THIS COPY IS A COPY OF THE QUARTERLY REPORT ON FORM 10-Q FILED ON NOVEMBER 15,
1996 PURSUANT TO RULE 201 TEMPORARY HARDSHIP EXEMPTION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission file number 33-77444
CINEMARK USA, INC.
(Exact name of registrant as specified in its charter)
Texas 75-2206284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7502 Greenville Ave., Suite 800, LB-9, Dallas, Texas 75231
(Address of principal executive offices) (Zip Code)
(214) 696-1644
(Registrant's telephone number including area code)
_______________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 ____ The Registrant became subject to the filing requirements
of the Securities Exchange Act of 1934 on June 10, 1992.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
1,500 shares of Class A Common Stock as of November 13, 1996
238,365 shares of Class B Common Stock (including options to
acquire 5,893 shares of Class B Common Stock exercisable
within 60 days of such date) as of November 13, 1996
CINEMARK USA, INC. AND SUBSIDIARIES
Index
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1996 (unaudited)
and December 31, 1995 3
Condensed Consolidated Statements of Income
(unaudited) for the three and nine month
periods ended September 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash
Flows (unaudited) for the nine month
periods ended September 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
PART II OTHER INFORMATION
Item 5. Other Information 11
Item 6(b). Reports on Form 8-K 11
SIGNATURES 15
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------------------------------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $15,071,431 $13,649,724
Temporary cash investments 282,026 275,126
Inventories 1,375,707 1,061,580
Tax and other receivables 9,031,337 4,241,479
-------------------------------------------
Total current assets 25,760,501 19,227,909
THEATRE PROPERTIES AND EQUIPMENT 400,797,073 287,542,090
Less accumulated depreciation and amortization (74,750,560) (63,059,873)
-------------------------------------------
Theatre properties and equipment - net 326,046,513 224,482,217
OTHER ASSETS:
Certificates of deposit 1,636,677 1,822,954
Investments in and advances to affiliates 5,746,404 4,275,602
Intangible assets - net 6,031,126 7,718,292
Deferred charges and other - net 15,060,449 10,220,127
-------------------------------------------
Total other assets 28,474,656 24,036,975
-------------------------------------------
TOTAL $380,281,670 $267,747,101
===========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $379,667 $377,737
Accounts payable and accrued expenses 38,674,820 36,239,365
Notes payable to related party 0 2,051,642
Income taxes payable and deferred 0 1,648,629
-------------------------------------------
Total current liabilities 39,054,487 40,317,373
LONG-TERM LIABILITIES:
12% senior notes - Cinemark USA, Inc. 1,630,000 125,000,000
9.625% senior subordinated notes - Cinemark USA, Inc. 199,118,417
12% senior subordinated notes-Cinemark Mexico (USA), Inc. 25,710,900 20,549,249
Other long-term debt, less current portion 43,493,822 50,516,320
Deferred lease expenses 11,654,249 9,811,038
Theatre development advance 769,657 1,125,703
Deferred income taxes 4,146,117 4,296,211
-------------------------------------------
Total long-term liabilities 286,523,162 211,298,521
MINORITY INTERESTS IN SUBSIDIARIES 1,442,244 4,786,165
SHAREHOLDERS' EQUITY :
Class A common stock, $.01 par value; 10,000,000 shares
authorized, 1,500 shares issued and outstanding 15 30
Class B common stock, no par value; 1,000,000 shares
authorized, 232,472 shares issued 49,529,943 10,967,419
Additional paid-in capital 7,869,528 6,604,037
Unearned compensation - stock options (1,775,805) (2,848,738)
Retained earnings 27,832,578 27,161,692
Treasury stock, 54,791 Class B shares (20,000,000) (20,000,000)
Cumulative foreign currency translation adjustment (10,194,482) (10,539,398)
-------------------------------------------
Total shareholders' equity 53,261,777 11,345,042
-------------------------------------------
TOTAL $380,281,670 $267,747,101
===========================================
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
REVENUES:
Admissions $59,662,112 $55,209,765 $157,070,386 $138,037,892
Concessions 33,458,048 31,207,179 86,964,258 77,583,474
Other 4,039,222 3,217,417 11,428,384 10,226,817
------------ ------------ ------------- -------------
Total 97,159,382 89,634,361 255,463,028 225,848,183
COSTS AND EXPENSES:
Cost of operations:
Film rentals 31,577,169 28,241,775 78,492,838 67,342,053
Concession supplies 5,171,222 5,096,595 14,195,192 13,529,903
Salaries and wages 13,323,204 11,150,736 34,586,807 31,172,401
Facility leases 9,489,796 7,806,969 25,433,526 23,081,961
Advertising 1,995,898 2,029,489 6,168,604 5,527,062
Utilities and other 13,124,220 11,430,330 36,084,609 30,445,945
------------ ------------ ------------- -------------
Total 74,681,509 65,755,894 194,961,576 171,099,325
General and administrative expenses 5,236,610 5,018,456 16,636,133 14,158,971
Depreciation and amortization (Note 2) 8,301,874 4,409,638 16,973,399 11,514,512
------------ ------------ ------------- -------------
Total 88,219,993 75,183,988 228,571,108 196,772,808
------------ ------------ ------------- -------------
OPERATING INCOME 8,939,389 14,450,373 26,891,920 29,075,375
OTHER INCOME (EXPENSE):
Interest expense (4,759,510) (3,925,830) (14,111,297) (13,831,905)
Amortization of debt issue cost (78,863) (164,887) (402,563) (494,660)
Amortization of bond discount (60,498) (41,995) (151,622) (121,588)
Interest Income 382,255 401,764 690,054 1,333,060
Other gains and losses (373,306) 0 3,322,906 (634,268)
Foreign currency exchange gain (loss) 45,619 (96,361) (3,221) (46,293)
Minority interests in subsidiaries 73,940 (43,671) 120,518 (111,612)
Equity in income of affiliates 1,015,672 270,929 1,417,171 537,054
------------ ------------ ------------- -------------
Total (3,754,691) (3,600,051) (9,118,054) (13,370,212)
------------ ------------ ------------- -------------
INCOME BEFORE INCOME TAXES 5,184,698 10,850,322 17,773,866 15,705,163
AND EXTRAORDINARY ITEMS
INCOME TAXES 2,552,957 4,341,872 7,978,470 6,558,899
------------ ------------ ------------- -------------
INCOME BEFORE EXTRAORDINARY ITEMS 2,631,741 6,508,450 9,795,396 9,146,264
EXTRAORDINARY ITEMS:
Loss on early extinguishments of debt, net of
income tax benefits of $5,748,322 and $6,083,007 respectively (8,789,825) (9,124,510)
------------ ------------ ------------- -------------
NET INCOME (LOSS) ($6,158,084) $6,508,450 $670,886 $9,146,264
============ ============ ============= =============
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Before extraordinary item $14.00 $39.62 $53.85 $55.90
============ ============ ============= =============
Net income (loss) ($32.76) $39.62 $3.69 $55.90
============ ============ ============= =============
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 187,987 164,264 181,898 163,611
============ ============ ============= =============
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
1995
OPERATIONS:
Net Income $670,886 $9,146,264
Loss on early extinguishments of debt 15,207,517
Noncash items in net income :
Depreciation 14,046,142 10,201,226
Amortization 3,481,442 1,929,534
Deferred lease expenses 1,843,211 1,143,500
Deferred income tax expense (150,094) 1,823,500
Debt issued for accrued interest 2,006,371 122,471
Amortized compensation - stock options 932,110 1,080,361
Equity in income of affiliate (1,417,171) (537,054)
Minority interests (120,518) 111,612
Loss on sale of assets 344,740 289,171
Cash from (used for) operating working capital:
Inventories (314,127) 39,767
Tax and other receivables (3,484,665) (1,077,456)
Accounts payable and accrued expenses 2,435,455 723,920
Income taxes payable (1,648,629) 1,229,608
------------- ------------
Net cash from operations 33,832,670 26,226,424
INVESTING ACTIVITIES:
Additions to theatre properties (115,955,178) (50,113,967)
(Increase) decrease in temporary cash investments (6,900) 3,232,875
Increase in deferred issue costs and other assets (9,368,778) (4,550,710)
(Increase) decrease in advances to affiliates (53,631) 1,756,331
------------- ------------
Net cash used for investing activities (125,384,487) (49,675,471)
FINANCING ACTIVITIES:
Decrease in long-term debt (200,890,568) (9,018,805)
Increase in long-term debt 70,500,000 29,000,000
Decrease in notes payable to related parties (2,086,513) (533,562)
Net proceeds from common stock issuance 38,562,509
Proceeds from senior subordinated notes issuance 199,106,000
Debt extinguishment costs (12,135,438)
Sale of common stock warrants-minority interest 1,324,132
Distribution of partnership capital to minority interest (200,000)
Increase (decrease) in additional paid in capital (71,336) 302,625
Decrease in theatre development advance (356,046) (370,808)
------------- ------------
Net cash from financing activities 92,628,608 20,503,582
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 344,916 (1,607,909)
------------- ------------
DECREASE IN CASH AND CASH EQUIVALENTS 1,421,707 (4,553,374)
CASH AND CASH EQUIVALENTS:
Beginning of period 13,649,724 26,574,074
------------- ------------
End of period $15,071,431 $22,020,700
============= ============
SUPPLEMENTAL INFORMATION:
Cash paid for interest $14,766,429 $11,749,172
============= ============
Cash paid for income taxes $6,251,631 $3,239,631
============= ============
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim Financial Statements
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.
These financial statements should be read in conjunction with the audited
annual financial statements and the notes thereto for the year ended December
31, 1995 included in the Annual Report filed on Form 10-K by the Company under
the Securities Exchange Act of 1934 on March 31, 1996.
Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results to be achieved for the full year.
2. Depreciation and amortization include a $2.4 million charge pursuant to
Statement of Financial Accounting Standard No. 121 (FASB 121). In accordance
with FASB 121, the Company wrote down the assets of certain theatres to their
realizable value which exceeded their carrying value. The impairment was the
result of changes in market conditions that occurred during the quarter.
3. Subsequent Events
On October 17, 1996, the Company sold its 84.4% interest in 2-Day Video,
Inc., a 21 store chain of video superstores. As a result of the sale the
Company will recognize an after tax gain of approximately $5.7 million.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
The following table presents certain income statement items as a
percentage of revenues.
% of Revenues
---------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenues:
Admissions 61.4 61.6 61.5 61.1
Concessions 34.4 34.8 34.0 34.4
Other 4.2 3.6 4.5 4.5
Total revenues 100.0 100.0 100.0 100.0
Cost of operations 76.9 73.4 76.3 75.8
General and
administrative expenses 5.4 5.6 6.5 6.3
Depreciation and
amortization 8.5 4.9 6.6 5.1
Operating income 9.2 16.1 10.6 12.8
Interest expense 5.0 4.6 5.7 6.4
Income before income taxes
extraordinary items 5.3 12.1 7.0 7.0
Net income (loss) (6.3) 7.3 .3 4.1
Revenues
Revenues for the quarter ended September 30, 1996 increased to $97.2 million
from $89.6 million for the quarter ended September 30, 1995, an 8.4% increase.
The Company generated revenues for the nine months ended September 30, 1996
(the "1996 period") of $255.5 million compared to $225.8 million for the nine
months ended September 30, 1995 (the "1995 period"), a 13.1% increase. The
increase in revenues for the third quarter is primarily attributable to a
10.4% increase in attendance as the result of the net addition of 129 screens
since the third quarter of 1995 and for the 1995 period is attributable a
15.2% increase in attendance as the result of a strong industry performance
during the first two quarters of 1996, compared to the first two quarters of
1995, and the additional screens. Revenues per average screen increased 3.36%
to $196,661 in the 1996 period from $190,268 in the 1995 period.
Cost of Operations
Cost of operations, as a percentage of revenues, increased to 76.9% in the
third quarter of 1996 from 73.4% in the third quarter of 1995. The increase as
a percentage of revenues resulted from increases during the quarter in film
rentals as a percentage of admission revenues to 52.9% in 1996 from 51.2% in
1995, an increase in salaries and wages as a percentage of revenues to 13.7%
in 1996 from 12.4% in 1995, an increase in facility leases as a percentage of
revenues to 9.8% in 1996 from 8.7% in 1995 and an increase in utilities and
other as a percentage of revenues to 13.5% in 1996 from 12.8% in 1995. These
increases were partially offset by a decrease during the quarter in concession
supplies as a percentage of concession revenues to 15.5% in 1996 from 16.3% in
1995.
Cost of operations as a percentage of revenues increased slightly to
76.3% in the 1996 period from 75.8% in the 1995 period. The increase during
the 1996 period as a percentage of revenues primarily resulted from an
increase during the period in film rentals as a percentage of admission
revenues to 50.0% in 1996 from 48.8% in 1995 which was partially offset by a
decrease in concession supplies as a percentage of concession revenues to
16.3% in 1996 from 17.4% in 1995.
General and Administrative Expenses
General and administrative expenses, as a percentage of revenues, decreased
to 5.4% in the third quarter of 1996 from 5.6% in the third quarter of 1995.
For the 1996 period, general and administrative costs increased, as a
percentage of revenues, to 6.5% from 6.3% for the 1995 period. The absolute
level of general and administrative expenses increased to $5.2 million in the
third quarter of 1996 from $5.0 million in the third quarter of 1995 and to
$16.6 million for the 1996 period from $14.2 million for the 1995 period. The
slight increase as a percentage of revenues, and in absolute terms, for the
quarter is attributable to the Company's expansion program. The increase for
the 1996 period is primarily the result of a $1.8 million special bonus
payment paid to key employees during the second quarter of 1996 to cover the
taxes due on the exercise of non-qualified stock options.
Depreciation and Amortization
Depreciation and amortization increased $3.9 million in the third quarter of
1996 to $8.4 million. The increase includes a $2.4 million charge pursuant to
Statement of Financial Accounting Standards No. 121 (FASB 121). In accordance
with FASB 121, the Company wrote down the assets of certain theatres to their
realizable value which exceeded their carrying value. The impairment was the
result of changes in market conditions that occurred during the quarter.
Depreciation and amortization before the affect of FASB 121 increased 34.2%
($1.5 million) for the third quarter of 1996. During the same period net
theatre property and equipment increased 55.7%.
For the 1996 period, depreciation and amortization before the FASB 121
adjustment increased 26.7% to $14.6 million from $11.5 million in 1995. The
increases are a result of the net addition of $143.4 million in theatre
property and equipment since the third quarter of 1995. 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.
Interest Expense
Interest costs incurred, including amortization of debt issue cost and debt
discount, increased 12.4% during the third quarter of 1996 to $6.2 million
(including capitalized interest to properties under construction) from $5.6
million in the third quarter of 1995 (including capitalized interest).
Interest costs for the 1996 period, including amortization of debt issue cost
and debt discount, increased 9.5% to $17.4 million (including capitalized
interest) from $15.9 million in the 1995 period. The increase in interest
costs incurred for the third quarter of 1996 and 1996 period was due
principally to an increase in average debt outstanding resulting from
borrowings under the Credit Facility.
Income Taxes
Income taxes decreased to $2.6 million for the third quarter of 1996 from
$4.3 million in the third quarter of 1995, and the Company's effective tax
rate for the third quarter of 1996 was 49.2% compared to 40.0% for the third
quarter of 1995. Income taxes increased to $8.0 million for the 1996 period
from $6.6 million in the 1995 period, resulting primarily from the increase in
income before taxes. The effective rate for the 1996 period increased to
44.9% from 41.8% in the 1995 period. The changes were primarily a result of
the relative level of goodwill amortization and foreign losses. The effective
tax rates reflect the full reserve of the potential tax benefit associated
with the loss incurred by Cinemark Mexico.
Other Gains and Losses
Other gains and losses for the 1996 period of $3.3 million is primarily
attributable to a gain from the settlement of litigation.
Extraordinary Items
In the third quarter of 1996, the Company issued $200 million aggregate
principle of 9-5/8 Senior Subordinated Notes, a portion of the proceeds of
$193.2 million (net of discount, fees and expenses) were used to repurchase
98.7% of the Company's $125 million 12% Senior Notes at a price of $1,098.33
per $1,000 principal amount. As a result, an extraordinary loss of $8.9
million (net of related tax benefit) was recognized in connection with the
premium paid and the write-off of the unamortized debt issue cost associated
with the Senior Notes repurchased.
The 1996 period also includes an extraordinary loss of $.3 million (net of
related tax benefit) which was recognized in connection with the write-off of
the Company's existing bank line of credit which was replaced with a new
revolving and term credit facility in February 1996.
Net Income
Net income before extraordinary items of $2.6 million for the third quarter
of 1996 and net income of $6.5 million for the third quarter of 1995 included
the consolidated losses of Cinemark Mexico of $.6 million (net of minority
interest) and $.6 million (net of minority interest), respectively. Net
income before extraordinary items of $9.8 million for the 1996 period and $9.1
million for the 1995 period included the consolidated losses of Cinemark
Mexico of $2.2 million (net of minority interest) and $2.1 million (net of
minority interest), respectively.
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 64% of the screens operated by the
Company having been built in the last six and half years. The Company's
investing activities have been principally in connection with new theatre
openings and acquisitions of existing theatres and theatre circuits. From
January 1, 1996 to November 13, 1996, the Company has opened in the U.S. nine
theatres (124 screens) and has fifteen theatres (199 screens) under
construction. In addition, as of November 13, 1996, the Company has six
theatres (99 screens) scheduled to begin construction during the remainder of
1996 or in 1997. The Company currently estimates that its capital
expenditures for the development of these screens in 1996 and 1997 will be
approximately $110 million and $85 million, respectively. As of November 13,
1996, the Company had expended approximately $81.6 million toward the
development of these screens. Actual expenditures for theatre development and
acquisitions during 1996 are subject to change based upon the availability of
attractive opportunities for expansion of the Company's theatre circuit.
On August 15, 1996, the Company issued $200 million of Senior
Subordinated Notes due 2008 (the "Subordinated Notes"). The Subordinated
Notes bear interest at the rate of 9-5/8% per annum, payable semi-annually on
February 1 and August 1 of each year. The Subordinated 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
Subordinated Notes (net of discount, fees and expenses) were approximately
$193.2 million. The proceeds from the Subordinated Notes were used to
repurchase 98.7% of the Company's $125 million 12% Senior Notes due 2002
("Senior Notes") pursuant to a tender offer which expired on August 15, 1996.
The Senior Notes were purchased at a premium of the $1,098.33 (including a
consent fee of $25) per $1,000 principal amount, plus accrued and unpaid
interest up to the date of repurchase. Excess proceed were utilized to reduce
borrowings under the Company's Credit Facility and for general corporate
purposes.
On February 14, 1996, the Company replaced its existing bank line of
credit with a revolving and term credit agreement (the "Credit Facility"),
which has a final maturity of 2003 and provides for borrowing availability of
up to $175 million. Any amounts borrowed by the Company under the Credit
Facility prior to February 13, 1999 will be borrowed on a revolving basis. On
February 13, 1999, any outstanding revolving borrowings under the Credit
Facility will be converted into a term loan. The term loan will be payable
quarterly beginning June 30, 1999 with 11.25%, 18.75%, 23.75% and 36.25% of
the initial principal amount of the term loan due in 1999, 2000, 2001 and
2002, respectively. Any remaining principal amount of the term loan is due and
payable on February 13, 2003. As of November 13, 1996, the Company had
borrowed $51.0 million under the Credit Facility.
In 1992, the Company formed Cinemark International to explore theatre
development opportunities outside the United States. As of November 13, 1996,
the Company has contributed $31 million to the capital of Cinemark
International to fund theatre development principally in Latin America.
Cinemark International plans to invest up to an additional $40 million in
international ventures, principally in Latin America, over the next two to
three years. 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 1993, the Company incorporated Cinemark de Mexico, S.A. de C.V.
("Cinemark de Mexico") as an indirect subsidiary of Cinemark International to
pursue new development opportunities in Mexico. At November 13, 1996, the
Company operated eleven theatres (114 screens) and had two theatres (25
screens) under commitment with executed leases. In 1993 and 1994, Cinemark
Mexico, which is the direct parent of Cinemark de Mexico, issued $22.4 million
principal amount of 12% Senior Subordinated Notes due 2003 (the "Cinemark
Mexico Old Notes") with detachable warrants.
On September 30, 1996, Cinemark Mexico exchanged new notes (New Notes) in
exchange for the Cinemark Mexico Old Notes. The New Notes are Senior
Subordinated Notes due 2003 with an annual stated interest rate of 12% payable
semi-annually on February 1 and August 1. Cinemark Mexico has the ability to
issue additional notes, subject to the same terms as the New Notes, in payment
of interest due on any of the semi-annual interest payment dates through
February 1, 2000. If the Company elects to exercise this option, the interest
rate for the applicable semi-annual period for which the additional bonds are
issued is accruable at 13% rather than 12%. The election is at the discretion
of Cinemark Mexico and applies to all outstanding bonds for the relevant
semiannual interest period. The Indenture governing the New Notes is the same
as the old indenture with certain modifications. The Indenture requires
Cinemark Mexico to maintain a Cash Flow Coverage Ratio (as defined in the
Indenture) of 2.0 to 1.0 beginning after December 31, 1999.
As part of the exchange agreement the note holders agreed to receive
additional notes in payment of the accrued interest due on the Cinemark Mexico
Old Notes for the period February 1 1996 through the date of the exchange.
The interest for this period was paid at the rate of 13% per annum ($2.0
million of New Notes were issued). Additionally, Cinemark Mexico repurchased
the majority of its outstanding warrants (94.1%) for the issuance of $1.3
million of additional New Notes. Also, Cinemark International contributed an
additional $10 million of equity to Cinemark Mexico pursuant to the exchange.
At November 13, 1996, Cinemark International owned 97.1% (96.5% on a
fully diluted basis including the exercise of the warrants) of the common
stock of Cinemark Mexico. The remaining 2.9% was owned by a corporation
controlled by Mexican citizens. The Cinemark Mexico Indenture also allows for
the incurrence by Cinemark Mexico of $10 million of additional senior debt. On
December 4, 1995, Cinemark Mexico entered into the Mexico Senior Credit
Facility with Cinemark International, allowing it to borrow $10 million from
Cinemark International. As of November 13, 1996, Cinemark Mexico had borrowed
$9 million under the Mexico Senior Credit Facility.
Cinemark International entered into a joint venture agreement in
November 1992 with a Chilean theatre operator. Cinemark Chile, S.A. ("Cinemark
Chile") currently operates two theatres (13 screens), and as of November 13,
1996, had one theatre (12 screens) under commitment. In December 1995,
Cinemark entered into a joint venture agreement with Argentine theatre
operators to develop multiplex theatres in Argentina. In 1996 Cinemark LTDA, a
Brazilian company ("Cinemark Brazil"), was organized as an indirect subsidiary
of Cinemark International. Cinemark Brazil will develop modern multiplex
theatres in Brazil. Cinemark Brazil plans to begin construction on its first
theatre within the next 30 days.
PART II. Other Information
Item 5. Other Information
Supplemental schedules specified by the Senior Notes indenture:
Condensed Consolidating Balance Sheet
(unaudited) as of September 30, 1996
Condensed Consolidating Statement of
Income (unaudited) for the nine months
ended September 30, 1996
Condensed Consolidating Statement of
Cash Flow (unaudited) for the nine months
ended September 30, 1996
Item 6(b) Reports on Form 8-K
No reports have been filed by Registrant during the
quarter for which this report is filed.
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(Unaudited)
Restricted Cinemark II
Group Group Eliminations TOTAL
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $12,862,552 $2,208,879 $ - $15,071,431
Temporary cash investments 282,026 282,026
Inventories 1,278,251 97,456 1,375,707
Tax and other receivables 9,342,684 12,407,727 (12,719,074) 9,031,337
------------------ ---------------- ----------------- ----------------
Total current assets 23,483,487 14,996,088 (12,719,074) 25,760,501
THEATRE PROPERTIES AND EQUIPMENT 373,418,504 27,378,569 400,797,073
Less accumulated depreciation and amortization (72,738,193) (2,012,367) (74,750,560)
------------------ ---------------- ----------------- ----------------
Theatre properties and equipment - net 300,680,311 25,366,202 326,046,513
OTHER ASSETS:
Certificates of deposit 1,636,677 1,636,677
Investments in and advances to affiliates 16,927,729 4,518,629 (15,699,954) 5,746,404
Intangible assets - net 8,380,693 (2,349,567) 6,031,126
Deferred charges and other - net 10,653,397 4,407,052 15,060,449
------------------ ---------------- ----------------- ----------------
Total other assets 37,598,496 8,925,681 (18,049,521) 28,474,656
------------------ ---------------- ----------------- ----------------
TOTAL $361,762,294 $49,287,971 ($30,768,595) $380,281,670
================== ================ ================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $379,667 $ - $ - $379,667
Accounts payable and accrued expenses 46,370,038 2,304,782 ($10,000,000) 38,674,820
Income taxes payable 0 0
------------------ ---------------- ----------------- ----------------
Total current liabilities 46,749,705 2,304,782 (10,000,000) 39,054,487
LONG-TERM LIABILITIES:
12% senior notes-Cinemark USA, Inc. 1,630,000 1,630,000
9.625% senior subordinated notes - Cinemark USA, Inc. 199,118,417 199,118,417
12% senior subordinated notes-Cinemark Mexico (USA), Inc. 25,710,900 25,710,900
Other long-term debt, less current portion 43,493,822 43,493,822
Deferred lease expenses 11,354,739 299,510 11,654,249
Notes payable to related party 188 2,238,288 (2,238,476)
Theatre development advance 769,657 769,657
Deferred income taxes 4,340,423 286,292 (480,598) 4,146,117
------------------ ---------------- ----------------- ----------------
Total long-term liabilities 260,707,246 28,534,990 (2,719,074) 286,523,162
MINORITY INTERESTS IN SUBSIDIARIES 1,043,566 398,678 1,442,244
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, 232,472 shares issued 49,529,943 1,000 (1,000) 49,529,943
Additional paid-in capital 7,869,528 31,014,208 (31,014,208) 7,869,528
Unearned compensation - stock options (1,775,805) (1,775,805)
Retained earnings (deficit) 27,832,578 (2,744,981) 2,744,981 27,832,578
Treasury stock, 54,791 Class B shares (20,000,000) (20,000,000)
Cumulative foreign currency translation adjustment (10,194,482) (10,220,706) 10,220,706 (10,194,482)
------------------ ---------------- ----------------- ----------------
Total shareholders' equity 53,261,777 18,049,521 (18,049,521) 53,261,777
------------------ ---------------- ----------------- ----------------
TOTAL $361,762,294 $49,287,971 ($30,768,595) $380,281,670
================== ================ ================= ================
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Restricted Cinemark II
Group Group Eliminations TOTAL
REVENUES:
Admissions $146,092,810 $10,977,576 $ - $157,070,386
Concessions 81,199,283 5,764,975 86,964,258
Other 12,094,963 162,390 (828,969) 11,428,384
------------------ ---------------- ------------- ------------------
Total 239,387,056 16,904,941 (828,969) 255,463,028
COSTS AND EXPENSES:
Cost of operations:
Film rentals 73,680,568 4,812,270 78,492,838
Concession supplies 12,239,446 1,955,746 14,195,192
Salaries and wages 32,536,756 2,050,051 34,586,807
Facility leases 23,348,162 2,085,364 25,433,526
Advertising 5,841,765 326,839 6,168,604
Utilities and other 33,862,281 2,222,328 36,084,609
------------------ ---------------- ------------- ------------------
Total 181,508,978 13,452,598 0 194,961,576
General and administrative expenses 15,487,438 1,977,664 (828,969) 16,636,133
Depreciation and amortization 15,833,664 1,242,386 (102,651) 16,973,399
------------------ ---------------- ------------- ------------------
Total 212,830,080 16,672,648 (931,620) 228,571,108
------------------ ---------------- ------------- ------------------
OPERATING INCOME 26,556,976 232,293 102,651 26,891,920
OTHER INCOME (EXPENSE):
Interest expense (11,914,417) (2,196,880) (14,111,297)
Amortization of debt issue costs and debt discount (338,596) (215,589) (554,185)
Interest Income 427,781 262,273 690,054
Other gains 3,322,906 3,322,906
Foreign currency exchange loss 0 (3,221) (3,221)
Minority interests (87,167) 207,685 120,518
Equity in income (loss) of affiliates (667,566) 1,088,838 995,899 1,417,171
------------------ ---------------- ------------- ------------------
Total (9,257,059) (856,894) 995,899 (9,118,054)
------------------ ---------------- ------------- ------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 17,299,917 (624,601) 1,098,550 17,773,866
INCOME TAXES 7,504,521 473,949 7,978,470
------------------ ---------------- ------------- ------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 9,795,396 (1,098,550) 1,098,550 9,795,396
EXTRAORDINARY ITEMS:
Loss on early extinguishments of debt, net of
income tax benefit of $6,083,007 (9,124,510) 0 (9,124,510)
------------------ ---------------- ------------- ------------------
NET INCOME (LOSS) $670,886 ($1,098,550) $1,098,550 $670,886
================== ================ ============= ==================
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Restricted Cinemark II
Group Group Eliminations TOTAL
OPERATIONS:
Net income (loss) $670,886 ($1,098,550) $1,098,550 $670,886
Loss on early extinguishments of debt 15,207,517 15,207,517
Noncash items in net income:
Depreciation 12,805,580 1,240,562 14,046,142
Amortization 3,366,680 217,413 (102,651) 3,481,442
Deferred lease expenses 1,745,616 97,595 1,843,211
Deferred income tax expense (436,386) 286,292 (150,094)
Debt issued for accrued interest 34,871 1,971,500 2,006,371
Amortized compensation - stock option 932,110 932,110
Equity in income (loss) of affiliate 770,217 (1,088,838) (1,098,550) (1,417,171)
Minority interests 87,167 (207,685) (120,518)
Loss on sale of assets 344,740 344,740
Cash used for operating working capital 7,371,249 (11,983,349) 1,600,134 (3,011,966)
------------------ ---------------- ------------- ------------------
Net cash from (used for) operations 42,900,247 (10,565,060) 1,497,483 33,832,670
INVESTING ACTIVITIES:
Additions to theatre properties (107,800,820) (8,154,358) (115,955,178)
Increase in temporary cash investments 0 (6,900) (6,900)
Increase in deferred issue costs and other assets (9,301,956) (169,473) 102,651 (9,368,778)
(Increase) decrease in advances to affiliates (9,929,192) (124,439) 10,000,000 (53,631)
------------------ ---------------- ------------- ------------------
Net cash used for investing activities (127,031,968) (8,455,170) 10,102,651 (125,384,487)
FINANCING ACTIVITIES:
Decrease in long-term debt (200,890,568) (200,890,568)
Increase in long-term debt 70,500,000 70,500,000
Increase (decrease) in notes payable to related parties (2,086,513) 1,600,134 (1,600,134) (2,086,513)
Net proceeds from common stock issuance 38,562,509 38,562,509
Proceeds from senior subordinated notes issuance 199,106,000 199,106,000
Debt extinguishment costs (12,135,438) (12,135,438)
Increase in additional paid-in-capital (670,377) 10,599,041 (10,000,000) (71,336)
Decrease in theatre development advance (356,046) (356,046)
------------------ ---------------- ------------- ------------------
Net cash from financing activities 92,029,567 12,199,175 (11,600,134) 92,628,608
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 0 344,916 344,916
------------------ ---------------- ------------- ------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,897,846 (6,476,139) 0 1,421,707
CASH AND CASH EQUIVALENTS:
Beginning of period 4,964,706 8,685,018 13,649,724
------------------ ---------------- ------------- ------------------
End of period $12,862,552 $2,208,879 $15,071,431
================== ================ ============= ==================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $13,421,049 $1,345,380 $14,766,429
================== ================ ============= ==================
Cash paid for income taxes $6,251,631 $6,251,631
================== ================ ============= ==================
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: November 13, 1996
/Jeffrey J. Stedman/
Jeffrey J. Stedman
Vice President and
Chief Financial Officer