to its parent company and sole stockholder, Cinemark Holdings, Inc.
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 iswas subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.
On August 21, 2020, in conjunction with the issuance of Cinemark Holdings, Inc.’s issuance of's 4.50% Convertible Senior Notes, we further amended the waiver of the leverage covenant through the fiscal quarter ending September 30, 2021. The amendment also i) modifies
the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits us to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver and (iv) makes such other changes to permit the issuance of Cinemark Holdings, Inc.’sthe 4.50% Convertible Senior Notes.Notes discussed below. The required maximum ratio is 4.25 to 1 and our actual ratio as of June 30, 2022, using the substitute Consolidated EBITDA as described above, was 1.67.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from November 28, 2022 to November 28, 2024.
We have fourthree 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.
AtAs of June 30, 2021,2022, there was $636.4$629.8 million outstanding under the term loan and no borrowings were outstanding under the $100.0 million revolving line of credit. The average interest rate on outstanding term loan borrowings under the Credit Agreement as of June 30, 20212022 was approximately 3.4%3.7% per annum, after giving effect to the interest rate swap agreements discussed above.
5.875% Senior Notes
On March 16, 2021, Cinemark USA, Inc. issued $405 million aggregate principal amount of 5.875% senior notes due 2026, at par value (the “5.875% Senior Notes”). Proceeds, after payment of fees, were used to fund a cash tender offer to purchase any and all of Cinemark USA’s 5.125% Senior Notes (the “5.125% Senior Notes”) and to redeem any of the 5.125% Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on March 15, 2026. The Company incurred debt issueissuance 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 condensed 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 5.875% 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 June 30, 2021, Cinemark USA, Inc. could have distributed up to approximately $2.9 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 4.875% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control, as defined in the indenture, the Company would be required to make an offer to repurchase the 5.875% Senior Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 5.875% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if we satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of June 30, 2021 was below zero.
36
Prior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of the 5.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.875% Senior Notes to the date of redemption. After March 15, 2023, Cinemark USA, Inc. may redeem the 5.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
5.125% Senior Notes
On March 16, 2021, Cinemark USA, Inc. completed a tender offer to purchase it’s previously outstanding 5.125% Senior Notes, of which $334 million was tendered at the expiration of the offer. On March 16, 2021, Cinemark USA, Inc. also issued a notice of optional redemption to redeem the remaining $66 million principal amount of the 5.125% Senior Notes. In connection therewith, on March 16, 2021, Cinemark USA deposited with Wells Fargo Bank, N.A., as trustee for the 5.125% Senior Notes (the “Trustee”), funds sufficient to redeem all 5.125% Notes remaining outstanding on April 15, 2021 (the “Redemption Date”). The
redemption payment (the “Redemption Payment”) included approximately $66 million of outstanding principal at the redemption price equal to 100% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on March 16, 2021, the indenture governing the 5.125% Senior Notes was fully satisfied and discharged.
5.25% Senior Notes
On June 15, 2021, Cinemark USA, Inc. issued $765 million aggregate principal amount of 5.25% senior notes due 2028, at par value (the “5.25% Senior Notes”). Proceeds, after payment of fees, were used to redeem all of Cinemark USA’s 4.875% $755 million aggregate principal amount of Senior Notes due 2023 (the “4.875% Senior Notes”). Interest on the 5.25% Senior Notes is payable on January 15 and July 15 of each year, beginning January 15, 2022. The 5.25% Senior Notes mature on July 15, 2028.
The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s 8.750% senior secured notes due 2025, in each case to the extent of the value of the collateral securing such debt, (iv) are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA’s non-guarantor subsidiaries, and (v) are structurally senior to the 4.50% convertible senior notes due 2025 issued by Cinemark Holdings.
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. As of June 30, 2021, Cinemark USA, Inc. could have distributed up to approximately $2.9 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 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, 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. The required minimum coverage ratio is 2 to 1 and our actual ratio as of June 30, 2021 was below zero.
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 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, Cinemark USA, Inc. issued $250 million 8.750% senior secured notes (the “8.750% Secured Notes”). The 8.750% SeniorSecured Notes will mature on May 1, 2025; provided, however, that if (i) on September 13, 2022, the aggregate outstanding principal amount of the 5.125% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds $50 million, the 8.750% Senior Notes will mature on September 14, 2022 and (ii) on February 27, 2023, the aggregate outstanding principal amount of the 4.875% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds $50 million, the 8.750% Senior Notes will mature on February 28, 2023.2025. Interest on the 8.750% SeniorSecured Notes will beis payable on May 1 and November 1 of each year, beginning on November 1, 2020. year. Cinemark USA, Inc. may redeem the 8.750% Secured Notes in whole or in part at redemption prices specified in the indenture.
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.
Borrowings of International Subsidiaries
As of June 30, 2022, certain of the Company’s international subsidiaries have an aggregate borrowing of $28.2 million outstanding under various local bank loans. The indentureCompany has deposited cash into a collateral account to support the issuance of letters of credit to the lenders for certain of these international bank loans. The total amount deposited as of June 30, 2022 was $25.8 million and is considered restricted cash.
During the year ended December 31, 2021, we obtained a waiver of the maintenance covenant related to the bank loans in Chile through June 30, 2022.
37
Covenant Compliance
See discussion above at Senior Secured Credit Facility for discussion of dividend restriction, negative covenants and leverage ratio covenant under the Credit Agreement.
The indentures governing the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes contains("the indentures") contain covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. As of June 30, 2021,2022, Cinemark USA, Inc. could have distributed up to approximately $2.9$3.1 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 8.750% Secured Notes,indentures, subject to its available cash and other borrowing restrictions outlined in the indenture.indentures. Upon a change of control, as defined in the indenture governing the 8.750% Secured Notes,indentures, Cinemark USA, Inc. would be required to make an offer to repurchase the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 8.750% Secured Notes allowsindentures allow 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. The required minimum coverage ratio is 2 to 1 and our actual ratio as of June 30, 20212022 was below zero. 2.62.
Additional Borrowings of International Subsidiaries
During the six months ended June 30, 2021, certain of our international subsidiaries borrowed an aggregate of $9.0 million under various local bank loans. Below is a summary of these loans:
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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 was $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 30, 2021. These restricted cash amounts do not impact the Applicable Amount as defined under the Credit Agreement or the restricted payments as defined in the indentures to the notes as described above.
Covenant Compliance
As of June 30, 2021,2022, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.
38
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 ahave variable rate debt facility.debt. An increase or decrease in interest rates would affect our interest expense related to this variable rate debt. We have fourthree interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with the variable interest rates on $600our term loan, covering $450.0 million of the term loan$629.8 million outstanding under the Credit Agreement. An increase or decrease in interest rates would affect our interest expense relating to our variable rate debt.at June 30, 2022. At June 30, 2021,2022, we had an aggregate of approximately $67.8$208.0 million of variable rate debt outstanding. Based on the interest rates in effect on the variable rate debt outstanding, at June 30, 2021,and a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $0.7$2.0 million.
The table below provides information about our fixed rate and variable rate long-term debt agreements as of June 30, 2021:2022:
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| Expected Maturity for the Twelve Months Ending June 30, |
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| Average |
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| (in millions) |
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| Interest |
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| 2023 |
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| Thereafter |
| Total |
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| Fair Value |
|
| Rate |
| |||||||||
Fixed rate |
| $ | — |
| $ | — |
| $ | 700.0 |
| $ | 405.0 |
| $ | — |
| $ | 765.0 |
| $ | 1,870.0 |
|
| $ | 1,661.2 |
|
|
| 5.5 | % |
Variable rate |
|
| 25.7 |
|
| 9.9 |
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| 168.0 |
|
| 1.2 |
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| 1.1 |
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| 2.1 |
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| 208.0 |
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| 198.5 |
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| 3.9 | % |
Total debt (1) |
| $ | 25.7 |
| $ | 9.9 |
| $ | 868.0 |
| $ | 406.2 |
| $ | 1.1 |
| $ | 767.1 |
| $ | 2,078.0 |
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| $ | 1,859.7 |
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| Expected Maturity for the Twelve-Month Periods Ending June 30, |
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| Average |
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| Interest |
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| 2022 |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
| Thereafter |
| Total |
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| Fair Value |
| �� | Rate |
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Fixed rate |
| $ | — |
| $ | — |
| $ | — |
| $ | 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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| 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 |
| $ | 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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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 condensed 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, 20202021 filed March 3, 2021.9, 2022.
Item 4. Controls and Procedures
Evaluation of the Effectiveness of Disclosure Controls and Procedures
As of June 30, 2021,2022, 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 June 30, 2021,2022, 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 June 30, 20212022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
39
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
Other than the discussion at Note 18,17, 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, 20202021 filed March 3, 20219, 2022..
Item 1A. RiRisk Factorssk Factors
See discussion in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20202021 filed March 3, 2021, as updated by risk factors included in a Form 8-K that was filed on March 4, 20219, 2022..
Item 5. Other Information
Supplemental Schedules Specified by the Senior Notes Indentures
As required by the indentures governing the Company’s 5.875% Senior Notes, 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 loss, comprehensive 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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CINEMARK USA, INC. AND SUBSIDIARIES40
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
JUNE 30, 2021
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|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 233,048 |
|
| $ | 88,049 |
|
| $ | — |
|
| $ | 321,097 |
|
Other current assets |
|
| 278,628 |
|
|
| (111,700 | ) |
|
| (4,286 | ) |
|
| 162,642 |
|
Total current assets |
|
| 511,676 |
|
|
| (23,651 | ) |
|
| (4,286 | ) |
|
| 483,739 |
|
Theatre properties and equipment, net |
|
| 1,492,564 |
|
|
| — |
|
|
| — |
|
|
| 1,492,564 |
|
Operating lease right-of-use assets, net |
|
| 1,229,587 |
|
|
| — |
|
|
| — |
|
|
| 1,229,587 |
|
Other assets |
|
| 1,820,176 |
|
|
| 321,352 |
|
|
| (370,542 | ) |
|
| 1,770,986 |
|
Total assets |
| $ | 5,054,003 |
|
| $ | 297,701 |
|
| $ | (374,828 | ) |
| $ | 4,976,876 |
|
Liabilities and equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
| $ | 20,910 |
|
| $ | — |
|
| $ | — |
|
| $ | 20,910 |
|
Current portion of operating lease obligations |
|
| 211,468 |
|
|
| — |
|
|
| — |
|
|
| 211,468 |
|
Current portion of finance and capital lease obligations |
|
| 14,439 |
|
|
| — |
|
|
| — |
|
|
| 14,439 |
|
Accounts payable and accrued expenses |
|
| 400,843 |
|
|
| 18 |
|
|
| (4,286 | ) |
|
| 396,575 |
|
Total current liabilities |
|
| 647,660 |
|
|
| 18 |
|
|
| (4,286 | ) |
|
| 643,392 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion |
|
| 2,296,307 |
|
|
| — |
|
|
| (263,523 | ) |
|
| 2,032,784 |
|
Operating lease obligations, less current portion |
|
| 1,085,539 |
|
|
| — |
|
|
| — |
|
|
| 1,085,539 |
|
Finance and capital lease obligations, less current portion |
|
| 109,327 |
|
|
| — |
|
|
| — |
|
|
| 109,327 |
|
Other long-term liabilities and deferrals |
|
| 505,122 |
|
|
| 18,680 |
|
|
| — |
|
|
| 523,802 |
|
Total long-term liabilities |
|
| 3,996,295 |
|
|
| 18,680 |
|
|
| (263,523 | ) |
|
| 3,751,452 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 410,048 |
|
|
| 279,003 |
|
|
| (107,019 | ) |
|
| 582,032 |
|
Total liabilities and equity |
| $ | 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 LOSS INFORMATIONBALANCE SHEET
SIX MONTHS ENDED JUNE 30, 2021
(In thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
|
|
| ||
|
| Group |
|
| Group |
|
|
|
| Eliminations |
|
| Consolidated |
| ||||
Revenues |
| $ | 409,013 |
|
| $ | — |
|
|
|
| $ | — |
|
| $ | 409,013 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Theatre operating costs |
|
| 449,723 |
|
|
| — |
|
|
|
|
| — |
|
|
| 449,723 |
|
General and administrative expenses |
|
| 71,776 |
|
|
| 18 |
|
|
|
|
| — |
|
|
| 71,794 |
|
Depreciation and amortization |
|
| 135,080 |
|
|
| — |
|
|
|
|
| — |
|
|
| 135,080 |
|
Restructuring costs |
|
| (948 | ) |
|
| — |
|
|
|
|
| — |
|
|
| (948 | ) |
Loss on disposal of assets and other |
|
| 6,863 |
|
|
| — |
|
|
|
|
| — |
|
|
| 6,863 |
|
Total cost of operations |
|
| 662,494 |
|
|
| 18 |
|
|
|
|
| — |
|
|
| 662,512 |
|
Operating loss |
|
| (253,481 | ) |
|
| (18 | ) |
|
|
|
| — |
|
|
| (253,499 | ) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (62,976 | ) |
|
| (1 | ) |
|
|
|
| 1,399 |
|
|
| (61,578 | ) |
Loss on extinguishment of debt |
|
| (6,527 | ) |
|
| — |
|
|
|
|
| — |
|
|
| (6,527 | ) |
Equity in loss of affiliates |
|
| (8,377 | ) |
|
| (6,538 | ) |
|
|
|
| — |
|
|
| (14,915 | ) |
Distributions from NCM |
|
| — |
|
|
| 77 |
|
|
|
|
| — |
|
|
| 77 |
|
Interest expense - NCM |
|
| (11,797 | ) |
|
| — |
|
|
|
|
| — |
|
|
| (11,797 | ) |
Other income |
|
| 3,770 |
|
|
| 1,411 |
|
|
|
|
| (1,399 | ) |
|
| 3,782 |
|
Total other income (expense) |
|
| (85,907 | ) |
|
| (5,051 | ) |
|
|
|
| — |
|
|
| (90,958 | ) |
Loss before income taxes |
|
| (339,388 | ) |
|
| (5,069 | ) |
|
|
|
| — |
|
|
| (344,457 | ) |
Income taxes |
|
| (3,041 | ) |
|
| (847 | ) |
|
|
|
| — |
|
|
| (3,888 | ) |
Net loss |
|
| (336,347 | ) |
|
| (4,222 | ) |
|
|
|
| — |
|
|
| (340,569 | ) |
Less: Net loss attributable to noncontrolling interests |
|
| (416 | ) |
|
| — |
|
|
|
|
| — |
|
|
| (416 | ) |
Net loss attributable to Cinemark USA, Inc. |
| $ | (335,931 | ) |
| $ | (4,222 | ) |
|
|
| $ | — |
|
| $ | (340,153 | ) |
2022
Note: “Restricted Group” and “Unrestricted Group” are defined (in the indentures for the senior notes.
CINEMARK USA, INC. AND SUBSIDIARIESmillions, unaudited)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF
COMPREHENSIVE LOSS INFORMATION
SIX MONTHS ENDED JUNE 30, 2021
(In thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
| ||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||
Net loss |
| $ | (336,347 | ) |
| $ | (4,222 | ) |
| $ | — |
|
| $ | (340,569 | ) |
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
| (1,206 | ) |
|
| — |
|
|
| — |
|
|
| (1,206 | ) |
Total other comprehensive loss, net of tax |
|
| 5,244 |
|
|
| — |
|
|
| — |
|
|
| 5,244 |
|
Total comprehensive loss, net of tax |
|
| (331,103 | ) |
|
| (4,222 | ) |
|
| — |
|
|
| (335,325 | ) |
Comprehensive loss attributable to noncontrolling interests |
|
| 416 |
|
|
| — |
|
|
| — |
|
|
| 416 |
|
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
SIX MONTHS ENDED JUNE 30, 2021
(In thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
| ||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||
Operating activities |
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
| 160,584 |
|
|
| (2,306 | ) |
|
| — |
|
|
| 158,278 |
|
Net cash used for operating activities |
|
| (21,478 | ) |
|
| 74 |
|
|
| — |
|
|
| (21,404 | ) |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to theatre properties and equipment |
|
| (32,819 | ) |
|
| — |
|
|
| — |
|
|
| (32,819 | ) |
Proceeds from sale of theatre properties and equipment and other |
|
| 1,995 |
|
|
| — |
|
|
| — |
|
|
| 1,995 |
|
Investments and loans to affliates |
|
| — |
|
|
| (6,785 | ) |
|
| 6,785 |
|
|
| — |
|
Net cash used for investing activities |
|
| (30,824 | ) |
|
| (6,785 | ) |
|
| 6,785 |
|
|
| (30,824 | ) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions from parent |
|
| 120,000 |
|
|
| — |
|
|
| — |
|
|
| 120,000 |
|
Borrowings from parent/subsidiary |
|
| 6,785 |
|
|
| — |
|
|
| (6,785 | ) |
|
| — |
|
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 |
|
| (4,204 | ) |
|
| — |
|
|
| — |
|
|
| (4,204 | ) |
Payment of debt issue costs |
|
| (17,272 | ) |
|
| — |
|
|
| — |
|
|
| (17,272 | ) |
Payments on finance leases |
|
| (7,373 | ) |
|
| — |
|
|
| — |
|
|
| (7,373 | ) |
Other |
|
| (2,070 | ) |
|
| — |
|
|
| — |
|
|
| (2,070 | ) |
Net cash used for financing activities |
|
| 119,878 |
|
|
| — |
|
|
| (6,785 | ) |
|
| 113,093 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (306 | ) |
|
| — |
|
|
| — |
|
|
| (306 | ) |
Decrease in cash and cash equivalents |
|
| 67,270 |
|
|
| (6,711 | ) |
|
| — |
|
|
| 60,559 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
| 165,778 |
|
|
| 94,760 |
|
|
| — |
|
|
| 260,538 |
|
End of year |
| $ | 233,048 |
|
| $ | 88,049 |
|
| $ | — |
|
| $ | 321,097 |
|
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
| ||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 339.0 |
|
| $ | 101.6 |
|
| $ | — |
|
| $ | 440.6 |
|
Other current assets |
|
| 352.8 |
|
|
| (109.8 | ) |
|
| (7.2 | ) |
|
| 235.8 |
|
Total current assets |
|
| 691.8 |
|
|
| (8.2 | ) |
|
| (7.2 | ) |
|
| 676.4 |
|
Theatre properties and equipment, net |
|
| 1,296.0 |
|
|
| — |
|
|
| — |
|
|
| 1,296.0 |
|
Operating lease right-of-use assets, net |
|
| 1,180.6 |
|
|
| — |
|
|
| — |
|
|
| 1,180.6 |
|
Other assets |
|
| 1,741.4 |
|
|
| 284.5 |
|
|
| (371.5 | ) |
|
| 1,654.4 |
|
Total assets |
| $ | 4,909.8 |
|
| $ | 276.3 |
|
| $ | (378.7 | ) |
| $ | 4,807.4 |
|
Liabilities and equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current portion of long-term debt |
| $ | 25.7 |
|
| $ | — |
|
| $ | — |
|
| $ | 25.7 |
|
Current portion of operating lease obligations |
|
| 219.4 |
|
|
| — |
|
|
| — |
|
|
| 219.4 |
|
Current portion of finance lease obligations |
|
| 14.7 |
|
|
| — |
|
|
| — |
|
|
| 14.7 |
|
Current income tax payable |
|
| 0.1 |
|
|
| 0.1 |
|
|
| — |
|
|
| 0.2 |
|
Accounts payable and accrued expenses |
|
| 464.7 |
|
|
| — |
|
|
| (7.1 | ) |
|
| 457.6 |
|
Total current liabilities |
|
| 724.6 |
|
|
| 0.1 |
|
|
| (7.1 | ) |
|
| 717.6 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Long-term debt, less current portion |
|
| 2,290.2 |
|
|
| — |
|
|
| (264.6 | ) |
|
| 2,025.6 |
|
Operating lease obligations, less current portion |
|
| 1,023.2 |
|
|
| — |
|
|
| — |
|
|
| 1,023.2 |
|
Finance lease obligations, less current portion |
|
| 95.3 |
|
|
| — |
|
|
| — |
|
|
| 95.3 |
|
Other long-term liabilities and deferrals |
|
| 475.0 |
|
|
| 12.0 |
|
|
| — |
|
|
| 487.0 |
|
Total long-term liabilities |
|
| 3,883.7 |
|
|
| 12.0 |
|
|
| (264.6 | ) |
|
| 3,631.1 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Equity |
|
| 301.5 |
|
|
| 264.2 |
|
|
| (107.0 | ) |
|
| 458.7 |
|
Total liabilities and equity |
| $ | 4,909.8 |
|
| $ | 276.3 |
|
| $ | (378.7 | ) |
| $ | 4,807.4 |
|
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
41
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF LOSS
SIX MONTHS ENDED JUNE 30, 2022
(in millions, unaudited)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
| ||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||
Revenue |
| $ | 1,204.6 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,204.6 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
| — |
| |||
Theatre operating costs |
|
| 960.1 |
|
|
| — |
|
|
| — |
|
|
| 960.1 |
|
General and administrative expense |
|
| 87.4 |
|
|
| — |
|
|
| — |
|
|
| 87.4 |
|
Depreciation and amortization |
|
| 122.7 |
|
|
| — |
|
|
| — |
|
|
| 122.7 |
|
Impairment of long-lived assets and other |
|
| 60.9 |
|
|
| 31.4 |
|
|
| — |
|
|
| 92.3 |
|
Restructuring costs |
|
| (0.2 | ) |
|
| — |
|
|
| — |
|
|
| (0.2 | ) |
Gain on sale of assets and other |
|
| (7.6 | ) |
|
| — |
|
|
| — |
|
|
| (7.6 | ) |
Total cost of operations |
|
| 1,223.3 |
|
|
| 31.4 |
|
|
| — |
|
|
| 1,254.7 |
|
Operating loss |
|
| (18.7 | ) |
|
| (31.4 | ) |
|
| — |
|
|
| (50.1 | ) |
Other income (expense) |
|
| (78.7 | ) |
|
| (0.4 | ) |
|
| — |
|
|
| (79.1 | ) |
Loss before income taxes |
|
| (97.4 | ) |
|
| (31.8 | ) |
|
| — |
|
|
| (129.2 | ) |
Income tax expense (benefit) |
|
| 3.7 |
|
|
| (6.6 | ) |
|
| — |
|
|
| (2.9 | ) |
Net loss |
|
| (101.1 | ) |
|
| (25.2 | ) |
|
| — |
|
|
| (126.3 | ) |
Less: Net income attributable to noncontrolling interests |
|
| 2.1 |
|
|
| — |
|
|
| — |
|
|
| 2.1 |
|
Net loss attributable to Cinemark USA, Inc. |
| $ | (103.2 | ) |
| $ | (25.2 | ) |
| $ | — |
|
| $ | (128.4 | ) |
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
42
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS
SIX MONTHS ENDED JUNE 30, 2022
(in millions, unaudited)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
| ||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||
Net loss |
| $ | (101.1 | ) |
| $ | (25.2 | ) |
| $ | — |
|
| $ | (126.3 | ) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements |
|
| 21.6 |
|
|
| — |
|
|
| — |
|
|
| 21.6 |
|
Foreign currency translation adjustments |
|
| (1.3 | ) |
|
| — |
|
|
| — |
|
|
| (1.3 | ) |
Total other comprehensive income, net of tax |
|
| 20.3 |
|
|
| — |
|
|
| — |
|
|
| 20.3 |
|
Total comprehensive loss, net of tax |
|
| (80.8 | ) |
|
| (25.2 | ) |
|
| — |
|
|
| (106.0 | ) |
Comprehensive income attributable to noncontrolling interests |
|
| (2.1 | ) |
|
| — |
|
|
| — |
|
|
| (2.1 | ) |
Comprehensive loss attributable to Cinemark USA, Inc. |
| $ | (82.9 | ) |
| $ | (25.2 | ) |
| $ | — |
|
| $ | (108.1 | ) |
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
43
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2022
(in millions, unaudited)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
| ||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | (101.1 | ) |
| $ | (25.2 | ) |
| $ | — |
|
| $ | (126.3 | ) |
Adjustments to reconcile net loss to cash provided by (used for) operating activities |
|
| 221.4 |
|
|
| 3.4 |
|
|
| — |
|
|
| 224.8 |
|
Changes in assets and liabilities |
|
| (65.6 | ) |
|
| 23.3 |
|
|
| — |
|
|
| (42.3 | ) |
Net cash provided by (used for) operating activities |
|
| 54.7 |
|
|
| 1.5 |
|
|
| — |
|
|
| 56.2 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Additions to theatre properties and equipment |
|
| (40.6 | ) |
|
| — |
|
|
| — |
|
|
| (40.6 | ) |
Proceeds from sale of theatre properties and equipment and other |
|
| 11.8 |
|
|
| — |
|
|
| — |
|
|
| 11.8 |
|
Net cash used for investing activities |
|
| (28.8 | ) |
|
| — |
|
|
| — |
|
|
| (28.8 | ) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Restricted stock withholdings for payroll taxes |
|
| (2.1 | ) |
|
| — |
|
|
| — |
|
|
| (2.1 | ) |
Repayments on long-term debt |
|
| (6.9 | ) |
|
| — |
|
|
| — |
|
|
| (6.9 | ) |
Payments on finance leases |
|
| (7.2 | ) |
|
| — |
|
|
| — |
|
|
| (7.2 | ) |
Other financing activities |
|
| (3.0 | ) |
|
| — |
|
|
| — |
|
|
| (3.0 | ) |
Net cash provided by (used for) financing activities |
|
| (19.2 | ) |
|
| — |
|
|
| — |
|
|
| (19.2 | ) |
Effect of exchange rate changes on cash and cash |
|
| (10.3 | ) |
|
| — |
|
|
| — |
|
|
| (10.3 | ) |
Decrease in cash and cash equivalents |
|
| (3.6 | ) |
|
| 1.5 |
|
|
| — |
|
|
| (2.1 | ) |
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning of year |
|
| 342.6 |
|
|
| 100.1 |
|
|
| — |
|
|
| 442.7 |
|
End of year |
| $ | 339.0 |
|
| $ | 101.6 |
|
| $ | — |
|
| $ | 440.6 |
|
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
44
Item 6. Exhibits Exhibits
10.1 |
| |
|
|
|
10.2 |
| |
|
|
|
| ||
|
| |
|
|
|
*31.2 |
| |
|
|
|
*32.1 |
| |
|
|
|
*32.2 |
| |
|
|
|
* 101 |
| The following material from Cinemark USA, Inc.’s Form 10-Q for the quarter ended June 30, |
|
|
|
* 104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
|
|
SIGNATURES* filed herewith.
45
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: |
| August |
|
|
|
|
|
|
|
|
|
|
| /s/ |
|
|
|
|
|
|
|
|
| Chief Executive Officer |
|
|
|
|
|
|
|
|
| /s/ |
|
|
|
|
|
|
|
|
| Chief Financial Officer |
46
49