SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 August 13, 2001, 1,500 shares of Class A Common stock and 185,798
shares of Class B Common stock (including options to acquire 8,261 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 June 30, 2001 (unaudited)
and December 31, 2000 3
Condensed Consolidated Statements of Operations
(unaudited) for the three and six month periods
ended June 30, 2001 and 2000 4
Condensed Consolidated Statements of Cash
Flows (unaudited) for the six month
periods ended June 30, 2001 and 2000 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 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 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 24
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2001 2000
(Unaudited)
-------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 27,853,527 $ 19,839,994
Inventories 3,552,328 3,734,955
Co-op advertising and other receivables 9,995,467 8,246,024
Income tax receivable 3,021,653 1,462,721
Prepaid expenses and other 3,771,255 3,591,666
-------------------------------------
Total current assets 48,194,230 36,875,360
THEATRE PROPERTIES AND EQUIPMENT 1,196,650,224 1,193,507,019
Less accumulated depreciation and amortization (272,949,971) (243,372,299)
-------------------------------------
Theatre properties and equipment - net 923,700,253 950,134,720
OTHER ASSETS
Goodwill - net 16,108,649 16,826,740
Investments in and advances to affiliates 5,990,108 6,932,208
Deferred charges and other - net 46,899,117 49,807,442
-------------------------------------
Total other assets 68,997,874 73,566,390
-------------------------------------
TOTAL $1,040,892,357 $1,060,576,470
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 37,686,395 $ 32,767,581
Accounts payable and accrued expenses 102,991,295 116,488,863
-------------------------------------
Total current liabilities 140,677,690 149,256,444
LONG-TERM LIABILITIES
Senior credit agreements 405,236,561 397,338,980
Senior subordinated notes 380,201,928 380,216,182
Deferred lease expenses 21,583,809 20,475,247
Deferred gain on sale leasebacks 4,921,500 5,104,461
Deferred income taxes 11,628,099 14,831,678
Deferred revenues and other long-term liabilits 10,538,434 16,752,114
-------------------------------------
Total long-term liabilities 834,110,331 834,718,662
MINORITY INTERESTS IN SUBSIDIARIES 23,760,126 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 and outstanding 49,538,316 49,538,316
Additional paid-in-capital 13,145,365 13,198,615
Unearned compensation - stock options (1,518,639) (1,956,944)
Retained earnings 43,728,524 48,717,567
Treasury stock, 57,245 Class B shares at cost (24,232,890) (24,232,890)
Accumulated other comprehensive loss (38,316,481) (36,354,842)
-------------------------------------
Total shareholders' equity 42,344,210 48,909,837
-------------------------------------
TOTAL $1,040,892,357 $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 JUNE 30, SIX MONTHS ENDED JUNE 30,
2001 2000 2001 2000
------------------------------------ -----------------------------------
REVENUES
Admissions $ 130,004,407 $ 123,413,502 $ 257,843,145 $ 235,900,347
Concessions 61,702,235 56,756,317 119,545,982 108,880,374
Other 10,652,217 7,808,884 21,039,804 18,063,560
------------------------------------ -----------------------------------
Total 202,358,859 187,978,703 398,428,931 362,844,281
COSTS AND EXPENSES
Cost of operations:
Film rentals and advertising 68,490,322 65,630,832 133,798,745 123,078,771
Concession supplies 10,230,831 9,947,499 20,503,711 19,660,737
Salaries and wages 22,377,694 20,928,104 43,856,298 42,577,590
Facility leases 28,132,827 26,058,247 56,924,233 52,692,232
Utilities and other 27,205,026 25,639,123 53,892,744 50,597,257
------------------------------------ -----------------------------------
Total 156,436,700 148,203,805 308,975,731 288,606,587
General and administrative expenses 10,347,268 9,391,395 20,190,208 19,403,288
Depreciation and amortization 17,076,249 15,726,957 33,684,813 29,942,410
Asset impairment loss - 1,175,000 450,000 1,615,000
(Gain) loss on sale of assets 1,720,172 (136,367) 1,831,086 114,809
------------------------------------ -----------------------------------
Total 185,580,389 174,360,790 365,131,838 339,682,094
OPERATING INCOME 16,778,470 13,617,913 33,297,093 23,162,187
OTHER INCOME (EXPENSE)
Interest expense (17,850,288) (18,455,799) (37,112,518) (35,345,751)
Amortization of debt issue costs and debt discount (643,129) (245,494) (1,286,257) (490,988)
Interest income 349,546 166,942 719,190 481,594
Foreign currency exchange loss (1,379,241) (361,384) (2,531,370) (21,713)
Equity in loss of affiliates (1,418,886) (71,250) (1,456,564) (12,894)
Minority interests in (income) loss of subsidiaries 575,879 287,609 695,769 (156,927)
------------------------------------ -----------------------------------
Total (20,366,119) (18,679,376) (40,971,750) (35,546,679)
------------------------------------ -----------------------------------
LOSS BEFORE INCOME TAXES (3,587,649) (5,061,463) (7,674,657) (12,384,492)
Income tax benefit (1,261,124) (1,211,050) (2,685,614) (2,972,393)
------------------------------------ -----------------------------------
NET LOSS $ (2,326,525) $ (3,850,413) $ (4,989,043) $ (9,412,099)
==================================== ===================================
EARNINGS PER SHARE:
Basic:
Net loss $ (12.99) $ (21.53) $ (27.87) $ (52.69)
==================================== ===================================
Diluted:
Net loss $ (12.99) $ (21.53) $ (27.87) $ (52.69)
==================================== ===================================
See accompanying Notes to Condensed Consolidated Financial Statements.
4
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED JUNE 30,
2001 2000
-----------------------------------
OPERATING ACTIVITIES
Net loss $ (4,989,043) $ (9,412,099)
Noncash items in net loss:
Depreciation 32,364,610 28,707,931
Amortization - goodwill and other assets 1,320,203 1,234,479
Loss on impairment of assets 450,000 1,615,000
Amortization of gain on sale leasebacks (182,961) (182,960)
Deferred lease expenses 1,108,562 1,519,833
Amortization of prepaid leases 1,143,028 1,185,253
Deferred income tax expense (3,203,579) (7,064,852)
Amortization of debt discount and premium (14,254) (14,254)
Amortized compensation - stock options 388,742 481,843
Compensation expense related to repurchase of stock options - 103,584
Loss on sale of assets 1,831,086 114,809
Equity in loss of affiliates 1,456,564 12,894
Minority interests in income (loss) of subsidiaries (695,769) 156,927
Amortization of deferred revenues (6,380,397) -
Cash provided by (used for) operating working capital:
Inventories 182,627 912,917
Co-op advertising and other receivables (1,749,443) 4,087,078
Prepaid expenses and other (179,589) 5,059,501
Accounts payable and accrued expenses (13,497,568) (10,897,980)
Other long-term liabilities 166,717 768,503
Income tax receivable (1,558,932) 980,902
-----------------------------------
Net cash provided by operating activities 7,960,604 19,369,309
INVESTING ACTIVITIES
Additions to theatre properties and equipment (14,022,555) (72,592,491)
Sale of theatre properties and equipment 3,942,537 7,819,711
Increase in investments in and advances to affiliates (514,464) (7,265,592)
Decrease in deferred charges and other 1,159,498 2,784,418
-----------------------------------
Net cash used for investing activities (9,434,984) (69,253,954)
FINANCING ACTIVITIES
Decrease in long-term debt (27,990,167) (41,185,274)
Increase in long-term debt 40,806,562 72,279,859
Increase in deferred revenues - 22,478,015
Purchase of treasury stock - (34,000)
Repurchase of stock options - (67,452)
Common stock issued for options exercised - 425
Minority investment in subsidiaries, net (3,235,632) 1,317,982
-----------------------------------
Net cash provided by financing activities 9,580,763 54,789,555
EFFECT OF EXCHANGE RATE CHANGES ON CASH (92,850) (100,477)
-----------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 8,013,533 4,804,433
CASH AND CASH EQUIVALENTS
Beginning of period 19,839,994 8,872,157
-----------------------------------
End of period $ 27,853,527 $ 13,676,590
===================================
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 2,962 screens in 274 theatres and manages an additional 4
theatres (27 screens) at June 30, 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 June 30, 2000 and December 31, 2000 amounts to conform with
the June 30, 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 and six month periods ended June 30, 2001 are not
necessarily indicative of the results to be achieved for the full year.
2. Earnings Per Share
Earnings (loss) 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
(loss) per share.
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net loss $(2,326,525) $(3,850,413) $(4,989,043) $(9,412,099)
============ ============ ============ ============
Basic:
Weighted average Common shares outstanding 179,037 178,863 179,037 178,635
======= ======= ======= =======
Net loss per Common share $(12.99) $(21.53) $(27.87) $(52.69)
======== ======== ======== ========
Diluted:
Weighted average Common shares outstanding 179,037 178,863 179,037 178,635
Common equivalent shares for stock options - - - -
------- ------- ------- -------
Weighted average shares outstanding 179,037 178,863 179,037 178,635
======= ======= ======= =======
Net loss per Common and Common equivalent share $(12.99) $(21.53) $(27.87) $(52.69)
======== ======== ======== ========
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. Options to purchase 11,752 and 12,341 shares of Common stock have
been excluded from the diluted net loss per share calculation for the three
month periods ended June 30, 2001 and 2000, respectively, as their effect would
have been antidilutive. Options to purchase 11,752 and 12,742 shares of Common
stock have been excluded from the diluted net loss per share calculation for the
six month periods ended June 30, 2001 and 2000, respectively, as their effect
would have been antidilutive.
3. Other Comprehensive Income (Loss)
Statement of Financial Accounting Standards (SFAS) No. 130 establishes
standards for reporting and display of comprehensive income (loss) and its
components in the financial statements. The following components are reflected
in the Company's comprehensive loss:
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
------------ ------------ ------------ -------------
Net loss $(2,326,525) $(3,850,413) $(4,989,043) $ (9,412,099)
Foreign currency translation adjustment 1,101,744 (5,474,174) (1,961,639) (2,695,747)
------------ ------------ ------------ -------------
Comprehensive loss $(1,224,781) $(9,324,587) $(6,950,682) $(12,107,846)
============ ============ ============ =============
4. Foreign Currency Translation
The accumulated other comprehensive loss in shareholders' equity
of $38,316,481 and $36,354,842 at June 30, 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 June 30, 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 condensed
consolidated statements of cash flows:
Six Months Ended June 30,
2001 2000
----------- -----------
Cash paid for interest $38,602,949 $34,307,247
Cash paid for income taxes 1,903,256 2,592,445
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 in the
United States and Canada, Mexico, Brazil and other foreign countries for the six
months ended June 30 are as follows:
Six Months Ended
June 30,
Revenues 2001 2000
-------- ------------- -------------
U.S. and Canada $302,520,015 $273,635,486
Mexico 34,858,256 29,419,087
Brazil 31,310,175 28,653,102
Other Foreign Countries 34,127,007 31,573,627
Eliminations (4,386,522) (437,021)
------------- -------------
Total $398,428,931 $362,844,281
============= =============
Long-lived assets in the United States and Canada, Mexico, Brazil and
other foreign countries as of June 30 are as follows:
June 30,
Long-Lived Assets 2001 2000
----------------- ------------- -------------
U.S. and Canada $715,195,578 $762,523,941
Mexico 76,282,484 64,878,980
Brazil 58,682,074 68,492,330
Other Foreign Countries 73,540,117 69,803,578
------------- -------------
Total $923,700,253 $965,698,829
============= =============
7. Accounting for Derivative Instruments and Hedging Activities
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).
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 June 30, 2001 includes an interest rate cap recorded at its fair value of
$1.1 million. This derivative asset is recorded as deferred charges and other on
the Company's balance sheet. For the six month period ended June 30, 2001, a
loss of $0.6 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. New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". This statement requires that goodwill and other intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually. This statement is effective for all fiscal years
beginning after December 15, 2001. The statement will become effective for the
Company on January 1, 2002. Management is currently assessing the impact of this
statement on the consolidated financial statements.
9. Subsequent Event
In July 2001, the Company's Brazilian partners contributed an additional
$5 million of capital to Cinemark Brasil, S.A. and are expected to contribute an
additional $6 million of capital by the end of the year, which will effectively
dilute the Company's ownership of Cinemark Brasil, S.A. from 60% at June 30,
2001 to 53% at December 31, 2001.
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. To some extent,
advertising cost is 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 been decreasing recently as the Company has been strategically
reducing the size of directory advertisements in favor of alternative forms of
advertising (i.e. internet web-site advertising) which has further helped 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 % of Revenues
------------- -------------
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
-------------------- -------------------
Revenues
Admissions 64.2 65.7 64.7 65.0
Concessions 30.5 30.2 30.0 30.0
Other 5.3 4.1 5.3 5.0
------ ------ ------ ------
Total revenues 100.0 100.0 100.0 100.0
Cost of operations 77.3 78.8 77.5 79.5
General and administrative expenses 5.1 5.0 5.1 5.3
Depreciation and amortization 8.4 8.4 8.4 8.3
Asset impairment loss - 0.6 0.1 0.5
Loss on sale of assets 0.9 - 0.5 -
------ ------ ------ ------
Total operating expenses 91.7 92.8 91.6 93.6
------ ------ ------ ------
Operating income 8.3 7.2 8.4 6.4
Interest expense (8.8) (9.8) (9.3) (9.7)
Other expense (1.3) (0.1) (1.0) (0.1)
------ ------ ------ ------
Loss before income taxes (1.8) (2.7) (1.9) (3.4)
Income tax benefit (0.7) (0.6) (0.7) (0.8)
------ ------ ------ ------
Net loss (1.1) (2.1) (1.2) (2.6)
====== ====== ====== ======
Second quarter ended June 30, 2001 and 2000
Revenues
Revenues for the second quarter ended June 30, 2001 increased to $202.4
million from $188.0 million for the second quarter ended June 30, 2000, a 7.7%
increase. The increase in revenues for the second quarter is primarily
attributable to an 8.7% increase in attendance as a result of the net addition
of 107 screens since the second quarter of 2000 and a 1.9% increase in revenues
per screen. Revenues per screen increased to $68,596 in the second quarter of
2001 from $67,340 in the second quarter of 2000.
Cost of Operations
Cost of operations, as a percentage of revenues, decreased to 77.3% in
the second quarter of 2001 from 78.8% in the second quarter of 2000. The
decrease as a percentage of revenues primarily resulted from a decrease in
concession supplies as a percentage of concessions revenues to 16.6% in the
second quarter of 2001 from 17.5% in the second quarter of 2000 resulting from
lower concession procurement costs and increased concession volume rebates, a
decrease in film rentals and advertising costs as a percentage of admissions
revenues to 52.7% in the second quarter of 2001 from 53.2% in the second quarter
of 2000 resulting from reduced advertising and promotion costs and a decrease in
utilities and other expenses as a percentage of revenues to 13.4% in the second
quarter of 2001 from 13.6% in the second quarter of 2000.
10
General and Administrative Expenses
General and administrative expenses as a percentage of revenues of 5.1%
for the second quarter of 2001 were relatively consistent with the second
quarter of 2000.
The absolute level of general and administrative expenses increased to
$10.3 million in the second quarter of 2001 from $9.4 million in the second
quarter of 2000 primarily as a result of increased costs associated with the
Company's international growth and increased accrued bonus expenses.
Depreciation and Amortization
Depreciation and amortization increased 8.9% to $17.1 million in the
second quarter of 2001 from $15.7 million in the second quarter of 2000. The
increase is a result of the net addition of $26.9 million in theatre property
and equipment since the second quarter of 2000, a 2.3% 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 and the scaled back
construction program which has significantly reduced the amount of
non-depreciable construction-in-progress assets.
Asset Impairment Loss
The Company wrote down the assets of certain properties to their fair
value which resulted in asset impairment charges of $1.2 million in the second
quarter of 2000 pursuant to Statement of Financial Accounting Standards (SFAS)
No. 121.
Interest Expense
Interest costs incurred, including amortization of debt issue costs and
debt discount and the mark-to-market adjustment to the interest rate cap,
decreased 1.1% during the second quarter of 2001 to $18.6 million (including
capitalized interest to properties under construction) from $18.8 million
(including capitalized interest) in the second quarter of 2000. The decrease in
interest costs incurred for the second quarter of 2001 was due principally to a
decrease in the average interest rate outstanding under the Company's Credit
Facility, partially offset by an increase in the Company's average debt
outstanding.
Income Taxes
An income tax benefit of $1.3 million was recorded for the second
quarter of 2001 as compared to an income tax benefit of $1.2 million in the
second quarter of 2000. The Company's effective tax rate for the second quarter
of 2001 was 35.2% as compared to 23.9% for the second 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 $2.3 million for the second quarter
of 2001 in comparison with a net loss of $3.9 million for the second quarter of
2000.
11
Six month periods ended June 30, 2001 and 2000
Revenues
Revenues for the six month period ended June 30, 2001 (the "2001
period") increased to $398.4 million from $362.8 million for the six month
period ended June 30, 2000 (the "2000 period"), a 9.8% increase. The increase in
revenues for the 2001 period is primarily attributable to an 11.4% increase in
attendance as a result of the net addition of 107 screens since the second
quarter of 2000 and a 3.0% increase in revenues per screen. Revenues per screen
increased to $135,546 in the 2001 period from $131,554 in the 2000 period.
Cost of Operations
Cost of operations, as a percentage of revenues, decreased to 77.5% in
the 2001 period from 79.5% in the 2000 period. The decrease as a percentage of
revenues primarily resulted from a decrease in concession supplies as a
percentage of concessions revenues to 17.2% in the 2001 period from 18.1% in the
2000 period resulting from lower concession procurement costs and increased
concession volume rebates, a decrease in film rentals and advertising costs as a
percentage of admissions revenues to 51.9% in the 2001 period from 52.2% in the
2000 period, a decrease in salaries and wages as a percentage of revenues to
11.0% in the 2001 period from 11.7% in the 2000 period, a decrease in utilities
and other expenses as a percentage of revenues to 13.5% in the 2001 period from
13.9% in the 2000 period and a decrease in facility lease expense as a
percentage of revenues to 14.3% in the 2001 period from 14.5% in the 2000
period.
General and Administrative Expenses
General and administrative expenses as a percentage of revenues
decreased to 5.1% for the 2001 period from 5.3% for the 2000 period as a result
of the economies of scale realized with the Company's growth over the last year.
The absolute level of general and administrative expenses increased to
$20.2 million in the 2001 period from $19.4 million in the 2000 period. The
increase in general and administrative expenses is attributed to costs
associated with the Company's international growth and increased accrued bonus
expenses.
Depreciation and Amortization
For the 2001 period, depreciation and amortization increased 12.7% to
$33.7 million from $29.9 million in the 2000 period. The increase is a result of
the net addition of $26.9 million in theatre property and equipment since the
second quarter of 2000, a 2.3% 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 and the scaled back construction program
which has significantly reduced the amount of non-depreciable
construction-in-progress assets.
Asset Impairment Loss
The Company wrote down the assets of certain properties to their fair
value which resulted in asset impairment charges of $0.5 million and $1.6
million in the 2001 and 2000 periods, respectively, pursuant to Statement of
Financial Accounting Standards (SFAS) No. 121.
12
Interest Expense
Interest costs incurred in the 2001 period, including amortization of
debt issue costs and debt discount and the mark-to-market adjustment to the
interest rate cap, increased 5.8% to $38.5 million (including capitalized
interest to properties under construction) from $36.4 million (including
capitalized interest) in the 2000 period. The increase in interest costs
incurred for the 2001 period was due principally to an increase in the Company's
average debt outstanding, partially offset by lower interest rates on the
Company's variable rate debt.
Income Taxes
An income tax benefit of $2.7 million was recorded for the 2001 period
as compared to an income tax benefit of $3.0 million in the 2000 period. The
Company's effective tax rate for the 2001 period was 35.0% as compared to 24.0%
for the 2000 period. 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 $5.0 million for the 2001 period in
comparison with a net loss of $9.4 million for the 2000 period.
Liquidity and Capital Resources
The Company's revenues are collected in cash, primarily through box
office receipts and concession sales. 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 the development and acquisition of theatres. As
of June 30, 2001, the Company has opened one theatre (12 screens), acquired one
theatre (6 screens) and closed two theatres (10 screens) in the United States in
2001 and has only one additional theatre commitment (4 screens) under
construction and scheduled to open in the United States by the end of 2001. The
Company presently has only one future theatre commitment (12 screens) along with
a five-screen expansion commitment in the United States after 2001. As of June
30, 2001, the Company estimates that the remaining capital expenditures for the
development of its remaining theatre and expansion commitments (21 screens) in
the United States will be less than $5 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. 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 June 30, 2001, the Company owned approximately $270
million of real estate and improvements resulting from the development of
multiplex facilities over the last several years. 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.
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
13
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 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.
In February 1998, the Company replaced its existing credit facility with
a reducing, revolving credit agreement (the "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 August 13,
2001, the aggregate commitment available to the Company is $332.5 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). As of August 13, 2001, the Company
had borrowed $267 million under the Credit Facility with the effective interest
rate on such borrowings being 5.7% 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 twelve 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.
14
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 due in 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. 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 August 13, 2001, Cinema Properties, Inc. has outstanding
$77 million under the Cinema Properties Facility, and the effective interest
rate on such borrowing was 9.6% per annum.
In 1992, the Company formed Cinemark International to develop and
acquire theatres in international markets. As of June 30, 2001, Cinemark
International, through its affiliates, has opened four theatres (42 screens)
internationally in 2001 and currently operates 84 theatres (737 screens),
principally in Latin America. Cinemark International, through its affiliates,
has six additional theatres (62 screens) under construction and scheduled to
open by the end of 2001 and presently has three theatres (28 screens) committed
to being built after 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 June 30, 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% 25 theatres (244 screens) 1 theatre (12 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) 3 theatres (29 screens)
Ecuador 1996 60% 2 theatres (16 screens)
Peru 1996 100% 2 theatres (21 screens)
Central America 1997 50.1% 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)
Total 84 theatres (737 screens) 6 theatres (62 screens)
15
The Company estimates that the remaining capital expenditures for the
development of its remaining theatre commitments (90 screens) internationally
will be approximately $25 million. 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 August 13, 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 14.0%. The effective interest rate
on the Cinemark Investment Corporation borrowings as of August 13, 2001 is 5.7%
per annum.
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 due in January 2003. As
of August 13, 2001, Cinemark Mexico has outstanding $30 million under the
Cinemark Mexico Credit Agreement. The effective interest rate on such borrowings
as of August 13, 2001 is 6.7% per annum.
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 at August 13, 2001 are approximately 6.2% per
annum.
16
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 four promissory notes amounting to $11 million,
which were subsequently paid. 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.
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
amounting to 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 August 13, 2001 are approximately
10.5% per annum.
In July 2001, the Company's Brazilian partners contributed an additional
$5 million of capital to Cinemark Brasil, S.A. and are expected to contribute an
additional $6 million of capital by the end of the year, which will effectively
dilute the Company's ownership of Cinemark Brasil, S.A. from 60% at June 30,
2001 to 53% at December 31, 2001.
17
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". This statement requires that goodwill and other intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually. This statement is effective for all fiscal years
beginning after December 15, 2001. The statement will become effective for the
Company on January 1, 2002. Management is currently assessing the impact of this
statement on the consolidated financial statements.
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.
18
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.
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 June 30, 2001, there was an aggregate of approximately $443 million of
variable rate debt outstanding under these facilities. These facilities
represent approximately 54% 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:
June 30, 2001 June 30, 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 $387 $380 $404
==== ==== ==== ====
Average interest rate 9.3% 9.3%
==== ====
Variable rate $443 $419 $430 $435
==== ==== ==== ====
Average interest rate 6.8% 9.2%
==== ====
Long-term debt $823 $806 $810 $839
==== ==== ==== ====
The Company does not have any derivative financial instruments in place
as of June 30, 2001 that would have a material effect on the Company's financial
position, results of operations and cash flows. However, 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 $1.1 million
at June 30, 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 (losses)
or foreign currency translation adjustments relating to its international
subsidiaries depending on the inflationary environment of the country in which
the Company operates.
19
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 six 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 June 30, 2001
Condensed Consolidating Statements of
Operations (unaudited) for the six months
ended June 30, 2001
Condensed Consolidating Statements of
Cash Flows (unaudited) for the six months
ended June 30, 2001
b) Reports on Form 8-K
No reports have been filed by Registrant during the
quarter for which this report is filed.
20
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF JUNE 30, 2001
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
--------------- --------------- --------------- ---------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,152,716 $ 22,700,811 $ - $ 27,853,527
Inventories 2,820,907 731,421 - 3,552,328
Co-op advertising and other receivables 6,528,979 4,110,179 (643,691) 9,995,467
Income tax receivable 2,517,215 504,438 - 3,021,653
Prepaid expenses and other 2,733,020 1,038,235 - 3,771,255
---------------------------------------------------------------------
Total current assets 19,752,837 29,085,084 (643,691) 48,194,230
THEATRE PROPERTIES AND EQUIPMENT 952,957,845 243,692,379 - 1,196,650,224
Less accumulated depreciation and amortization (229,254,487) (43,695,484) - (272,949,971)
---------------------------------------------------------------------
Theatre properties and equipment - net 723,703,358 199,996,895 - 923,700,253
OTHER ASSETS
Goodwill - net 8,614,223 7,494,426 - 16,108,649
Investments in and advances to affiliates 161,838,096 1,281,790 (157,129,778) 5,990,108
Deferred charges and other - net 36,897,601 10,001,516 - 46,899,117
---------------------------------------------------------------------
Total other assets 207,349,920 18,777,732 (157,129,778) 68,997,874
---------------------------------------------------------------------
TOTAL $ 950,806,115 $ 247,859,711 $(157,773,469) $ 1,040,892,357
=====================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 4,240,871 $ 33,445,524 $ - $ 37,686,395
Current income taxes payable (44,261) 44,261 - -
Accounts payable and accrued expenses 86,532,104 17,102,882 (643,691) 102,991,295
---------------------------------------------------------------------
Total current liabilities 90,728,714 50,592,667 (643,691) 140,677,690
LONG-TERM LIABILITIES
Senior credit agreements 310,378,758 94,857,803 - 405,236,561
Senior subordinated notes 380,201,928 - - 380,201,928
Deferred lease expenses 21,127,779 456,030 - 21,583,809
Deferred gain on sale leasebacks 4,921,500 - - 4,921,500
Deferred income taxes 11,673,712 (45,613) - 11,628,099
Deferred revenues and other long-term liabilities 10,431,151 107,283 - 10,538,434
---------------------------------------------------------------------
Total long-term liabilities 738,734,828 95,375,503 - 834,110,331
MINORITY INTERESTS IN SUBSIDIARIES 6,616,504 17,143,622 - 23,760,126
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 14,062,000 (14,062,000) 49,538,316
Additional paid-in-capital 13,145,365 143,067,778 (143,067,778) 13,145,365
Unearned compensation - stock options (1,518,639) - - (1,518,639)
Retained earnings 87,719,744 (43,991,220) - 43,728,524
Treasury stock, 57,245 Class B shares at cost (24,232,890) - - (24,232,890)
Accumulated other comprehensive loss (9,925,842) (28,390,639) - (38,316,481)
---------------------------------------------------------------------
Total shareholders' equity 114,726,069 84,747,919 (157,129,778) 42,344,210
---------------------------------------------------------------------
TOTAL $ 950,806,115 $ 247,859,711 $(157,773,469) $1,040,892,357
=====================================================================
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 OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
--------------- --------------- --------------- ---------------
REVENUES
Admissions $ 203,391,825 $ 54,451,320 $ - $ 257,843,145
Concessions 99,828,973 19,717,009 - 119,545,982
Other 21,597,271 3,829,055 (4,386,522) 21,039,804
---------------------------------------------------------------------
Total 324,818,069 77,997,384 (4,386,522) 398,428,931
COSTS AND EXPENSES
Cost of operations:
Film rentals and advertising 106,201,872 27,596,873 - 133,798,745
Concession supplies 15,901,108 4,602,603 - 20,503,711
Salaries and wages 37,038,732 6,817,566 - 43,856,298
Facility leases 48,618,793 8,305,440 - 56,924,233
Utilities and other 44,917,656 13,361,610 (4,386,522) 53,892,744
---------------------------------------------------------------------
Total 252,678,161 60,684,092 (4,386,522) 308,975,731
General and administrative expenses 16,390,261 3,799,947 - 20,190,208
Depreciation and amortization 24,707,607 8,977,206 - 33,684,813
Asset impairment loss 450,000 - - 450,000
(Gain) loss on sale of assets (1,433,798) 3,264,884 - 1,831,086
---------------------------------------------------------------------
Total 292,792,231 76,726,129 (4,386,522) 365,131,838
OPERATING INCOME 32,025,838 1,271,255 - 33,297,093
OTHER INCOME (EXPENSE)
Interest expense (29,582,608) (7,529,910) - (37,112,518)
Amortization of debt issue costs and debt discount (512,238) (774,019) - (1,286,257)
Interest income 247,770 471,420 - 719,190
Foreign currency exchange loss (37,317) (2,494,053) - (2,531,370)
Equity in loss of affiliates (1,370,803) (85,761) - (1,456,564)
Minority interests in (income) loss of subsidiaries (521,766) 1,217,535 - 695,769
---------------------------------------------------------------------
Total (31,776,962) (9,194,788) - (40,971,750)
---------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 248,876 (7,923,533) - (7,674,657)
Income taxes (benefit) (2,785,010) 99,396 - (2,685,614)
---------------------------------------------------------------------
NET INCOME (LOSS) $ 3,033,886 $ (8,022,929) $ - $ (4,989,043)
=====================================================================
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
22
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
--------------- --------------- --------------- ---------------
OPERATING ACTIVITIES
Net income (loss) $ 3,033,886 $ (8,022,929) $ - $ (4,989,043)
Noncash items in net income (loss):
Depreciation 24,068,488 8,296,122 - 32,364,610
Amortization - goodwill and other assets 639,119 681,084 - 1,320,203
Loss on impairment of assets 450,000 - - 450,000
Amortization of gain on sale leasebacks (182,961) - - (182,961)
Deferred lease expenses 1,118,629 (10,067) - 1,108,562
Amortization of prepaid leases 692,874 450,154 - 1,143,028
Deferred income tax expense (3,203,579) - - (3,203,579)
Amortization of debt discount and premium (14,254) - - (14,254)
Amortized compensation - stock options 388,742 - - 388,742
(Gain) loss on sale of assets (1,433,798) 3,264,884 - 1,831,086
Equity in loss of affiliates 1,370,803 85,761 - 1,456,564
Minority interests in income (loss) of subsidiaries 521,766 (1,217,535) - (695,769)
Amortization of deferred revenues (6,380,397) - - (6,380,397)
Cash provided by (used for) operating working capital:
Inventories 102,838 79,789 - 182,627
Co-op advertising and other receivables (6,790,877) 5,041,434 - (1,749,443)
Prepaid expenses and other (84,267) (95,322) - (179,589)
Accounts payable and accrued expenses (14,116,883) 619,315 - (13,497,568)
Other long-term liabilities 49,632 117,085 - 166,717
Income tax receivable (1,622,200) 63,268 - (1,558,932)
---------------------------------------------------------------------
Net cash provided by (used for) operating activities (1,392,439) 9,353,043 - 7,960,604
INVESTING ACTIVITIES
Additions to theatre properties and equipment (13,800,414) (222,141) - (14,022,555)
Sale of theatre properties and equipment 3,848,379 94,158 - 3,942,537
Decrease (increase) in other assets, investments in
and advances to affiliates (2,608,976) 3,254,010 - 645,034
---------------------------------------------------------------------
Net cash provided by (used for) investing activities (12,561,011) 3,126,027 - (9,434,984)
FINANCING ACTIVITIES
Decrease in long-term debt (20,690,351) (7,299,816) - (27,990,167)
Increase in long-term debt 38,011,413 2,795,149 - 40,806,562
Minority investment in subsidiaries, net 4,164 (3,239,796) - (3,235,632)
---------------------------------------------------------------------
Net cash provided by (used for) financing activities 17,325,226 (7,744,463) - 9,580,763
EFFECT OF EXCHANGE RATE CHANGES ON CASH 144,592 (237,442) - (92,850)
---------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 3,516,368 4,497,165 - 8,013,533
CASH AND CASH EQUIVALENTS:
Beginning of period 1,636,348 18,203,646 - 19,839,994
---------------------------------------------------------------------
End of period $ 5,152,716 $ 22,700,811 $ - $ 27,853,527
=====================================================================
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
23
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: August 14, 2001
/s/Alan W. Stock
Alan W. Stock
President
/s/Robert Copple
Robert Copple
Chief Financial Officer
24