9. Other Investments
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 March 31, 2022, the Company had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. DCIP also entered into long-term Digital Cinema Deployment Agreements (“DCDAs”) with six major motion picture studios pursuant to which Kasima LLC, one of DCIP’s subsidiaries, received a virtual print fee ("VPF") each time the studio booked a film or
15
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data)
certain other content on the leased digital projection systems. Other content distributors entered into similar DCDAs that provided for the payment of VPFs for bookings of the distributor's content on a leased digital projection system. The DCDAs expired in October 2021. Pursuant to the operating agreement between the Exhibitors and DCIP, DCIP began to distribute excess cash generated from their operations to the Exhibitors during 2019. As the DCDAs 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 during 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 March 31, 2022 was $0.
Below is summary financial information for DCIP for the periods indicated:
| | | | | | | | |
| | Three Months Ended | |
| | March 31, 2022 | | | March 31, 2021 | |
Gross revenues | | $ | 0.5 | | | $ | 5.6 | |
Operating income (loss) | | $ | (0.5 | ) | | $ | 4.0 | |
Net income (loss) | | $ | (0.6 | ) | | $ | 3.9 | |
| | | | | | | | |
| | As of | |
| | March 31, 2022 | | | December 31, 2021 | |
Current assets | | $ | 22.1 | | | $ | 22.9 | |
Current liabilities | | $ | 11.4 | | | $ | 11.6 | |
Members' equity | | $ | 10.7 | | | $ | 11.3 | |
Other Investment Activity
Below is a summary of activity for each of the Company’s other investees and corresponding changes to the Company's investment balances during the three months ended March 31, 2022:
| | | | | | | | | | | | | | | | |
| | AC JV,
LLC | | DCDC | | FE Concepts | | Other | | Total | |
Balance at January 1, 2022 | | $ | 3.7 | | $ | 1.8 | | $ | 19.3 | | $ | 0.4 | | $ | 25.2 | |
Cash distributions received | | | (0.6 | ) | | — | | | — | | | — | | | (0.6 | ) |
Equity income | | | 1.0 | | | 0.1 | | | 0.2 | | | — | | | 1.3 | |
Other | | | — | | | — | | | — | | | (0.1 | ) | | (0.1 | ) |
Balance at March 31, 2022 | | $ | 4.1 | | $ | 1.9 | | $ | 19.5 | | $ | 0.3 | | $ | 25.8 | |
Transactions with Other Investees
Below is a summary of transactions with each of the Company’s other investees for the three months ended March 31, 2022 and 2021:
| | | | | | | | | |
| | | Three Months Ended | |
Investee | Transactions | | March 31, 2022 | | | March 31, 2021 | |
DCIP | Equipment lease payments (1) | | $ | — | | | $ | 1.0 | |
DCIP | Warranty reimbursements (2) | | $ | — | | | $ | (0.3 | ) |
AC JV, LLC | Event fees paid (3) | | $ | 1.8 | | | $ | 0.2 | |
DCDC | Content delivery fees paid (3) | | $ | 0.2 | | | $ | 0.1 | |
(1)As a result of the MELA amendment noted above, the Company recorded a lease termination liability during 2020. Lease termination payments of $1.0 made to DCIP during the three months ended March 31, 2021 reduced the liability outstanding, which was fully paid by October 2021.
(2)Included in utilities and other costs on the condensed consolidated statements of loss.
(3)Included in film rentals and advertising costs on the condensed consolidated statements of loss.
16
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data)
10. Share Based Awards
Restricted Stock
Below is a summary of restricted stock activity for the three months ended March 31, 2022:
| | | | | | | | |
| | Shares of | | | Weighted
Average | |
| | Restricted | | | Grant Date | |
| | Stock | | | Fair Value | |
Outstanding at January 1, 2022 | | | 2.00 | | | $ | 21.73 | |
Granted | | | 0.74 | | | $ | 16.64 | |
Vested | | | (0.33 | ) | | $ | 30.59 | |
Forfeited | | | (0.03 | ) | | $ | 19.99 | |
Outstanding at March 31, 2022 | | | 2.38 | | | $ | 18.96 | |
Unvested restricted stock at March 31, 2022 | | | 2.38 | | | | |
| | | | | | | | |
| | Three Months Ended
March 31, | |
| | 2022 | | | 2021 | |
Compensation expense recognized by the Company during the period | | $ | 4.0 | | | $ | 4.0 | |
Additional compensation expense recognized by Cinemark Holdings, Inc. during the period | | $ | 0.2 | | | $ | 0.2 | |
Fair value of restricted shares held by Company employees that vested during the period | | $ | 5.6 | | | $ | 1.2 | |
Income tax benefit (cost) related to restricted stock awards held by Company employees | | $ | 0.8 | | | $ | (0.1 | ) |
During the three months ended March 31, 2022, Cinemark Holdings, Inc. granted 0.74 shares of restricted stock to 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, which ranged from $15.10 to $16.65 per share. The Company assumed forfeiture rates for the restricted stock awards that ranged from 0% to 10%. The restricted stock granted during the three months ended March 31, 2022 vest over periods ranging from one to four years. The recipients of restricted stock are entitled to receive non-forfeitable dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.
As of March 31, 2022, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $30.0, of which $29.8 will be recognized by the Company and $0.2 will be recognized by Cinemark Holdings, Inc. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.
Restricted Stock Units
Below is a summary of restricted stock unit activity for the periods presented:
| | | | | | | | |
| | Three Months Ended March 31, | |
| | 2022 | | | 2021 | |
Number of restricted stock unit awards that vested during the period | | | 0.10 | | | | 0.01 | |
Fair value of restricted stock unit awards that vested during the period | | $ | 1.7 | | | $ | 0.3 | |
Accumulated dividends paid upon vesting of restricted stock unit awards | | $ | 0.3 | | | $ | 0.1 | |
Compensation expense recognized during the period | | $ | 0.9 | | | $ | 0.5 | |
Income tax benefit (cost) related to stock unit awards | | $ | 0.3 | | | $ | (0.1 | ) |
17
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data)
During the three months ended March 31, 2022, the Company granted performance awards in the form of restricted stock units. The maximum number of shares issuable under the performance awards is 0.80 shares of Cinemark Holdings, Inc.'s common stock. The performance metrics for these awards are based upon the achievement of pre-established criteria that consists of revenue and consolidated cash flows as defined in the award agreement. The performance measurement period for these performance awards is one year with an additional service requirement to the third anniversary of the date 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 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 the Company if, and at the time that, the restricted stock unit awards vest.
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 closing price of the Company’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. If during the service period, additional information becomes available to lead the Company to believe a different achievement level will be reached for the one-year performance period, the Company will reassess the number of units that are expected to vest for the grant and adjust its compensation expense accordingly over the remaining service period.
As of March 31, 2022, the estimated remaining unrecognized compensation expense related to outstanding restricted stock unit awards was $10.3. The weighted average period over which this remaining compensation expense will be recognized is approximately two years. As of March 31, 2022, the Company had restricted stock units outstanding that represented a total of 1.1 hypothetical shares of common stock, net of forfeitures, reflecting actual certified performance levels for restricted stock units granted during 2019 and 2020 and the maximum performance level for the 2022 grant discussed above.
11. Goodwill and Other Intangible Assets
A summary of the Company’s goodwill is as follows:
| | | | | | | | | | | | |
| | U.S.
Operating
Segment | | | International
Operating
Segment | | | Total | |
Balance at January 1, 2022 (1) | | $ | 1,182.9 | | | $ | 65.9 | | | $ | 1,248.8 | |
Foreign currency translation adjustments | | | — | | | | 8.1 | | | | 8.1 | |
Balance at March 31, 2022 (1) | | $ | 1,182.9 | | | $ | 74.0 | | | $ | 1,256.9 | |
(1)Balances are presented net of accumulated impairment losses of $214.0 for the U.S. operating segment and $43.8 for the international operating segment. See discussion of the qualitative impairment analysis performed by the Company as of March 31, 2022 at Note 12.
A summary of the Company’s intangible assets is as follows:
| | | | | | | | | | | | | |
| | Balance at
January 1, 2022 | | Amortization | | Foreign Currency Translation Adjustments | | Balance at March 31, 2022 | |
Intangible assets with finite lives: | | | | | | | | | |
Gross carrying amount | | $ | 81.8 | | $ | — | | $ | 0.3 | | $ | 82.1 | |
Accumulated amortization | | | (71.1 | ) | | (0.6 | ) | | — | | | (71.7 | ) |
Total net intangible assets with finite lives | | $ | 10.7 | | $ | (0.6 | ) | $ | 0.3 | | $ | 10.4 | |
| | | | | | | | | |
Intangible assets with indefinite lives: | | | | | | | | | |
Tradename and other | | | 300.1 | | | — | | | 0.3 | | | 300.4 | |
Total intangible assets, net | | $ | 310.8 | | $ | (0.6 | ) | $ | 0.6 | | $ | 310.8 | |
18
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data)
The estimated aggregate future amortization expense for intangible assets is as follows:
| | | | |
| | Estimated | |
| | Amortization | |
For the nine months ended December 31, 2022 | | $ | 2.0 | |
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 | | $ | 10.4 | |
12. Impairment of Long-Lived Assets
The Company performed a qualitative impairment analysis on its long-lived assets as of March 31, 2022. The Company’s qualitative analysis considered economic and market conditions, industry trading multiples and the impact of recent industry developments and events on the estimated fair values as determined during its most recent quantitative assessments as of December 31, 2021. The Company’s consideration of economic and market conditions included the status of the COVID-19 pandemic and its impact on the Company’s anticipated recovery as well as future film release schedules. As a result of the qualitative assessment, the Company noted no impairment indicators as of March 31, 2022.
Further description of the Company's qualitative impairment analysis, by asset class, is as follows:
•Goodwill – The Company’s qualitative assessment of goodwill for each reporting unit considers economic and market conditions, industry trading multiples and the impact of recent developments and events on the Company's estimated fair values as compared with its most recent quantitative assessment.
•Tradename Intangible Assets – The Company’s qualitative assessment considers recent developments that may impact the Company's revenue forecasts and other estimates as compared with its most recent quantitative assessment.
•Other Long-lived Assets – The Company’s qualitative assessment considers relevant market transactions, industry trading multiples and recent developments that would impact the Company's estimates of future cash flows, which are the primarily measure of estimated fair value, as compared with its most recent quantitative impairment assessment.
13. Fair Value Measurements
The Company determines fair value measurements in accordance with ASC Topic 820, which establishes a fair value hierarchy under which an asset or liability is categorized based on the lowest level of input significant to its fair value measurement. The levels of input defined by ASC Topic 820 are as follows:
Level 1 – quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date;
Level 2 – other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3 – unobservable and should be used to measure fair value to the extent that observable inputs are not available.
Below is a summary of assets and liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | |
| | | | Carrying | | | Fair Value Hierarchy | |
Description | | As of, | | Value | | | Level 1 | | | Level 2 | | | Level 3 | |
Interest rate swap assets (1) | | March 31, 2022 | | $ | 3.9 | | | $ | — | | | $ | 3.9 | | | $ | — | |
| | | | | | | | | | | | | | |
Interest rate swap liabilities (1) | | December 31, 2021 | | $ | 14.6 | | | $ | — | | | $ | 14.6 | | | $ | — | |
(1)See further discussion of interest rate swaps at Note 6.
The Company uses the market approach for fair value measurements on a nonrecurring basis in the impairment evaluations of its goodwill, intangible assets and long-lived assets (see Note 11 and Note 12). 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, 2021, filed March 9, 2022. There were no changes in valuation techniques. There were 0 transfers into or out of Level 1, Level 2 or Level 3 during the three months ended March 31, 2022.
19
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data)
14. Foreign Currency Translation
The accumulated other comprehensive loss account in stockholders’ equity of $366.9 and $397.0 as of March 31, 2022 and December 31, 2021, respectively, primarily includes cumulative foreign currency net losses of $380.1 and $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 March 31, 2022, all foreign countries where the Company has operations are non-highly inflationary, other than Argentina. In non-highly inflationary countries, the local currency is the same as the functional currency 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 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 March 31, 2022 and March 31, 2021 financial statements of the Company’s international subsidiaries:
| | | | | | | | | | | | | | | |
| | | | | | | | Other Comprehensive Income (Loss) for | |
| | Exchange Rate as of | | | Three Months Ended | |
Country | | March 31, 2022 | | | December 31, 2021 | | | March 31, 2022 | | March 31, 2021 | |
Brazil | | | 4.8 | | | | 5.6 | | | $ | 8.0 | | $ | (6.9 | ) |
Chile | | | 788.6 | | | | 852.0 | | | | 4.8 | | | (1.0 | ) |
Peru | | | 3.8 | | | | 4.0 | | | | 1.6 | | | (1.2 | ) |
All other | | | | | | | | | 0 | | | (0.4 | ) |
| | | | | | | | $ | 14.4 | | $ | (9.5 | ) |
As noted above, beginning July 1, 2018, Argentina was deemed highly inflationary. A foreign currency exchange gain of $0.5 and $0.2 was recorded for the three months ended March 31, 2022 and 2021, respectively, as a result of translating Argentina's financial results to U.S. dollars.
15. Supplemental Cash Flow Information
The following is provided as supplemental information to the condensed consolidated statements of cash flows:
| | | | | | | | |
| | Three Months Ended | |
| | March 31, | |
| | 2022 | | | 2021 | |
Cash paid for interest | | $ | 42.6 | | | $ | 22.3 | |
Cash paid (refunds received) for income taxes, net | | $ | 0.7 | | | $ | (1.9 | ) |
Cash deposited in restricted accounts (1) | | $ | 0 | | | $ | 7.3 | |
Noncash operating activities: | | | | | | |
Interest expense - NCM (see Note 8) | | $ | (5.8 | ) | | $ | (5.8 | ) |
Noncash investing activities: | | | | | | |
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment(2) | | $ | (1.2 | ) | | $ | (7.0 | ) |
(1)Represents cash deposited in a collateral account during the period to support the issuance of letters of credit to lenders. See further discussion at Note 6.
(2)Additions to theatre properties and equipment included in accounts payable as of March 31, 2022 and December 31, 2021 were $7.0 and $8.2, respectively.
16. Segments
The Company manages its international market and its U.S. market as separate reportable operating segments, with the international segment consisting of operations in Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues. The Company uses Adjusted EBITDA, as shown in the reconciliation table below, as the primary measure of segment profit and loss to evaluate performance and allocate its resources. The Company does not report total assets by segment because that information is not used to evaluate the performance of or allocate resources between segments.
20
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data)
Below is a breakdown of selected financial information by reportable operating segment:
| | | | | | | | |
| | Three Months Ended | |
| | March 31, | |
| | 2022 | | | 2021 | |
Revenues | | | | | | |
U.S. | | $ | 373.7 | | | $ | 97.3 | |
International | | | 88.5 | | | | 17.3 | |
Eliminations | | | (1.7 | ) | | | (0.2 | ) |
Total revenues | | $ | 460.5 | | | $ | 114.4 | |
| | | | | | |
Adjusted EBITDA | | | | | | |
U.S. | | $ | 15.0 | | | $ | (76.5 | ) |
International | | | 10.8 | | | | (15.0 | ) |
Total Adjusted EBITDA | | $ | 25.8 | | | $ | (91.5 | ) |
| | | | | | |
Capital expenditures | | | | | | |
U.S. | | $ | 14.0 | | | $ | 13.7 | |
International | | | 4.7 | | | | 4.0 | |
Total capital expenditures | | $ | 18.7 | | | $ | 17.7 | |
The following table sets forth a reconciliation of net loss to Adjusted EBITDA:
| | | | | | | | | |
| | | Three Months Ended | |
| | | March 31, | |
| | | 2022 | | | 2021 | |
Net loss | | | $ | (61.0 | ) | | $ | (203.5 | ) |
Add (deduct): | | | | | | | |
Income taxes | | | | (6.5 | ) | | | (13.2 | ) |
Interest expense (1) | | | | 32.1 | | | | 30.5 | |
Other expense, net (2) | | | | 3.2 | | | | 15.0 | |
Cash distributions from other equity investees (3) | | | | 0.6 | | | | 0.1 | |
Depreciation and amortization | | | | 61.7 | | | | 68.2 | |
Restructuring costs | | | | 0 | | | | (0.2 | ) |
(Gain) loss on disposal of assets and other | | | | (6.9 | ) | | | 4.5 | |
Loss on extinguishment of debt | | | | 0 | | | | 2.6 | |
Non-cash rent expense | | | | (2.3 | ) | | | 0.1 | |
Share based awards compensation expense | | | | 4.9 | | | | 4.4 | |
Adjusted EBITDA | | | $ | 25.8 | | | $ | (91.5 | ) |
(1)Includes amortization of debt issue costs and amortization of accumulated losses for amended swap agreements.
(2)Includes interest income, foreign currency exchange (gain) loss, equity in loss of affiliates and interest expense - NCM and excludes distributions from NCM.
(3)Reflects cash distributions received from equity investees that were recorded as a reduction of the respective investment balances (see Note 9). These distributions are reported entirely within the U.S. operating segment.
Financial Information About Geographic Areas
Below is a breakdown of selected financial information by geographic area:
| | | | | | | | |
| | Three Months Ended | |
| | March 31, | |
Revenues | | 2022 | | | 2021 | |
U.S. | | $ | 373.7 | | | $ | 97.3 | |
Brazil | | | 33.1 | | | $ | 4.4 | |
Other international countries | | | 55.4 | | | $ | 12.9 | |
Eliminations | | | (1.7 | ) | | $ | (0.2 | ) |
Total | | $ | 460.5 | | | $ | 114.4 | |
21
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data)
| | | | | | | | |
| | As of | | | As of | |
Theatre Properties and Equipment-net | | March 31, 2022 | | | December 31, 2021 | |
U.S. | | $ | 1,166.8 | | | $ | 1,208.7 | |
Brazil | | | 62.9 | | | | 56.8 | |
Other international countries | | | 119.3 | | | | 117.4 | |
Total | | $ | 1,349.0 | | | $ | 1,382.9 | |
17. Related Party Transactions
The Company manages a theatre for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Lee Roy Mitchell is Cinemark Holdings, Inc.’s Chairman of the Board of Directors and directly and indirectly owns approximately 9% of Cinemark Holdings, Inc.’s common stock. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5% of annual theatre revenues. The Company recorded $0.1 and $0.0 of management fee revenues during the three months ended March 31, 2022 and 2021, respectively. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.
Walter Hebert, Mr. Mitchell’s brother-in-law, previously served as the Executive Vice President – Purchasing of the Company and retired in July 2021. Mr. Hebert now serves as a consultant to the Company until July 2022. During the three months ended March 31, 2022, the Company has 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 three months ended March 31, 2022 and 2021, the Company did not make any payments to Copper Beech for the use of the aircraft.
The Company leases 13 theatres from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy. Raymond Syufy is one of the directors of Cinemark Holdings, Inc. and is an officer of the general partner of Syufy. For the three months ended March 31, 2022 and 2021, the Company paid total rent of $5.6 and $6.0, respectively, to Syufy. During 2019, the Company began providing digital equipment support to drive-in theatres owned by Syufy. The Company did not record any management fees related to these services during the three months ended March 31, 2022 and 2021.
The Company has a 50% voting interest in FE Concepts, a joint venture with AWSR, an entity owned by Lee Roy Mitchell and Tandy Mitchell. FE Concepts operates a family entertainment center that offers bowling, gaming, movies and other amenities. See Note 9 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 March 31, 2022 and December 31, 2021 was $49.2 and $46.7, respectively. The Company received contributions from Cinemark Holdings, Inc. of $120.0 during the three months ended March 31, 2021.
18. Commitments and Contingencies
From time to time, the Company is involved in various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, patent claims, landlord-tenant disputes, contractual disputes with landlords over certain termination rights or the right to discontinue rent payments due to the COVID-19 pandemic and other contractual disputes, some of which are covered by insurance. The Company believes its potential liability with respect to proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.
Cinemark Holdings, Inc., et al vs Factory Mutual Insurance Company. The Company filed suit on November 18, 2020, in the District Court, 471st Judicial District, Collin County, Texas. On December 22, 2020, the case was moved to the US District Court for the Eastern District of Texas, Sherman Division. The Company submitted a claim under its property insurance policy issued by Factory Mutual Insurance Company (the “FM Policy”) for losses sustained as a result of the closure of the Company’s theatres due to the COVID-19 pandemic. Factory Mutual Insurance Company (“FM”) denied the Company’s claim. The Company is seeking damages resulting from FM’s breach of contract, FM’s bad faith conduct and a declaration of the parties’ rights under the FM Policy. The Company cannot predict the outcome of this litigation.
22
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data)
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.
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. In December 2021, the parties reached a settlement and announced the settlement to the court. The settlement was recorded in (gain) loss on disposal of assets and other on the consolidated statement of income (loss) for the year ended December 31, 2021. The parties entered into definitive settlement agreements, and the court has dismissed the lawsuit with prejudice.
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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. Amounts included in the following discussion, except for screens, average screens, average ticket price and concessions per patron, are rounded in millions.
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 March 31, 2022, we managed our business under two reportable operating segments – U.S. markets and international markets. See Note 16 to our condensed consolidated financial statements.
Recent Developments
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 move 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 pressures and other economic factors.
Revenues and Expenses
We generate revenue primarily from filmed entertainment box office receipts and concession sales with additional revenue from screen advertising, screen 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 and other special events in our theatres through Fathom Entertainment (operated by AC JV, LLC). NCM provides our domestic theatres with 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 three months ended March 31, 2022 included the carryover of Spider-Man: No Way Home as well as new releases including The Batman, Uncharted, The Lost City and Scream. Films currently scheduled for release during the remainder of 2022 include Sonic the Hedgehog 2, Doctor Strange in the Multiverse of Madness, Top Gun: Maverick, Jurassic World: Dominion, Lightyear, Minions: The Rise of Gru, Thor: Love and Thunder, Black Adam, Black Panther: Wakanda Forever and the highly anticipated sequel, Avatar: The Way 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 and other forms of entertainment.
Film rental costs are variable in nature and fluctuate with our admissions revenue. Film rental costs as a percentage of revenue are generally higher for periods in which more blockbuster films are released. The Company received virtual print fees from studios for certain of its international locations, which are included as a contra-expense in film rental and advertising costs on the condensed consolidated statements of income. However, these costs were fully recovered during 2021 and virtual print fees will not be received in future periods. Advertising costs, which are expensed as incurred, are primarily related to our loyalty and subscription programs, brand advertising, reengaging our audiences as our theatres reopened and new film content was released as well as campaigns for new and remodeled theatres. These expenses vary depending on the timing and length of such campaigns.
Concession supplies expense is variable in nature and fluctuates with our concession revenue 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 source products from a variety of partners around the world to minimize supply chain interruptions and price increases, wherever possible.
Although salaries and wages include a fixed cost component (i.e., the minimum staffing costs to operate a theatre facility during non-peak periods), salaries and wages tend to move in relation to revenue as theatre staffing is adjusted to respond to changes in attendance. Staffing levels may vary based on the amenities offered at a location, such as full-service restaurants, bars or expanded food and beverage options. In certain 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.
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Facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment. Certain 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 expense as a percentage of revenue 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, property taxes, janitorial costs, credit card fees, third party ticket sales commissions, repairs and maintenance expenses, security services and expenses for the maintenance and monitoring of projection and sound equipment.
General and administrative expenses to support the overall management of the Company are 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, supplies and other costs that are not specifically associated with the operations of our theatres.
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Results of Operations
The following table sets forth, for the periods indicated, the amounts for certain items reflected in our condensed consolidated statements of income along with each of those items as a percentage of revenues.
| | | | | | | | |
| | Three Months Ended | |
| | March 31, | |
| | 2022 | | | 2021 | |
Operating data (in millions): | | | | | | |
Revenues | | | | | | |
Admissions | | $ | 235.8 | | | $ | 56.1 | |
Concession | | | 173.0 | | | | 39.5 | |
Other | | | 51.7 | | | | 18.8 | |
Total revenues | | $ | 460.5 | | | $ | 114.4 | |
Cost of operations | | | | | | |
Film rentals and advertising | | | 127.6 | | | | 23.2 | |
Concession supplies | | | 30.0 | | | | 7.2 | |
Salaries and wages | | | 79.8 | | | | 31.2 | |
Facility lease expense | | | 73.7 | | | | 64.8 | |
Utilities and other | | | 86.9 | | | | 49.1 | |
General and administrative expenses | | | 39.9 | | | | 35.1 | |
Depreciation and amortization | | | 61.7 | | | | 68.2 | |
Restructuring costs | | | — | | | | (0.2 | ) |
(Gain) loss on disposal of assets and other | | | (6.9 | ) | | | 4.5 | |
Total cost of operations | | | 492.7 | | | | 283.1 | |
Operating loss | | $ | (32.2 | ) | | $ | (168.7 | ) |
| | | | | | |
Operating data as a percentage of total revenues: | | | | | | |
Revenues | | | | | | |
Admissions | | | 51.2 | % | | | 49.0 | % |
Concession | | | 37.6 | % | | | 34.5 | % |
Other | | | 11.2 | % | | | 16.5 | % |
Total revenues | | | 100.0 | % | | | 100.0 | % |
Cost of operations (1) | | | | | | |
Film rentals and advertising | | | 54.1 | % | | | 41.4 | % |
Concession supplies | | | 17.3 | % | | | 18.2 | % |
Salaries and wages | | | 17.3 | % | | N/A | |
Facility lease expense | | | 16.0 | % | | N/A | |
Utilities and other | | | 18.9 | % | | N/A | |
General and administrative expenses | | | 8.7 | % | | N/A | |
Depreciation and amortization | | | 13.4 | % | | N/A | |
Restructuring costs | | | — | % | | N/A | |
(Gain) loss on disposal of assets and other | | | (1.5 | )% | | N/A | |
Total cost of operations | | | 107.0 | % | | N/A | |
Operating loss | | | (7.0 | )% | | N/A | |
(1)All costs are expressed as a percentage of total revenues, except film rentals and advertising, which are expressed as a percentage of admissions revenue and concession supplies, which are expressed as a percentage of concession revenue. Certain values for the 2021 period are considered not applicable (“N/A”) as they are not comparable due to limited film content and certain ongoing theatre closures as a result of the COVID-19 pandemic.
Three months ended March 31, 2022 (the "2022 period") versus the three months ended March 31, 2021 (the "2021 period")
As noted above at Recent Developments, 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:
•All of our domestic and international theatres were open during the 2022 period while certain of our domestic and international theatres were temporarily closed for portions of the 2021 period.
•The North American Industry box office exceeded $1.3B during the 2022 period, which included blockbuster films such as The Batman and Uncharted, as well as the sustained performance of the 2021 release of Spider-Man: No Way Home.
•The North American Industry box office totaled less than $0.3B during the 2021 period with a limited number of new releases including Tom and Jerry, Raya and the Last Dragon and Croods: A New Age in addition to library content.
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Revenues. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | U.S. Operating Segment | | | International Operating Segment | Consolidated | |
| | | | | | | | | | | | | | Constant
Currency (3) | | | | | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2022 | | | 2021 | |
Admissions revenues (1) | | $ | 191.8 | | | $ | 48.5 | | | $ | 44.0 | | | $ | 7.6 | | | $ | 46.4 | | | $ | 235.8 | | | $ | 56.1 | |
Concession revenues (1) | | | 141.1 | | | | 33.0 | | | | 31.9 | | | | 6.5 | | | | 33.9 | | | | 173.0 | | | | 39.5 | |
Other revenues (1)(2) | | | 39.1 | | | | 15.6 | | | | 12.6 | | | | 3.2 | | | | 13.1 | | | | 51.7 | | | | 18.8 | |
Total revenues (1)(2) | | $ | 372.0 | | | $ | 97.1 | | | $ | 88.5 | | | $ | 17.3 | | | $ | 93.4 | | | $ | 460.5 | | | $ | 114.4 | |
Attendance (1) | | | 20.7 | | | | 5.2 | | | | 12.4 | | | | 2.5 | | | | | | | 33.1 | | | | 7.7 | |
Average ticket price (1) | | $ | 9.27 | | | $ | 9.25 | | | $ | 3.55 | | | $ | 3.05 | | | $ | 3.74 | | | $ | 7.12 | | | $ | 7.25 | |
Concession revenues per patron (1) | | $ | 6.82 | | | $ | 6.30 | | | $ | 2.57 | | | $ | 2.58 | | | $ | 2.73 | | | $ | 5.23 | | | $ | 5.10 | |
(1)Average ticket price is calculated as admissions revenues divided by attendance. Concession revenues per patron is calculated as concession revenues divided by attendance.
(2)U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 16 to our condensed consolidated financial statements.
(3)Constant currency revenue amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2021. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.
•U.S. Average ticket price increased to $9.27 during the 2022 period compared with $9.25 during the 2021 period. The 2021 period reflected limited operating hours and therefore fewer matinee showtimes. The 2021 period also benefited from Private Watch Parties, which carried a higher ticket price per patron. The 2022 period benefited from favorable ticket type mix, strategic pricing actions and a higher mix of premium large format box office. Concession revenues per patron increased 8.3% to $6.82 during the 2022 period compared with $6.30 during the 2021 period driven by higher incidence, audience mix and operating hours that are more conducive to concession purchases. Other revenues for the 2022 period increased 150.6% to $39.1 million compared with $15.6 million during the 2021 period primarily as a result of growth in attendance, which drove an increase in transaction fees, screen advertising and promotional revenues.
•International. Average ticket price was $3.55 as reported, $3.74 in constant currency, compared with the 2021 period of $3.05. The increase in average ticket price in constant currency was primarily the result of the impact of inflation and higher premium ticket mix. Concession revenues per patron was $2.57 as reported, $2.73 in constant currency, for the 2022 period compared with $2.58 in the 2021 period. The increase in concession revenues per patron in constant currency was a result of the impact of inflation coupled with higher purchase incidence. Other revenues for the 2022 period increased 293.8% to $12.6 million compared with $3.2 million during the 2021 period primarily as a result of growth in attendance, which drove an increase in transaction fees, screen advertising and promotional revenues.
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
Currency (1)
2022 | | | 2022 | | | 2021 | |
Film rentals and advertising | | $ | 106.2 | | | $ | 19.3 | | | $ | 21.4 | | | $ | 3.9 | | | $ | 22.6 | | | $ | 127.6 | | | $ | 23.2 | |
Concession supplies | | $ | 22.9 | | | $ | 5.5 | | | $ | 7.1 | | | $ | 1.7 | | | $ | 7.6 | | | $ | 30.0 | | | $ | 7.2 | |
Salaries and wages | | $ | 67.1 | | | $ | 24.9 | | | $ | 12.7 | | | $ | 6.3 | | | $ | 13.4 | | | $ | 79.8 | | | $ | 31.2 | |
Facility lease expense | | $ | 62.5 | | | $ | 59.0 | | | $ | 11.2 | | | $ | 5.8 | | | $ | 11.7 | | | $ | 73.7 | | | $ | 64.8 | |
Utilities and other | | $ | 68.1 | | | $ | 40.0 | | | $ | 18.8 | | | $ | 9.1 | | | $ | 19.7 | | | $ | 86.9 | | | $ | 49.1 | |
(1) Constant currency expense amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2021. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.
•U.S. Film rentals and advertising costs for the 2022 period were 55.4% of admissions revenue compared with 39.8% for the 2021 period. The rate for the 2022 period reflected the success of new film releases as discussed above. The rate for the 2021 period reflected the release of limited new films which skewed lower on our negotiated film rental scales, and the impact of library content. Concession supplies expenses for the 2022 period was 16.2% of concessions revenue compared with 16.7% of concession revenues for the 2021 period.
Salaries and wages increased to $67.1 million for the 2022 period due to expanded operating hours, significantly higher attendance volumes and wage rate pressures with hourly rates increasing approximately 14% compared with the 2021 period. Facility lease expense, which is primarily fixed in nature, increased to $62.5 million primarily due to new theatres and an increase in percentage rent expense and common area maintenance costs. Utilities and other costs increased to $68.1 million,
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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 significant increase in attendance.
•International. Film rentals and advertising costs for the 2022 period were 48.6% of admissions revenue compared with 51.3% for the 2021 period. The decrease in the film rentals and advertising rate was a result of decreased promotional and advertising costs as a percentage of revenue. Concession supplies expenses were 22.3% of concessions revenue compared with 26.2% of concession revenues for the 2021 period. The decrease in concessions supplies rate was driven by the disposal of perishable goods during the 2021 period due to temporary theatre closures.
Salaries and wages increased to $12.7 million as reported for the first quarter of 2022 due to expanded operating hours, increased staffing to service the significant increase in attendance volumes and inflationary impacts. Facility lease expense increased to $11.2 million as reported due to increased percentage rent driven by increases in revenue and the return of minimum rent thresholds that were temporarily adjusted while theatres were reopening during the 2021 period. Utilities and other costs increased to $18.8 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 expansion of operating hours and the significant increase in attendance. These expenses, as reported, were also impacted by exchange rates in each of the countries in which we operate.
General and Administrative Expenses. General and administrative expenses increased to $39.9 million for the 2022 period compared with $35.1 million for the 2021 period. The increase is primarily due to increased consulting fees and salaries to support our strategic initiatives and increased legal fees.
Depreciation and Amortization. Depreciation and amortization expense decreased to $61.7 million for the 2022 period compared with $68.2 million for the 2021 period primarily due to the impairment of theatre assets during 2021.
(Gain) Loss on Disposal of Assets and Other. A gain on disposal of assets and other of $6.9 million was recorded during the 2022 period compared with a loss of $4.5 million during the 2021 period. Activity for the 2022 period was primarily related to the sales of excess land parcels. Activity for the 2021 period was primarily related to the write-off of certain digital projectors received from DCIP in a non-cash distribution during November 2020 that were replaced with laser projectors. See Note 9 for discussion of the distribution of digital projectors from DCIP.
Interest Expense. Interest expense, which includes amortization of debt issue costs and amortization of accumulated losses for swap amendments, increased to $32.1 million during the 2022 period compared with $30.5 million for the 2021 period. The increase was primarily due to the issuance of notes (the 5.875% Senior Notes and 5.25% Senior Notes) to refinance certain notes that had lower interest rates (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 $2.6 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. An equity in loss of affiliates of $2.2 million was recorded during the 2022 period compared with $6.8 million during the 2021 period. The decrease in equity loss of affiliates is due to the recovery of our equity investees’ performance as the industry continues to recover. See Notes 8 and 9 to our condensed consolidated financial statements for information about our equity investments.
Income Taxes. An income tax benefit of $(6.5) million was recorded for the 2022 period compared with an income tax benefit of $(13.2) million for the 2021 period. The effective tax rate was approximately 9.6% for the 2022 period compared with 6.1% for the 2021 period. The effective tax rate for the 2022 period was impacted by valuation allowances related to deferred tax assets and foreign tax credits for which the ultimate realization is uncertain. For the 2022 period, we utilized the discrete effective tax rate method (“discrete method”), as allowed by ASC Topic 740-270-30-18, Income Taxes — Interim Reporting, to calculate our interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. We believe that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as the estimated annual effective tax rate method is not reliable due to significant variations in income tax expense relative to changes (increases or decreases) in estimated pretax earnings.
Liquidity and Capital Resources
Operating Activities
We primarily collect our revenue in cash, mainly through box office receipts and the sale of concessions. Our revenues are 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. We temporarily closed all of our theatres during March 2020 and funded operating expenses with cash on hand and new 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
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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 level 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 for operating activities was $108.5 million for the three months ended March 31, 2022 compared with $124.0 million for the three months ended March 31, 2021. The decrease in cash used for operating activities was primarily a result of the timing and level of revenues earned during each period and the timing of payments to vendors for expenses incurred during each period.
As discussed in Note 4 to our condensed consolidated financial statements, we negotiated the deferral of rent and other lease-related payments in 2020 and early 2021 with some of our landlords. As of March 31, 2022, approximately $22.1 million in deferred lease payments remain outstanding, the majority of which will be repaid during 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 $8.1 million for the three months ended March 31, 2022 compared with $17.7 million for the three months ended March 31, 2021. The decrease in cash used for investing activities was primarily due to proceeds from the sale of excess land parcels recognized during the three months ended March 31, 2022.
Capital expenditures for the three months ended March 31, 2022 and 2021 were as follows (in millions):
| | | | | | | | |
| | Three Months Ended March 31, | |
| | 2022 | | | 2021 | |
New theatres | | $ | 6.6 | | | $ | 2.3 | |
Existing theatres | | $ | 12.1 | | | $ | 15.4 | |
Total capital expenditures | | $ | 18.7 | | | $ | 17.7 | |
We operated 520 theatres with 5,849 screens worldwide as of March 31, 2022. Theatres and screens acquired, built and closed during the three months ended March 31, 2022 were as follows:
| | | | | | | | | | | | | | | | |
| | January 1, 2022 | | | Built | | | Closed | | | March 31, 2022 | |
U.S (42 states) | | | | | | | | | | | | |
Theatres | | | 321 | | | | — | | | | (1 | ) | | | 320 | |
Screens | | | 4,408 | | | | — | | | | (12 | ) | | | 4,396 | |
| | | | | | | | | | | | |
International (15 countries) | | | | | | | | | | | | |
Theatres | | | 201 | | | | — | | | | (1 | ) | | | 200 | |
Screens | | | 1,460 | | | | 5 | | | | (12 | ) | | | 1,453 | |
| | | | | | | | | | | | |
Worldwide | | | | | | | | | | | | |
Theatres | | | 522 | | | | — | | | | (2 | ) | | | 520 | |
Screens | | | 5,868 | | | | 5 | | | | (24 | ) | | | 5,849 | |
As of March 31, 2022, we had the following signed commitments:
| | | | | | | | |
| | Theatres | | Screens | | Estimated
Cost (1) | |
Remainder of 2022 | | | | | | | |
U.S. | | 2 | | 28 | | $ | 20.4 | |
International | | 1 | | 14 | | | 4.2 | |
Total | | 3 | | 42 | | $ | 24.6 | |
| | | | | | | |
Subsequent to 2022 | | | | | | | |
U.S. | | 3 | | 34 | | $ | 20.8 | |
International | | 6 | | 36 | | | 16.2 | |
Total | | 9 | | 70 | | $ | 37.0 | |
| | | | | | | |
Total commitments at March 31, 2022 | | 12 | | 112 | | $ | 61.6 | |
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(1)We expect approximately $24.6 million during the remainder of 2022 and $31.1 million and $5.9 million to be paid during 2023 and 2024, respectively. The timing of payments is subject to change as a result of construction or other delays.
Actual expenditures for continued theatre development, remodels and acquisitions are subject to change based upon the availability of attractive opportunities. During 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, proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.
Financing Activities
Cash used for financing activities was $8.6 million for the three months ended March 31, 2022 compared with cash provided by financing activities of $120.8 million for the three months ended March 31, 2021. During the three months ended March 31, 2021, we received a contribution of $120.0 million from our parent company and issued the 5.875% Senior Notes, the proceeds of which were used to redeem the 5.125% Senior Notes, as discussed further below.
We may from time to time, subject to compliance with our debt instruments, purchase our debt securities on the open market depending upon the availability and prices of such securities. Long-term debt consisted of the following as of March 31, 2022 (in millions):
| | | | | | | |
| March 31, | | | December 31, | |
| 2022 | | | 2021 | |
Cinemark USA, Inc. term loan due 2025 | $ | 631.5 | | | $ | 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 | | 32.4 | | | | 30.2 | |
Total long-term debt | $ | 2,083.9 | | | $ | 2,083.3 | |
Less: Current portion | | 27.2 | | | | 24.3 | |
Less: Debt issuance costs, net of accumulated amortization | | 28.5 | | | | 30.3 | |
Long-term debt, less current portion, net of unamortized debt issuance costs | $ | 2,028.2 | | | $ | 2,028.7 | |
As of March 31, 2022, $100 million was available for borrowing under the revolving line of credit.
Contractual Obligations
There have been no 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, 2021 filed March 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 available borrowing capacity on the revolving credit line as of March 31, 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,
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or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 1.50% to 2.25% per annum. The margin of the revolving credit line is determined by the consolidated net senior secured leverage ratio as defined in the Credit Agreement.
Cinemark USA, Inc.’s obligations under the Credit Agreement are guaranteed by Cinemark Holdings, Inc. and certain of Cinemark USA, Inc.’s domestic subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of Cinemark USA, Inc.’s and the guarantors’ personal property, including, without limitation, pledges of all of Cinemark USA, Inc.’s capital stock, all of the capital stock of certain of Cinemark USA, Inc.’s domestic subsidiaries and 65% of the voting stock of certain of its foreign subsidiaries.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on Cinemark USA, Inc.’s ability, and in certain instances, its subsidiaries’ and our ability, to consolidate or merge or liquidate, wind up or dissolve; substantially change the nature of its business; sell, transfer or dispose of assets; create or incur indebtedness; create liens; pay dividends or repurchase stock; and make capital expenditures and investments. If Cinemark USA, Inc. has borrowings outstanding on the revolving credit line, it is required to satisfy a consolidated net senior secured leverage ratio covenant as defined in the Credit Agreement, not to exceed 4.25 to 1. See below for discussion of recent covenant waivers.
The dividend restriction contained in the Credit Agreement prevents the Company and any of its subsidiaries from paying a dividend or otherwise distributing cash to its stockholders unless (1) the Company is not in default, and the distribution would not cause Cinemark USA, Inc. to be in default, under the Credit Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Credit Agreement, and (c) certain other defined amounts, or collectively, the Applicable Amount. As of March 31, 2022, Cinemark USA, Inc. could have distributed up to approximately $2.75 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 is subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.
On August 21, 2020, in conjunction with the issuance of the 4.50% Convertible Senior Notes discussed below, we further amended the waiver of the leverage covenant through the fiscal quarter ending September 30, 2021. The amendment also i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits us to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver and (iv) makes such other changes to permit the issuance of the 4.50% Convertible Senior Notes discussed below.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from November 28, 2022 to November 28, 2024.
We have three interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with the variable interest rates on the term loan outstanding under the Credit Agreement. See Note 7 of our condensed consolidated financial statements for discussion of the interest rate swaps.
At March 31, 2022, there was $631.5 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 March 31, 2022 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed above.
5.875% Senior Notes
On March 16, 2021, Cinemark USA, Inc. issued $405 million aggregate principal amount of 5.875% senior notes due 2026, at par value (the “5.875% Senior Notes”). Proceeds, after payment of fees, were used to fund a cash tender offer to purchase any and all of Cinemark USA’s 5.125% Senior Notes (the “5.125% Senior Notes”) and to redeem any of the 5.125% Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on March 15, 2026. The Company incurred debt issue costs of approximately $6.0 million in connection with the issuance, which are recorded as a reduction of long-term debt, less current on the consolidated balance sheet.
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
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securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 5.875% Senior Notes.
Prior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of the 5.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.875% Senior Notes to the date of redemption. After March 15, 2023, Cinemark USA, Inc. may redeem the 5.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
5.25% Senior Notes
On June 15, 2021, Cinemark USA, Inc. issued $765 million aggregate principal amount of 5.25% senior notes due 2028, at par value (the “5.25% Senior Notes”). Proceeds, after payment of fees, were used to redeem all of Cinemark USA’s 4.875% $755 million aggregate principal amount of Senior Notes due 2023 (the “4.875% Senior Notes”). Interest on the 5.25% Senior Notes is payable on January 15 and July 15 of each year, beginning January 15, 2022. The 5.25% Senior Notes mature on July 15, 2028.
The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s 8.750% senior secured notes due 2025, in each case to the extent of the value of the collateral securing such debt, (iv) are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA’s non-guarantor subsidiaries, and (v) are structurally senior to the 4.50% convertible senior notes due 2025 issued by Cinemark Holdings.
Prior to July 15, 2024, Cinemark USA, Inc. may redeem all or any part of the 5.25% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.25% Senior Notes to the date of redemption. On or after July 15, 2024, Cinemark USA, Inc. may redeem the 5.25% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to July 15, 2024, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.25% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture, so long as at least 60% of the principal amount of the 5.25% Senior Notes remains outstanding immediately after each such redemption.
8.750% Secured Notes
On April 20, 2020, Cinemark USA, Inc. issued $250 million 8.750% senior secured notes (the “8.750% Secured Notes”). The 8.750% Secured Notes will mature on May 1, 2025. Interest on the 8.750% Secured Notes is payable on May 1 and November 1 of each 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.
Additional Borrowings of International Subsidiaries
As of March 31, 2022, certain of the Company’s international subsidiaries have an aggregate borrowing of $32.4 outstanding under various local bank loans. The Company 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 March 31, 2022 was $25.8 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.
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Covenant Compliance
The indentures governing the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes ("the indentures") contain covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. As of March 31, 2022, Cinemark USA, Inc. could have distributed up to approximately $2.98 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indentures, subject to its available cash and other borrowing restrictions outlined in the indentures. Upon a change of control, as defined in the 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 indentures allow 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 March 31, 2022 was 1.5.
As of March 31, 2022, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.
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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 currently have variable rate debt. An increase or decrease in interest rates would affect our interest expense related to this variable rate debt. We have three interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with our term loan, covering $450 million of the $631.5 million outstanding at March 31, 2022. At March 31, 2022, we had an aggregate of approximately $213.9 million of variable rate debt outstanding, and a 100 basis point increase in market interest rates would increase our annual interest expense by $2.1 million.
The table below provides information about our fixed rate and variable rate long-term debt agreements as of March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Expected Maturity for the Twelve-Month Periods Ending March 31, | | | Average | |
| | (in millions) | | | Interest | |
| | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter | | Total | | | Fair Value | | | Rate | |
Fixed rate | | $ | — | | $ | — | | $ | 450.0 | | $ | 655.0 | | $ | — | | $ | 765.0 | | $ | 1,870.0 | | | $ | 1,784.4 | | | | 5.5 | % |
Variable rate | | | 27.2 | | | 12.1 | | | 169.8 | | | 1.4 | | | 1.2 | | | 2.2 | | | 213.9 | | | | 209.4 | | | | 3.1 | % |
Total debt (1) | | $ | 27.2 | | $ | 12.1 | | $ | 619.8 | | $ | 656.4 | | $ | 1.2 | | $ | 767.2 | | $ | 2,083.9 | | | $ | 1,993.8 | | | | |
(1)Amounts are presented before adjusting for debt issuance costs.
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 7 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, 2021 filed March 9, 2022.
Item 4. Controls and Procedures
Evaluation of the Effectiveness of Disclosure Controls and Procedures
As of March 31, 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 March 31, 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 March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Other than the discussion at Note 18, there have been no material changes from legal proceedings previously reported under “Business – Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed March 9, 2022.
Item 1A. Risk Factors
See discussion in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed March 9, 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 SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2022
(in millions)
| | | | | | | | | | | | | | | | |
| | Restricted | | | Unrestricted | | | | | | | |
| | Group | | | Group | | | Eliminations | | | Consolidated | |
Assets | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 213.6 | | | $ | 100.7 | | | $ | - | | | $ | 314.3 | |
Other current assets | | | 324.1 | | | | (117.3 | ) | | | (6.4 | ) | | | 200.4 | |
Total current assets | | | 537.7 | | | | (16.6 | ) | | | (6.4 | ) | | | 514.7 | |
Theatre properties and equipment, net | | | 1,349.0 | | | | - | | | | - | | | | 1,349.0 | |
Operating lease right-of-use assets, net | | | 1,201.6 | | | | - | | | | - | | | | 1,201.6 | |
Other assets | | | 1,806.8 | | | | 318.6 | | | | (371.5 | ) | | | 1,753.9 | |
Total assets | | $ | 4,895.1 | | | $ | 302.0 | | | $ | (377.9 | ) | | $ | 4,819.2 | |
Liabilities and equity | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | |
Current portion of long-term debt | | $ | 27.2 | | | $ | - | | | $ | - | | | $ | 27.2 | |
Current portion of operating lease obligations | | | 219.4 | | | | - | | | | - | | | | 219.4 | |
Current portion of finance lease obligations | | | 14.7 | | | | - | | | | - | | | | 14.7 | |
Accounts payable and accrued expenses | | | 387.6 | | | | - | | | | (6.4 | ) | | | 381.2 | |
Total current liabilities | | | 648.9 | | | | - | | | | (6.4 | ) | | | 642.5 | |
Long-term liabilities | | | | | | | | | | | | |
Long-term debt, less current portion | | | 2,292.7 | | | | - | | | | (264.5 | ) | | | 2,028.2 | |
Operating lease obligations, less current portion | | | 1,044.1 | | | | - | | | | - | | | | 1,044.1 | |
Finance lease obligations, less current portion | | | 98.8 | | | | - | | | | - | | | | 98.8 | |
Other long-term liabilities and deferrals | | | 464.7 | | | | 12.0 | | | | - | | | | 476.7 | |
Total long-term liabilities | | | 3,900.3 | | | | 12.0 | | | | (264.5 | ) | | | 3,647.8 | |
Commitments and contingencies | | | | | | | | | | | | |
Equity | | | 345.9 | | | | 290.0 | | | | (107.0 | ) | | | 528.9 | |
Total liabilities and equity | | $ | 4,895.1 | | | $ | 302.0 | | | $ | (377.9 | ) | | $ | 4,819.2 | |
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
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CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF LOSS
THREE MONTHS ENDED MARCH 31, 2022
(in millions)
| | | | | | | | | | | | | | | | |
| | Restricted | | | Unrestricted | | | | | | | |
| | Group | | | Group | | | Eliminations | | | Consolidated | |
Revenues | | $ | 460.5 | | | $ | — | | | $ | — | | | $ | 460.5 | |
Cost of operations | | | | | | | | | | | | — | |
Theatre operating costs | | | 398.0 | | | | — | | | | — | | | | 398.0 | |
General and administrative expenses | | | 39.9 | | | | — | | | | — | | | | 39.9 | |
Depreciation and amortization | | | 61.7 | | | | — | | | | — | | | | 61.7 | |
Gain on sale of assets and other | | | (6.9 | ) | | | — | | | | — | | | | (6.9 | ) |
Total cost of operations | | | 492.7 | | | | — | | | | — | | | | 492.7 | |
Operating loss | | | (32.2 | ) | | | — | | | | — | | | | (32.2 | ) |
Other income (expense) | | | (35.8 | ) | | | 0.5 | | | | — | | | | (35.3 | ) |
Loss before income taxes | | | (68.0 | ) | | | 0.5 | | | | — | | | | (67.5 | ) |
Income tax benefit | | | (6.6 | ) | | | 0.1 | | | | — | | | | (6.5 | ) |
Net loss | | | (61.4 | ) | | | 0.4 | | | | — | | | | (61.0 | ) |
Less: Net income attributable to noncontrolling interests | | | 1.5 | | | | — | | | | — | | | | 1.5 | |
Net loss attributable to Cinemark USA, Inc. | | $ | (62.9 | ) | | $ | 0.4 | | | $ | — | | | $ | (62.5 | ) |
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
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CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31, 2022
(in millions)
| | | | | | | | | | | | | | | | |
| | Restricted | | | Unrestricted | | | | | | | |
| | Group | | | Group | | | Eliminations | | | Consolidated | |
Net loss | | $ | (61.4 | ) | | $ | 0.4 | | | $ | — | | | $ | (61.0 | ) |
Other comprehensive loss, net of tax | | | | | | | | | | | | |
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes and settlements | | | 14.6 | | | | - | | | | - | | | | 14.6 | |
Foreign currency translation adjustments | | | 14.4 | | | | - | | | | - | | | | 14.4 | |
Total other comprehensive loss, net of tax | | | 29.0 | | | | - | | | | - | | | | 29.0 | |
Total comprehensive loss, net of tax | | | (32.4 | ) | | | 0.4 | | | | - | | | | (32.0 | ) |
Comprehensive income attributable to noncontrolling interests | | | (1.5 | ) | | | - | | | | - | | | | (1.5 | ) |
Comprehensive loss attributable to Cinemark USA, Inc. | | $ | (33.9 | ) | | $ | 0.4 | | | $ | — | | | $ | (33.5 | ) |
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
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CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2022
(in millions)
| | | | | | | | | | | | | | | | |
| | Restricted | | | Unrestricted | | | | | | | |
| | Group | | | Group | | | Eliminations | | | Consolidated | |
Operating activities | | | | | | | | | | | | |
Net loss | | $ | (61.4 | ) | | $ | 0.4 | | | $ | - | | | $ | (61.0 | ) |
Adjustments to reconcile net loss to cash used for operating activities | | | 52.1 | | | | 0.8 | | | | — | | | | 52.9 | |
Changes in assets and liabilities | | | (99.8 | ) | | | (0.6 | ) | | | — | | | | (100.4 | ) |
Net cash provided by (used for) operating activities | | | (109.1 | ) | | | 0.6 | | | | — | | | | (108.5 | ) |
Investing activities | | | | | | | | | | | | |
Additions to theatre properties and equipment | | | (18.7 | ) | | | — | | | | — | | | | (18.7 | ) |
Proceeds from sale of theatre properties and equipment and other | | | 10.6 | | | | — | | | | — | | | | 10.6 | |
Net cash used for investing activities | | | (8.1 | ) | | | — | | | | — | | | | (8.1 | ) |
Financing activities | | | | | | | | | | | | |
Repayments on long-term debt | | | (3.4 | ) | | | — | | | | — | | | | (3.4 | ) |
Payments on finance leases | | | (3.6 | ) | | | — | | | | — | | | | (3.6 | ) |
Other | | | (1.6 | ) | | | — | | | | — | | | | (1.6 | ) |
Net cash provided by (used for) financing activities | | | (8.6 | ) | | | — | | | | — | | | | (8.6 | ) |
Effect of exchange rate changes on cash and cash
equivalents | | | (3.2 | ) | | | — | | | | — | | | | (3.2 | ) |
Decrease in cash and cash equivalents | | | (129.0 | ) | | | 0.6 | | | | — | | | | (128.4 | ) |
Cash and cash equivalents: | | | | | | | | | | | | |
Beginning of year | | | 342.6 | | | | 100.1 | | | | — | | | | 442.7 | |
End of year | | $ | 213.6 | | | $ | 100.7 | | | $ | — | | | $ | 314.3 | |
Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes.
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Item 6. Exhibits
| | |
*31.1 | | Certification of Sean Gamble, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
*31.2 | | Certification of Melissa Thomas, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
*32.1 | | Certification of Sean Gamble, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
*32.2 | | Certification of Melissa Thomas, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
* 101 | | The following material from Cinemark USA, Inc.’s Form 10-Q for the quarter ended March 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language), filed herewith: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Loss, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements. |
| | |
* 104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* filed herewith.
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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: | | May 11, 2022 | | |
| | | | |
| | | | /s/Sean Gamble |
| | | | Sean Gamble |
| | | | Chief Executive Officer |
| | | | |
| | | | /s/Melissa Thomas |
| | | | Melissa Thomas |
| | | | Chief Financial Officer |
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