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 March 31, 2001
Commission File Nos. 33-47040; 333-11895; 333-45417
CINEMARK USA, INC.
(Exact name of Registrant as specified in its charter)
Texas 75-2206284
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
3900 Dallas Parkway
Suite 500
Plano, Texas 75093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 665-1000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
As of May 14, 2001, 1,500 shares of Class A Common stock and 185,961 shares
of Class B Common stock (including options to acquire 8,424 shares of Class B
Common stock exercisable within 60 days of such date) were outstanding.
CINEMARK USA, INC. AND SUBSIDIARIES
Index
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of March 31, 2001 (unaudited)
and December 31, 2000 3
Condensed Consolidated Statements of Operations
(unaudited) for the three month periods
ended March 31, 2001 and 2000 4
Condensed Consolidated Statements of Cash
Flows (unaudited) for the three month
periods ended March 31, 2001 and 2000 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 18
PART II OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 23
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
(Unaudited)
------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 24,922,036 $ 19,839,994
Inventories 3,447,364 3,734,955
Co-op advertising and other receivables 10,234,360 8,246,024
Income tax receivable 1,686,316 1,462,721
Prepaid expenses and other 3,457,618 3,591,666
------------------------------------
Total current assets 43,747,694 36,875,360
THEATRE PROPERTIES AND EQUIPMENT 1,192,207,301 1,193,507,019
Less accumulated depreciation and amortization (258,019,334) (243,372,299)
------------------------------------
Theatre properties and equipment - net 934,187,967 950,134,720
OTHER ASSETS
Goodwill - net 16,467,694 16,826,740
Investments in and advances to affiliates 6,488,991 6,932,208
Deferred charges and other - net 45,183,413 49,807,442
------------------------------------
Total other assets 68,140,098 73,566,390
------------------------------------
TOTAL $1,046,075,759 $1,060,576,470
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 35,211,898 $ 32,767,581
Accounts payable and accrued expenses 82,654,917 116,488,863
------------------------------------
Total current liabilities 117,866,815 149,256,444
LONG-TERM LIABILITIES
Senior credit agreements 426,866,987 397,338,980
Senior subordinated notes 380,209,055 380,216,182
Deferred lease expenses 21,029,528 20,475,247
Deferred gain on sale leasebacks 5,012,980 5,104,461
Deferred income taxes 12,692,260 14,831,678
Deferred revenues and other long-term liabilities 13,305,140 16,752,114
------------------------------------
Total long-term liabilities 859,115,950 834,718,662
MINORITY INTERESTS IN SUBSIDIARIES 25,704,468 27,691,527
SHAREHOLDERS' EQUITY
Class A Common stock, $.01 par value: 10,000,000 shares
authorized, 1,500 shares issued and outstanding 15 15
Class B Common stock, no par value: 1,000,000 shares
authorized, 234,782 shares issued 49,538,316 49,538,316
Additional paid-in-capital 13,145,365 13,198,615
Unearned compensation - stock options (1,699,104) (1,956,944)
Retained earnings 46,055,049 48,717,567
Treasury stock, 57,245 Class B shares at cost (24,232,890) (24,232,890)
Accumulated other comprehensive loss (39,418,225) (36,354,842)
------------------------------------
Total shareholders' equity 43,388,526 48,909,837
------------------------------------
TOTAL $1,046,075,759 $1,060,576,470
====================================
See accompanying Notes to Condensed Consolidated Financial Statements.
3
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
2001 2000
------------------------------------
REVENUES
Admissions $ 127,838,738 $ 112,486,845
Concessions 57,843,747 52,124,057
Other 10,387,587 10,254,676
------------------------------------
Total 196,070,072 174,865,578
COSTS AND EXPENSES
Cost of operations:
Film rentals and advertising 65,308,423 57,447,939
Concession supplies 10,272,880 9,713,238
Salaries and wages 21,478,604 21,649,486
Facility leases 28,791,406 26,633,985
Utilities and other 26,687,718 24,958,134
------------------------------------
Total 152,539,031 140,402,782
General and administrative expenses 9,842,940 10,011,893
Depreciation and amortization 16,608,564 14,215,453
Asset impairment loss 450,000 440,000
Loss on sale of assets 110,914 251,176
------------------------------------
Total 179,551,449 165,321,304
OPERATING INCOME 16,518,623 9,544,274
OTHER INCOME (EXPENSE)
Interest expense (19,262,230) (16,889,952)
Amortization of debt issue cost and debt discount (643,128) (245,494)
Interest income 369,644 314,652
Foreign currency exchange gain (loss) (1,152,129) 339,671
Equity in income (loss) of affiliates (37,678) 58,356
Minority interests in (income) loss of subsidiaries 119,890 (444,536)
------------------------------------
Total (20,605,631) (16,867,303)
------------------------------------
LOSS BEFORE INCOME TAXES (4,087,008) (7,323,029)
Income tax benefit (1,424,490) (1,761,343)
------------------------------------
NET LOSS $ (2,662,518) $ (5,561,686)
====================================
EARNINGS PER SHARE:
Basic:
Net loss $ (14.87) $ (31.17)
====================================
Diluted:
Net loss $ (14.87) $ (31.17)
====================================
COMMON SHARES OUTSTANDING:
Basic:
Weighted average Common shares outstanding 179,037 178,407
====================================
Diluted:
Weighted average Common shares outstanding 179,037 178,407
Common equivalent shares for stock options - -
------------------------------------
Weighted average shares outstanding 179,037 178,407
====================================
See accompanying Notes to Condensed Consolidated Financial Statements.
4
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
2001 2000
------------------------------------
OPERATING ACTIVITIES
Net loss $ (2,662,518) $ (5,561,686)
Noncash items in net loss:
Depreciation 15,918,706 13,609,925
Amortization - goodwill and other assets 689,858 605,528
Loss on impairment of assets 450,000 440,000
Amortization of gain on sale leasebacks (91,481) (91,480)
Deferred lease expenses 554,281 759,916
Amortization of prepaid leases 690,048 574,896
Deferred income tax expense (2,139,418) (5,296,834)
Amortization of debt discount and premium (7,127) (7,126)
Amortized compensation - stock options 206,860 269,830
Compensation expense related to repurchase of stock options - 103,584
Loss on sale of assets 110,914 251,176
Equity in (income) loss of affiliates 37,678 (58,356)
Minority interests in income (loss) of subsidiaries (119,890) 444,536
Cash provided by (used for) operating working capital:
Inventories 287,591 1,212,046
Co-op advertising and other receivables (1,988,336) (1,343,174)
Prepaid expenses and other 134,048 4,380,898
Accounts payable and accrued expenses (33,833,946) (29,065,390)
Income tax receivable/payable (223,595) 2,748,819
------------------------------------
Net cash used for operating activities (21,986,327) (16,022,892)
INVESTING ACTIVITIES
Additions to theatre properties and equipment (6,604,114) (36,885,888)
Sale of theatre properties and equipment 3,159,517 7,042,268
Decrease (increase) in investments in and advances to affiliates 405,539 (1,112,502)
Decrease in deferred charges and other 3,600,899 4,116,813
------------------------------------
Net cash provided by (used for) investing activities 561,841 (26,839,309)
FINANCING ACTIVITIES
Decrease in long-term debt (2,220,484) (16,862,281)
Increase in long-term debt 34,192,808 45,562,723
Increase (decrease) in deferred revenues and other long-term liabilities (3,446,974) 13,550,018
Purchase of treasury stock - (34,000)
Repurchase of stock options - (67,452)
Minority investment in subsidiaries, net (1,867,169) 238,166
------------------------------------
Net cash provided by financing activities 26,658,181 42,387,174
EFFECT OF EXCHANGE RATE CHANGES ON CASH (151,653) 172,315
------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,082,042 (302,712)
CASH AND CASH EQUIVALENTS:
Beginning of period 19,839,994 8,872,157
------------------------------------
End of period $ 24,922,036 $ 8,569,445
====================================
See accompanying Notes to Condensed Consolidated Financial Statements.
5
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company and Basis of Presentation
Cinemark USA, Inc. and its subsidiaries (the Company), is a world leader
in the motion picture exhibition industry that owns or leases and operates
motion picture theatres in 33 states, Canada, Mexico, Argentina, Brazil, Chile,
Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica and Colombia. The
Company operates 2,938 screens in 273 theatres and manages an additional five
theatres (36 screens) at March 31, 2001.
The accompanying condensed consolidated financial statements have been
prepared by the Company, without audit, according to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, these
interim financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to state fairly the financial position and
results of operations as of and for the periods indicated. The consolidated
financial statements include the accounts of Cinemark USA, Inc. and its
subsidiaries. Majority-owned subsidiaries are consolidated while those
subsidiaries of which the Company owns between 20% and 50% are accounted for as
affiliates under the equity method. The results of these subsidiaries and
affiliates are included in the financial statements effective with their
formation or from their dates of acquisition. Significant intercompany balances
and transactions are eliminated in the consolidation. Certain reclassifications
have been made to March 31, 2000 and December 31, 2000 amounts to conform with
the March 31, 2001 presentation.
These financial statements should be read in conjunction with the
audited annual financial statements and the notes thereto for the year ended
December 31, 2000, included in the Annual Report filed on Form 10-K by the
Company under the Securities Exchange Act of 1934 on March 26, 2001. Operating
results for the three months ended March 31, 2001 are not necessarily indicative
of the results to be achieved for the full year.
2. Earnings Per Share
Earnings per share are computed using the weighted average number of
shares of Class A and Class B Common stock outstanding during each period. The
following table sets forth the computation of basic and diluted earnings per
share.
Three Months Ended
March 31,
2001 2000
------------ ------------
Net loss $(2,662,518) $(5,561,686)
============ ============
Basic:
Weighted average Common shares outstanding 179,037 178,407
======= =======
Net loss per Common share $(14.87) $(31.17)
======== ========
Diluted:
Weighted average Common shares outstanding 179,037 178,407
Common equivalent shares for stock options - -
------- -------
Weighted average shares outstanding 179,037 178,407
======= =======
Net loss per Common and Common equivalent share $(14.87) $(31.17)
======== ========
6
Basic net loss per share is computed by dividing the net loss by the
weighted average number of shares of Common stock of all classes outstanding
during the period. Diluted net loss per share is computed by dividing the net
loss by the weighted average number of shares of Common stock and potential
Common stock outstanding and options to purchase Common stock using the treasury
stock method. The dilutive effect of the options to purchase Common stock are
excluded from the computation of diluted net loss per share if their effect is
antidilutive. At March 31, 2001 and 2000, 11,753 and 13,143 options to purchase
Common stock have been excluded from the diluted net loss per share calculation,
respectively, as their effect would have been antidilutive.
3. Other Comprehensive Income (Loss)
Beginning in 1998, the Company adopted SFAS 130 "Reporting Comprehensive
Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in the financial statements.
The following components are reflected in the Company's comprehensive loss:
Three Months Ended
March 31,
2001 2000
------------ ------------
Net loss $(2,662,518) $(5,561,686)
Foreign currency translation adjustment (3,063,383) 2,778,427
------------ ------------
Comprehensive loss $(5,725,901) $(2,783,259)
============ ============
4. Foreign Currency Translation
The accumulated other comprehensive loss in shareholders' equity of
$39,418,225 and $36,354,842 at March 31, 2001 and December 31, 2000,
respectively, primarily relates to the unrealized adjustments from translating
the financial statements of Cinemark Brasil, S.A., Cinemark de Mexico, S.A. de
C.V. and Cinemark Chile, S.A. into U.S. dollars.
In 2000, the Company was required to utilize the U.S. dollar as the
functional currency of Cinemark del Ecuador, S.A. for U.S. reporting purposes
due to the highly inflationary economy of Ecuador. Thus, devaluations in the
sucre during 2000 that affected the Company's investment were charged to foreign
currency exchange gain (loss) rather than to the accumulated other comprehensive
loss account as a reduction to shareholders' equity. In September 2000, the
country of Ecuador officially switched to the U.S. dollar as the functional
currency effectively eliminating any exchange gain (loss) in the sucre on a
going forward basis. At March 31, 2001, the total assets of Cinemark del
Ecuador, S.A. were approximately $4 million.
5. Supplemental Cash Flow Information
The following is provided as supplemental information to the
consolidated statements of cash flows:
Three Months Ended March 31,
2001 2000
----------- -----------
Cash paid for interest $28,295,479 $25,901,452
Cash paid for income taxes 796,030 493,256
7
6. Financial Information About Geographic Areas
The Company operates in a single industry as a motion picture exhibitor.
The Company is a multinational corporation with consolidated operations in the
United States, Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru,
Honduras, El Salvador, Nicaragua, Costa Rica and Colombia. Revenues and
long-lived assets in the United States and Canada, Mexico, Brazil and other
foreign countries for the three months ended March 31 are as follows:
Three Months Ended
March 31,
Revenues 2001 2000
-------- ------------- -------------
U.S. and Canada $145,289,417 $128,616,868
Mexico 16,750,662 14,632,489
Brazil 17,550,195 15,207,868
Other Foreign Countries 18,560,844 16,639,265
Eliminations (2,081,046) (230,912)
------------- -------------
Total $196,070,072 $174,865,578
============= =============
March 31, March 31,
Long-Lived Assets 2001 2000
----------------- ------------- -------------
U.S. and Canada $723,090,096 $753,686,934
Mexico 70,836,242 65,023,896
Brazil 62,468,150 65,049,250
Other Foreign Countries 77,793,479 68,347,610
------------- -------------
Total $934,187,967 $952,107,690
============= =============
7. New Accounting Pronouncements
On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as extended by SFAS No. 137 (June 1999) and amended by SFAS
No. 138 (June 2000). All derivatives have been accounted for pursuant to SFAS
133 requirements.
Based upon the transition provisions of SFAS 133, no transition
adjustment was necessary as of January 1, 2001. The Company's balance sheet as
of March 31, 2001 includes an interest rate cap recorded at its fair value of
$1.0 million. This derivative asset is recorded as deferred charges and other on
the Company's balance sheet. As of March 31, 2001, a loss of $0.7 million has
been recorded as a component of interest expense on the Company's statement of
operations to recognize the decrease in the fair value of the derivative asset.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
The following is an analysis of the financial condition and results of
operations of the Company. This analysis should be read in conjunction with the
Company's condensed consolidated financial statements, including the notes
thereto, appearing elsewhere in this report.
Results of Operations
The Company's revenues are generated primarily from box office receipts
and concession sales. The Company's revenues are affected by changes in
attendance and average admission and concession revenues per patron. Attendance
is primarily affected by the commercial appeal of the films released during the
period or year reported. Since the Company's formation, attendance has grown
principally from the development and acquisition of theatres. The Company has
generally experienced increases in average admission revenues per patron from
ticket price increases as well as the development of theatres in markets that
can support higher ticket prices. Additional revenues related to theatre
operations are generated by screen advertising, pay phones, ATM charges and
electronic video games installed in video arcades located in some of the
Company's theatres.
Film rentals and advertising, concession supplies and salaries and wages
vary directly with changes in revenues. These expenses have historically
represented approximately 65% of all theatre operating expenses and
approximately 50% of revenues. Film rental costs are based on a percentage of
admissions revenues as determined by film license agreements. Advertising cost
is primarily fixed at the theatre level as daily movie directories placed in
newspapers represent the largest component of advertising costs. The monthly
cost of these ads is based on the size of the directory. However, advertising
costs have remained relatively constant when expressed as a percentage of
revenues as screen growth results in the addition of new or larger directory ads
which help drive revenues. The Company expenses concession supplies purchased as
they are sold. Although salaries and wages include a fixed component of cost
(i.e., the minimum staffing cost to operate a theatre facility during non-peak
periods), salaries and wages move in relation to revenues as theatre staffing is
adjusted to handle attendance volume.
Conversely, facility lease expense is primarily a fixed cost at the
theatre level as the Company's facility leases generally require a fixed monthly
minimum rent payment. Facility lease expense as a percentage of revenues is also
affected by the number of leased versus fee owned facilities.
Utilities and other costs include certain costs that are fixed such as
property taxes, certain costs which are variable such as liability insurance,
and certain costs that possess both fixed and variable components such as
utilities, repairs and maintenance and security services.
9
The following table sets forth, for the fiscal periods indicated, the
percentage of total revenues represented by certain items reflected in the
Company's condensed consolidated statements of operations.
% of Revenues
-------------
Three Months Ended
March 31,
2001 2000
------ ------
Revenues:
Admissions 65.2 64.3
Concessions 29.5 29.8
Other 5.3 5.9
------ ------
Total revenues 100.0 100.0
Cost of operations 77.8 80.3
General and administrative expenses 5.0 5.7
Depreciation and amortization 8.5 8.1
Asset impairment loss 0.2 0.3
Loss on sale of assets 0.1 0.1
------ ------
Total operating expenses 91.6 94.5
------ ------
Operating income 8.4 5.5
Interest expense (10.1) (9.8)
Other income (expense) (0.4) 0.1
------ ------
Loss before income taxes (2.1) (4.2)
Income tax benefit (0.7) (1.0)
------ ------
Net loss (1.4) (3.2)
====== ======
First quarter ended March 31, 2001 and 2000.
Revenues
Revenues for the first quarter ended March 31, 2001 increased to $196.1
million from $174.9 million for the first quarter ended March 31, 2000, a 12.1%
increase. The increase in revenues for the first quarter is primarily
attributable to a 14.3% increase in attendance as a result of the net addition
of 189 screens since the first quarter of 2000 and a 4.2% increase in revenues
per screen. Revenues per screen increased to $66,952 in the first quarter of
2001 from $64,230 in the first quarter of 2000.
Cost of Operations
Cost of operations, as a percentage of revenues, decreased to 77.8% in
the first quarter of 2001 from 80.3% in the first quarter of 2000. The decrease
as a percentage of revenues resulted from a decrease in concession supplies as a
percentage of concession revenues to 17.8% in the first quarter of 2001 from
18.6% in the first quarter of 2000, a decrease in salaries and wages as a
percentage of revenues to 11.0% in the first quarter of 2001 from 12.4% in the
first quarter of 2000, a decrease in facility lease expense as a percentage of
revenues to 14.7% in the first quarter of 2001 from 15.2% in the first quarter
of 2000 and a decrease in utilities and other expenses as a percentage of
revenues to 13.6% in the first quarter of 2001 from 14.3% in the first quarter
of 2000.
10
General and Administrative Expenses
General and administrative expenses as a percentage of revenues
decreased to 5.0% in the first quarter of 2001 from 5.7% in the first quarter of
2000 as general and administrative expenses remained relatively flat while
revenues increased 12.1% for the first quarter of 2001 in comparison with the
first quarter of 2000.
The absolute level of general and administrative expenses decreased to
$9.8 million in the first quarter of 2001 from $10.0 million in the first
quarter of 2000.
Depreciation and Amortization
Depreciation and amortization increased 16.9% to $16.6 million in the
first quarter of 2001 from $14.2 million in the first quarter of 2000. The
increase is a result of the net addition of $49 million in theatre property and
equipment since the first quarter of 2000, a 4.3% increase. The difference in
the percentage increase in depreciation and amortization compared to the
increase in theatre property and equipment is a result of the timing of when the
additions were placed in service during the period.
Asset Impairment Loss
The Company recorded asset impairment charges of $0.5 million and $0.4
million in the first quarter of 2001 and 2000, respectively, pursuant to
Statement of Financial Standards No. 121 (SFAS 121). In accordance with SFAS
121, the Company wrote down the assets of certain properties to their fair
value.
Interest Expense
Interest costs incurred, including amortization of debt issue cost and
debt discount and the mark to market adjustment to the interest rate cap,
increased 13.1% during the first quarter of 2001 to $19.9 million (including
capitalized interest to properties under construction) from $17.6 million
(including capitalized interest) in the first quarter of 2000. The increase in
interest costs incurred for the first quarter of 2001 was due principally to an
increase in average debt outstanding resulting from borrowings under the
Company's Credit Facility and other debt obligations and the recording of a loss
of $0.7 million to recognize the decrease in the fair value of the interest rate
cap.
Income Tax Benefit
An income tax benefit of $1.4 million was recorded for the first quarter
of 2001 as compared to an income tax benefit of $1.8 million in the first
quarter of 2000. The Company's effective tax rate for the first quarter of 2001
was 34.9% as compared to 24.1% for the first quarter of 2000. The change in the
effective tax rate is primarily due to an increase in foreign permanent
differences.
Net Loss
The Company realized a net loss of $2.7 million for the first quarter of
2001 in comparison with a net loss of $5.6 million for the first quarter of
2000.
11
Liquidity and Capital Resources
The Company's revenues are collected in cash, primarily through box
office receipts and the sale of concession items. Because its revenues are
received in cash prior to the payment of related expenses, the Company has an
operating "float" and, as a result, historically has not required traditional
working capital financing.
The Company's theatres are typically equipped with modern projection and
sound equipment, with approximately 88% of the screens operated by the Company
having been built since 1990. The Company's investing activities have been
principally in connection with new theatre openings. As of May 14, 2001, the
Company has opened one theatre (12 screens) in the United States in 2001 and has
no additional domestic theatre commitments under construction and scheduled to
open in the United States by the end of 2001. The Company is presently committed
to opening two additional theatres (29 screens) in the U.S. after 2001. As of
May 14, 2001, the Company estimates that the remaining capital expenditures for
the development of its remaining theatre commitments (29 screens) in the U.S.
will be approximately $10 million. Actual expenditures for theatre development
and acquisitions during 2001 and thereafter are subject to change based upon the
availability of attractive opportunities for expansion of the Company's theatre
circuit. Additionally, the Company and/or its affiliates may from time to time,
subject to compliance with the Company's debt instruments, purchase on the open
market the Company's debt securities depending upon the availability and prices
of such securities. The Company plans to fund capital expenditures for its
continued development from cash flow from operations, borrowings under the
Credit Facility, proceeds from sale leaseback transactions and/or sales of
excess real estate. As of May 14, 2001, the Company owned approximately $270
million of real estate and improvements resulting from the development of
multiplex facilities over the last several years.
In August 1996, the Company issued $200 million principal amount of
9-5/8% Series A Senior Subordinated Notes (the "Series A Notes") to qualified
institutional buyers in reliance on Rule 144A of the Securities Act of 1933, as
amended (the "Securities Act"). The Series A Notes were issued at 99.553% of the
principal face amount (a discount of $4.47 per $1,000 principal amount). The net
proceeds to the Company from the issuance of the Series A Notes (net of
discount, fees and expenses) were approximately $193.2 million. In November
1996, the Company completed an offer to exchange $200 million principal amount
of 9-5/8% Series B Senior Subordinated Notes (the "Series B Notes") due 2008
which were registered under the Securities Act for a like principal amount of
the Series A Notes. Interest on the Series B Notes is payable semi-annually on
February 1 and August 1 of each year.
In June 1997, the Company issued $75 million principal amount of 9-5/8%
Series C Senior Subordinated Notes (the "Series C Notes") to qualified
institutional buyers in reliance on Rule 144A of the Securities Act. The Series
C Notes were issued at 103% of the principal face amount. The net proceeds to
the Company from the issuance of the Series C Notes (net of discount, fees and
expenses) were approximately $77.1 million. In October 1997, the Company
completed an offer to exchange $75 million principal amount of 9-5/8% Series D
Senior Subordinated Notes (the "Series D Notes") due 2008 which were registered
under the Securities Act for a like principal amount of the Series C Notes.
Interest on the Series D Notes is payable semi-annually on February 1 and August
1 of each year.
In January 1998, the Company issued $105 million principal amount of
8-1/2% Series A Senior Subordinated Notes (the "Series A Notes") to qualified
institutional buyers in reliance on Rule 144A of the Securities Act. The Series
A Notes were issued at 99.0% of the principal face amount. The net proceeds to
the Company from the issuance of the Series A Notes (net of discount fees and
expenses) were approximately $103.8 million. In March 1998, the Company
completed an offer to exchange $105 million principal amount of 8-1/2% Series B
Senior Subordinated Notes (the "Series B Notes") due 2008 which were registered
under the Securities Act for a like principal amount of the Series A Notes.
Interest on the Series B Notes is payable semi-annually on February 1 and August
1 of each year.
12
In February 1998, the Company replaced its existing credit facility with
a reducing, revolving credit agreement ("Credit Facility") through a group of
banks for which Bank of America National Trust and Savings Association acts as
Administrative Agent. The Credit Facility provides for loans to the Company of
up to $350 million in the aggregate. The Credit Facility is a reducing,
revolving credit facility; with commitments automatically reduced each calendar
quarter by 2.5%, 3.75%, 5.0%, 6.25% and 6.25% of the aggregate $350 million in
calendar year 2001, 2002, 2003, 2004 and 2005, respectively. As of May 14, 2001,
the aggregate commitment available to the Company is $341.3 million. The Company
is required to prepay all loans outstanding in excess of the aggregate
commitment as reduced pursuant to the terms of the Credit Facility. Borrowings
under the Credit Facility are secured by a pledge of a majority of the issued
and outstanding Capital stock of the Company. Pursuant to the terms of the
Credit Facility, funds borrowed currently bear interest at a rate per annum
equal to the Offshore Rate (as defined in the Credit Facility) or the Base Rate
(as defined in the Credit Facility), as the case may be, plus the Applicable
Margin (as defined in the Credit Facility). In the first quarter of 2001, the
Company borrowed $33 million under the Credit Facility, the proceeds of which
were primarily used to make the Company's February 1, 2001 senior subordinated
notes $17.7 million interest payments. The remainder of the amount borrowed was
used for capital expenditures and other working capital needs. As of May 14,
2001, the Company had borrowed $298 million under the Credit Facility with the
effective interest rate on such borrowings being 6.7% per annum.
In February 1998, the Company completed a sale leaseback transaction
(the "Sale Leaseback") pursuant to which the Company sold the land, buildings
and site improvements of 12 theatre properties to special purpose entities for
an aggregate purchase price equal to approximately $131.5 million.
Simultaneously with the sale, the Company entered into operating leases for such
properties for a base term equal to approximately 20 years at a fixed aggregate
monthly rental payment of $1.1 million or $13.4 million annually.
In October 1998, the Company completed a second sale leaseback
transaction (the "Second Sale Leaseback") pursuant to which the Company sold the
land, buildings and site improvements of one theatre property to a special
purpose entity for an aggregate purchase price equal to approximately $13.9
million. Simultaneously with the sale, the Company entered into an operating
lease for the property for a base term equal to approximately 20 years at a
fixed monthly rental payment of $119,000 or $1.4 million annually.
In December 1999, the Company completed a third sale leaseback
transaction (the "Third Sale Leaseback") pursuant to which the Company sold the
land, building and site improvements of its corporate office property to a
special purpose entity for an aggregate purchase price equal to approximately
$20.3 million. Simultaneously with the sale, the Company entered into an
operating lease for approximately 60% of the property for a base term equal to
10 years at a fixed monthly rental payment of $114,000 or $1.4 million annually
for the first seven years and a fixed monthly rental payment of $123,000 or $1.5
million annually for the final three years.
In December 2000, Cinema Properties, Inc., a wholly-owned Unrestricted
Subsidiary (as those terms are defined in the Credit Facility and the Senior
Subordinated Note Indentures), completed a $77 million loan transaction with
Lehman Brothers Bank, FSB (the "Cinema Properties Facility"). The Cinema
Properties Facility is a term loan with a December 31, 2003 maturity date.
Cinema Properties, Inc. has the ability to extend the maturity date two times
for one year each. At the lender's discretion, Cinema Properties, Inc. may be
required to make principal payments of $1.5 million in the third and fourth
quarters of 2002 with the remaining principal outstanding throughout 2003.
Pursuant to the terms of the Cinema Properties Facility, funds borrowed bear
interest at a rate per annum equal to LIBOR (as defined in the Cinema Properties
Facility) plus the applicable margin. Borrowings are secured by, among other
things, a mortgage placed on six of Cinema Properties, Inc.'s theatres and
certain equipment leases. Cinema Properties, Inc. has a separate legal
existence, separate assets, separate creditors and separate financial
statements. The assets of Cinema Properties, Inc. are not available to satisfy
the debts of any of the other entities included in these consolidated financial
statements. The Cinema Properties Facility also requires Cinema Properties, Inc.
to comply with an interest coverage ratio requirement. Cinema Properties, Inc.
purchased from Lehman Brothers Derivative Products Inc. an Interest Rate Cap
Agreement with a notional amount equal to $77 million with a five year term and
a strike rate equal to three month LIBOR as of the date of closing.
13
Three month LIBOR as of the date of closing was 6.58%. The net proceeds from the
loan (net of fees and expenses) were $70.9 million. The proceeds were
distributed to the Company, and the Company used such funds to complete the
Company's domestic construction program for 2000 and to reduce outstanding debt
under the Company's existing Credit Facility. As of May 14, 2001, Cinema
Properties, Inc. has outstanding $77 million under the Cinema Properties
Facility, and the effective interest rate on such borrowing was 10.8% per annum.
In 1992, the Company formed Cinemark International to develop and acquire
theatres in international markets. As of May 14, 2001, Cinemark International,
through its affiliates, has opened three theatres (32 screens) internationally
in 2001 and currently operates 83 theatres (727 screens), principally in Latin
America. Cinemark International, through its affiliates has nine theatres (93
screens) under construction and scheduled to open by the end of 2001. The
following table summarizes the Company's and Cinemark International's holdings
in each international market, the number of theatres and screens in such market
as of May 14, 2001 and the number of theatres and screens in such market
scheduled to open the remainder of 2001.
Planned openings
Year of Operating through 2001
Country Formation Ownership% Theatres/Screens Theatres/Screens
- ------- --------- ---------- ---------------- ----------------
Mexico 1992 95% 24 theatres (234 screens) 2 theatres (22 screens)
Chile 1992 98% 12 theatres (88 screens) (5 screen expansion)
Argentina 1995 100% 9 theatres (79 screens)
Brazil 1996 60% 25 theatres (228 screens) 4 theatres (37 screens)
Ecuador 1996 60% 2 theatres (16 screens)
Peru 1996 100% 2 theatres (21 screens)
Central America 1997 50% 7 theatres (45 screens)
Colombia 1998 51% 2 theatres (16 screens) 1 theatre (6 screens)
United Kingdom 1998 100% N/A 1 theatre (10 screens)
Taiwan 1998 27% N/A 1 theatre (13 screens)
Germany 1999 100% N/A N/A
Total 83 theatres (727 screens) 9 theatres (93 screens)
The Company, through Cinemark International and its affiliates, plans to
invest up to an additional $50 million in international ventures in 2001 and
2002. The Company anticipates that investments in excess of Cinemark
International's available cash will be funded by the Company or by debt or
equity financing to be provided by third parties directly to Cinemark
International or its subsidiaries.
In August 1998, the Company formed Cinemark Investments Corporation for
the purpose of financing a portion of its Brazilian operations by investing in
foreign fixed rate notes issued by Cinemark Brasil, S.A., an indirect Brazilian
subsidiary of the Company. In September 1998, Cinemark Investments Corporation
executed a credit agreement with Bank of America that provides Cinemark
Investments Corporation up to $20 million in the aggregate under a revolving
line of credit facility (the "Cinemark Investments Credit Agreement") due
September 2001. The Cinemark Investments Credit Agreement is secured by an
assignment of certain fixed rate notes issued by Cinemark Brasil, S.A. to
Cinemark Investments Corporation and an unconditional guaranty by the Company.
Pursuant to the terms of the Cinemark Investments Credit Agreement, funds
borrowed bear interest at a rate per annum equal to the Offshore Rate or the
Base Rate (both as defined in the Cinemark Investments Credit Agreement) as the
case may be. As of May 14, 2001, Cinemark Investments Corporation had borrowed
$20 million under the Cinemark Investments Credit Agreement, the proceeds of
which were used to purchase fixed rate notes issued by Cinemark Brasil, S.A.
which currently bear interest at 13.8%. The effective interest rate on the
Cinemark Investment Corporation borrowings as of May 14, 2001 is 7.0% per annum.
14
In September 1998, Cinemark International incorporated Cinemark Theatres
U.K. Ltd., an English company, to develop state-of-the-art multiplex theatres in
the United Kingdom. Cinemark Theatres U.K. Ltd. is a wholly-owned subsidiary of
Cinemark International. Cinemark Theatres U.K. Ltd. has begun construction and
plans to open 1 theatre (10 screens) in 2001.
In September 1998, Cinemark International entered into a joint venture
agreement with Core Pacific Ltd. to develop state-of-the-art multiplex theatres
in Taiwan, Republic of China. The joint venture will conduct its business
through Cinemark-Core Pacific Ltd. which originally was 50.5% owned by Cinemark
International and 49.5% owned by Core Pacific Ltd. In April 2001, Cinemark
International's ownership in its' Taiwanese subsidiary was diluted from 51% to
27% as a result of additional capital contributions made by its' joint venture
partners. Cinemark-Core Pacific Ltd. has begun construction and plans to open
one theatre (13 screens) in 2001.
In November 1998, Cinemark Mexico executed a credit agreement with Bank
of America National Trust and Savings Association (the "Cinemark Mexico Credit
Agreement"). The Cinemark Mexico Credit Agreement is a revolving credit facility
and provides for a loan to Cinemark Mexico of up to $30 million in the
aggregate. The Cinemark Mexico Credit Agreement is secured by a pledge of 65% of
the stock of Cinemark de Mexico, S.A. de C.V. and an unconditional guaranty by
the Company. Pursuant to the terms of the Cinemark Mexico Credit Agreement,
funds borrowed bear interest at a rate per annum equal to the Offshore Rate (as
defined in the Cinemark Mexico Credit Agreement) or the Base Rate (as defined in
the Cinemark Mexico Credit Agreement), as the case may be, plus the Applicable
Margin (as defined in the Cinemark Mexico Credit Agreement). Cinemark Mexico
borrowed $30 million under the Cinemark Mexico Credit Agreement, the proceeds of
which were used to repay an intercompany loan of Cinemark Mexico from Cinemark
International. Cinemark International used the proceeds of such repayment to
repay all outstanding indebtedness under its then existing credit facility with
Bank of America National Trust and Savings. In September 2000, Cinemark Mexico
and the banks party to the Cinemark Mexico Credit Agreement executed an
amendment which among other things extended the maturity date of the Cinemark
Mexico Credit Agreement and increased the rate of interest paid on borrowings
thereunder. Pursuant to the amendment, Cinemark Mexico is to make principal
payments of $500,000 in the third and fourth quarters of 2001, $1,500,000 per
quarter in 2002 with the remaining principal outstanding in January 2003. As of
May 14, 2001, Cinemark Mexico has outstanding $30 million under the Cinemark
Mexico Credit Agreement. The effective interest rate on such borrowings as of
May 14, 2001 is 6.9% per annum.
In December 1998, Cinemark International entered into a joint venture
agreement with Casa Editorial El Tiempo S.A., Tempora S.A. and Prodiscos S.A. to
develop state-of-the-art multiplex theatres in Colombia. The joint venture will
conduct its business through Cinemark Colombia, S.A. which is owned 50.1% by
Cinemark International, and the remaining 49.9% is collectively owned by Casa
Editorial El Tiempo S.A., Tempora S.A. and Prodiscos S.A. Cinemark Colombia,
S.A. currently operates two theatres (16 screens) and plans to open one
additional theatre (six screens) in 2001.
Cinemark Chile, S.A. became a consolidated subsidiary of the company
effective January 1, 1999. Prior to that date, Cinemark Chile, S.A. had executed
four senior note payable agreements with a local bank for the U.S. dollar
equivalent of $6.0 million, $3.0 million, $4.5 million and $3.5 million in
December 1997, July 1998, November 1998 and December 1998, respectively. These
notes were each in Chilean pesos, adjusted for inflation, at the respective
borrowing dates. Interest is assessed for three notes at the 90-day TAB rate
(Chile's Central Bank interbank rate) plus 1.5% per annum, adjusted for
inflation, and for the other note (December 1998) at the 180-day TAB rate plus
1.5% per annum, adjusted for inflation, and is paid quarterly for three of the
notes and semi-annually for the December 1998 note. The term on all four notes
is five years with a two year grace period on principal. All four notes are
directly or indirectly guaranteed by Cinemark International. The effective
interest rates on the four notes as of March 31, 2001 are approximately 6.2% per
annum.
15
In September 1999, Cinemark International, through its wholly-owned
subsidiary Cinemark Germany GmbH, executed a lease agreement for a movie theatre
in Herne, Germany. The landlord for the project in Herne, Germany has initiated
insolvency proceedings in Berlin. The Company has filed claims against the
landlord and the bankruptcy estate in the bankruptcy proceedings. The Company is
unable to predict the outcome of these proceedings.
In September 1999, Cinemark International acquired all of the shares of
its Argentine joint venture partner, Prodecine S.A., which held the remaining
50% of the shares of Cinemark Argentina, S.A. Cinemark International paid $2.8
million in cash and delivered the following promissory notes bearing interest at
the rate of 10% per annum: (a) totaling US$2.5 million due January 2000, (b)
totaling US$2.5 million due April 2000, (c) totaling A$2.5 million pesos due
July 2000, (c) totaling A$3.5 million pesos due October 2000. The 100% interests
in Prodecine S.A., Cinemark Investments Argentina, S.A. and Cinemark Argentina,
S.A. held by Cinemark International were transferred to one of the Company's
subsidiaries in December 1999. At March 31, 2001, all four notes and related
accrued interest have been paid.
Cinemark Brasil, S.A. currently has four main types of funding sources
executed through nine separate local and international banks. These include: a)
BNDES automatic in the amount of US$5.4 million executed October 1999 at a term
of 5 years with nine months grace period at a BNDES basket rate (which is a
multiple currency rate based on the rate at which the bank borrows) plus spread
totalling 14.5%, b) FINAME/BNDES facility executed December 1999 in the amount
of R$450,000 (equivalent to US$225,000) for a term of 3 years with 6 months
grace period at a BNDES basket rate plus spread totalling 14.4%, c) Import
financing executed between April 2000 through December 2000 in the amount of
US$6.3 million at a term of 120 to 365 days at a rate of libor +2.8-5.15%, d)
Project developer financing executed between September 2000 through December
2000 in the amount of US$1.8 million for a term of 5 years with a 6 month grace
period at a rate of TJLP+5%. Each of these sources have varying guarantees
including comfort letters from Cinemark International, promissory notes for up
to 130% of the value, a revenue reserve account and equipment collateral. The
effective interest rates on these notes at March 31, 2001 are approximately
10.5% per annum.
16
New Accounting Pronouncements
On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as extended by SFAS No. 137 (June 1999) and amended by SFAS
No. 138 (June 2000). All derivatives have been accounted for pursuant to SFAS
133 requirements.
Based upon the transition provisions of SFAS 133, no transition
adjustment was necessary as of January 1, 2001. The Company's balance sheet as
of March 31, 2001 includes an interest rate cap recorded at its fair value of
$1.0 million. This derivative asset is recorded as deferred charges and other on
the Company's balance sheet. As of March 31, 2001, a loss of $0.7 million has
been recorded as a component of interest expense on the Company's statement of
operations to recognize the decrease in the fair value of the derivative asset.
Seasonality
The Company's revenues have historically been seasonal, coinciding with
the timing of releases of motion pictures by the major distributors. Generally,
the most successful motion pictures have been released during the summer
extending from Memorial Day to Labor Day and during the holiday season extending
from Thanksgiving through year-end. The unexpected emergence of a hit film
during other periods can alter this seasonality trend. The timing of such film
releases can have a significant effect on the Company's results of operations,
and the results of one quarter are not necessarily indicative of results for the
next quarter or for the same period in the following year.
Other Issues
The Company intends that this report be governed by the "safe harbor"
provision of the Private Securities Litigation Reform Act of 1995 (the "PSLR
Act") with respect to statements that may be deemed to be forward-looking
statements under the PSLR Act. Such forward-looking statements may include, but
are not limited to, the Company and any of its subsidiaries' long-term theatre
strategy. Actual results could differ materially from those indicated by such
forward-looking statements due to a number of factors.
17
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has limited exposure to financial market risks, including
changes in interest rates and other relevant market prices. The Company does not
have any derivative financial instruments in place as of March 31, 2001 that
would have a material effect on the Company's financial position, results of
operations and cash flow.
An increase or decrease in interest rates would affect interest costs
relating to the Company's variable rate credit facilities. The Company and/or
its subsidiaries are currently parties to such variable rate credit facilities.
At March 31, 2001, there was an aggregate of approximately $462 million of
variable rate debt outstanding under these facilities. These facilities
represent approximately 55% of the Company's outstanding long-term debt. Changes
in interest rates do not have a direct impact on interest expense relating to
the remaining fixed rate debt facilities.
The table below provides information about the Company's fixed rate and
variable rate long-term debt agreements:
March 31, 2001 March 31, 2001 December 31, 2000 December 31, 2000
(in millions) Carrying Amount Fair Market Value Carrying Amount Fair Market Value
--------------- ----------------- ----------------- -----------------
Long-term debt:
Fixed rate $380 $392 $380 $404
==== ==== ==== ====
Average interest rate 9.3% 9.3%
==== ====
Variable rate $462 $448 $430 $435
==== ==== ==== ====
Average interest rate 9.6% 9.2%
==== ====
Long-term debt $842 $840 $810 $839
==== ==== ==== ====
In December 2000, Cinema Properties, Inc., a wholly-owned subsidiary of
the Company, entered into the Cinema Properties Facility. Pursuant to the terms
of the Cinema Properties Facility, funds borrowed bear interest at a rate per
annum equal to LIBOR (as defined in the Cinema Properties Facility) plus the
applicable margin. As part of the Cinema Properties Facility, in order to hedge
against future changes in interest rates, Cinema Properties, Inc. purchased from
Lehman Brothers Derivative Products Inc. an Interest Rate Cap Agreement with a
notional amount equal to $77 million with a five year term and a strike rate
equal to three month LIBOR as of the date of closing. The three month LIBOR as
of the date of closing was 6.58%. The fair value and carrying value of the
interest rate cap is approximately $1.0 million at March 31, 2001.
The Company is also exposed to market risk arising from changes in
foreign currency exchange rates as a result of its international operations.
Currency fluctuations result in the Company's reporting exchange gains or losses
or foreign currency translation adjustments relating to its international
subsidiaries depending on the inflationary environment of the country in which
the Company operates.
18
PART II. Other Information
Item 1. Legal Proceedings
Reference is made to Item 3 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000.
Item 2. Change in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
There have not been any matters submitted to a vote of security holders
during the first three months of 2001 through the solicitation of proxies or
otherwise.
Item 5. Other Information
The Company intends that this report be governed by the "safe harbor"
provision of the Private Securities Litigation Reform Act of 1995 (the "PSLR
Act") with respect to statements that may be deemed to be forward-looking
statements under the PSLR Act. Such forward-looking statements may include, but
are not limited to, the Company and any of its subsidiaries' long-term theatre
strategy. Actual results could differ materially from those indicated by such
forward-looking statements due to a number of factors.
Item 6. Exhibits and Reports on Form 8-K
a) Supplemental schedules specified by the Senior Notes indenture:
Condensed Consolidating Balance Sheets
(unaudited) as of March 31, 2001
Condensed Consolidating Statements of
Operations (unaudited) for the three months
ended March 31, 2001
Condensed Consolidating Statements of Cash Flows
(unaudited) for the three months ended March 31, 2001
b) Reports on Form 8-K
No reports have been filed by Registrant during the
quarter for which this report is filed.
19
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF MARCH 31, 2001
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
--------------- --------------- --------------- ----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,998,422 $ 21,923,614 $ - $ 24,922,036
Inventories 2,701,536 745,828 - 3,447,364
Co-op advertising and other receivables 3,902,152 6,791,521 (459,313) 10,234,360
Tax receivable 1,068,082 618,234 - 1,686,316
Prepaid expenses and other 2,428,315 1,029,303 - 3,457,618
-------------------------------------------------------------------
Total current assets 13,098,507 31,108,500 (459,313) 43,747,694
THEATRE PROPERTIES AND EQUIPMENT 942,457,807 249,749,494 - 1,192,207,301
Less accumulated depreciation and amortization (216,715,969) (41,303,365) - (258,019,334)
-------------------------------------------------------------------
Theatre properties and equipment - net 725,741,838 208,446,129 - 934,187,967
OTHER ASSETS
Goodwill - net 8,826,163 7,641,531 - 16,467,694
Investments in and advances to affiliates 163,812,854 505,915 (157,829,778) 6,488,991
Deferred charges and other - net 34,699,831 10,483,582 - 45,183,413
-------------------------------------------------------------------
Total other assets 207,338,848 18,631,028 (157,829,778) 68,140,098
-------------------------------------------------------------------
TOTAL $ 946,179,193 $ 258,185,657 $(158,289,091) $1,046,075,759
===================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 2,757,711 $ 32,454,187 $ - $ 35,211,898
Current income taxes payable (95,400) 95,400 - -
Accounts payable and accrued expenses 67,883,189 15,231,041 (459,313) 82,654,917
-------------------------------------------------------------------
Total current liabilities 70,545,500 47,780,628 (459,313) 117,866,815
LONG-TERM LIABILITIES
Senior credit agreements 327,479,464 99,387,523 - 426,866,987
Senior subordinated debt 380,209,055 - - 380,209,055
Deferred lease expenses 20,568,464 461,064 - 21,029,528
Deferred gain on sale leasebacks 5,012,980 - - 5,012,980
Deferred income taxes 12,737,873 (45,613) - 12,692,260
Deferred revenues and other long-term liabilities 13,315,084 (9,944) - 13,305,140
-------------------------------------------------------------------
Total long-term liabilities 759,322,920 99,793,030 - 859,115,950
MINORITY INTERESTS IN SUBSIDIARIES 6,377,200 19,327,268 - 25,704,468
SHAREHOLDERS' EQUITY
Class A Common stock, $.01 par value: 10,000,000 shares
authorized, 1,500 shares issued and outstanding 15 - - 15
Class B Common stock, no par value: 1,000,000 shares
authorized, 234,782 shares issued 49,538,316 13,062,000 (13,062,000) 49,538,316
Additional paid-in-capital 13,145,365 144,767,778 (144,767,778) 13,145,365
Unearned compensation - stock options (1,699,104) - - (1,699,104)
Retained earnings 86,257,607 (40,202,558) - 46,055,049
Treasury stock, 57,245 Class B shares at cost (24,232,890) - - (24,232,890)
Accumulated other comprehensive loss (13,075,736) (26,342,489) - (39,418,225)
-------------------------------------------------------------------
Total shareholders' equity 109,933,573 91,284,731 (157,829,778) 43,388,526
-------------------------------------------------------------------
TOTAL $ 946,179,193 $ 258,185,657 $(158,289,091) $1,046,075,759
===================================================================
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
20
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
--------------- --------------- --------------- ----------------
REVENUES
Admissions $ 99,382,277 $ 28,456,461 $ - $ 127,838,738
Concessions 47,749,612 10,094,135 - 57,843,747
Other 10,292,310 2,176,323 (2,081,046) 10,387,587
------------------------------------------------------------------
Total 157,424,199 40,726,919 (2,081,046) 196,070,072
COSTS AND EXPENSES
Cost of operations:
Film rentals and advertising 51,130,734 14,177,689 - 65,308,423
Concession supplies 7,840,147 2,432,733 - 10,272,880
Salaries and wages 18,021,240 3,457,364 - 21,478,604
Facility leases 24,445,756 4,345,650 - 28,791,406
Utilities and other 22,146,023 6,622,741 (2,081,046) 26,687,718
-------------------------------------------------------------------
Total 123,583,900 31,036,177 (2,081,046) 152,539,031
General and administrative expenses 7,852,148 1,990,792 - 9,842,940
Depreciation and amortization 11,915,250 4,693,314 - 16,608,564
Asset impairment loss 450,000 - - 450,000
(Gain) loss on sale of assets (1,679,932) 1,790,846 - 110,914
-------------------------------------------------------------------
Total 142,121,366 39,511,129 (2,081,046) 179,551,449
OPERATING INCOME 15,302,833 1,215,790 - 16,518,623
OTHER INCOME (EXPENSE)
Interest expense (14,906,787) (4,355,443) - (19,262,230)
Amortization of debt issue cost and debt discount (256,119) (387,009) - (643,128)
Interest income 124,771 244,873 - 369,644
Foreign currency exchange gain (loss) 98,929 (1,251,058) - (1,152,129)
Equity in loss of affiliates (14,360) (23,318) - (37,678)
Minority interests in (income) loss of subsidiaries (257,175) 377,065 - 119,890
-------------------------------------------------------------------
Total (15,210,741) (5,394,890) - (20,605,631)
-------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 92,092 (4,179,100) - (4,087,008)
Income taxes (benefit) (1,479,657) 55,167 - (1,424,490)
------------------------------------------------------------------
NET INCOME (LOSS) $ 1,571,749 $ (4,234,267) $ - $ (2,662,518)
===================================================================
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
21
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
--------------- --------------- --------------- ----------------
OPERATING ACTIVITIES
Net income (loss) $ 1,571,749 $ (4,234,267) $ - $ (2,662,518)
Noncash items in net income (loss):
Depreciation 11,611,426 4,307,280 - 15,918,706
Amortization - goodwill and other assets 303,824 386,034 - 689,858
Loss on impairment of assets 450,000 - - 450,000
Amortization of gain on sale leasebacks (91,481) - - (91,481)
Deferred lease expenses 559,314 (5,033) - 554,281
Amortization of prepaid leases 435,543 254,505 - 690,048
Deferred income tax expense (2,139,418) - - (2,139,418)
Amortization of debt discount and premium (7,127) - - (7,127)
Amortized compensation - stock options 206,860 - - 206,860
(Gain) loss on sale of assets (1,679,932) 1,790,846 - 110,914
Equity in loss of affiliates 14,360 23,318 - 37,678
Minority interests in income (loss) of subsidiaries 257,175 (377,065) - (119,890)
Cash provided by (used for) operating working capital:
Inventories 222,209 65,382 - 287,591
Co-op advertising and other receivables (4,164,050) 2,175,714 - (1,988,336)
Prepaid expenses and other 220,438 (86,390) - 134,048
Accounts payable and accrued expenses (32,765,798) (1,068,148) - (33,833,946)
Income tax receivable/payable (268,467) 44,872 - (223,595)
-------------------------------------------------------------------
Net cash provided by (used for) operating activities (25,263,375) 3,277,048 - (21,986,327)
INVESTING ACTIVITIES
Additions to Theatre properties and equipment (5,408,707) (1,195,407) - (6,604,114)
Sale of Theatre properties and equipment 3,146,296 13,221 - 3,159,517
Decrease (increase) in other assets, investments in
and advances to affiliates (647,419) 4,653,857 - 4,006,438
-------------------------------------------------------------------
Net cash provided by (used for) investing activities (2,909,830) 3,471,671 - 561,841
FINANCING ACTIVITIES
Decrease in long-term debt (67,361) (2,153,123) - (2,220,484)
Increase in long-term debt 33,005,969 1,186,839 - 34,192,808
Decrease in deferred revenues and other long-term liabilities (3,446,832) (142) - (3,446,974)
Minority investment in subsidiaries, net 29,451 (1,896,620) - (1,867,169)
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Net cash provided by (used for) financing activities 29,521,227 (2,863,046) - 26,658,181
EFFECT OF EXCHANGE RATE CHANGES ON CASH 14,052 (165,705) - (151,653)
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INCREASE IN CASH AND CASH EQUIVALENTS 1,362,074 3,719,968 - 5,082,042
CASH AND CASH EQUIVALENTS:
Beginning of period 1,636,348 18,203,646 - 19,839,994
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End of period $ 2,998,422 $ 21,923,614 $ - $ 24,922,036
===================================================================
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
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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 thereunder duly authorized.
CINEMARK USA, INC.
Registrant
DATE: May 15, 2001
/s/Alan W. Stock
Alan W. Stock
President
/s/Robert Copple
Robert Copple
Chief Financial Officer
23