UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 and 333-11895
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 May 12, 1997
184,589 shares of Class B Common Stock (including options to
acquire 6,645 shares of Class B Common Stock exercisable
within 60 days of such date) as of May 12, 1997
CINEMARK USA, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 (UNAUDITED)
AND DECEMBER 31, 1996 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) FOR THE THREE MONTH
PERIODS ENDED MARCH 31, 1997 AND 1996 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) FOR THE THREE MONTH
PERIODS ENDED MARCH 31, 1997 AND 1996 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 12
ITEM 6(B). REPORTS ON FORM 8-K 12
SIGNATURES 16
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 15,778,562 $ 14,081,226
Temporary cash investments 304,408 301,408
Inventories 1,531,224 1,296,323
Tax and other receivables 9,118,075 11,270,453
-------------------------------
Total current assets 26,732,269 26,949,410
THEATRE PROPERTIES AND EQUIPMENT 476,501,504 450,842,912
Less accumulated depreciation and amortization (78,474,686) (73,421,992)
-------------------------------
Theatre properties and equipment - net 398,026,818 377,420,920
OTHER ASSETS:
Certificates of deposit 1,525,852 1,525,852
Investments in and advances to affiliates 15,459,037 6,049,992
Intangible assets - net 5,206,986 5,417,049
Deferred charges and other - net 16,894,882 15,542,244
-------------------------------
Total other assets 39,086,757 28,535,137
-------------------------------
TOTAL $ 463,845,844 $ 432,905,467
===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 994,981 $ 1,002,313
Accounts payable and accrued expenses 45,367,669 58,969,423
Income taxes payable and deferred 2,982,481 --
-------------------------------
Total current liabilities 49,345,131 59,971,736
LONG-TERM LIABILITIES:
Revolving credit agreement 105,000,000 70,000,000
12% senior notes - Cinemark USA, Inc. 1,630,000 1,630,000
9.625% senior subordinated notes - Cinemark USA, Inc. 199,155,667 199,137,042
12% senior subordinated notes-Cinemark Mexico (USA), Inc. 26,821,300 25,710,900
Deferred lease expenses 11,957,902 11,580,629
Theatre development advance and other 447,829 845,357
Deferred income taxes 5,799,503 5,926,609
-------------------------------
Total long-term liabilities 350,812,201 314,830,537
MINORITY INTERESTS IN SUBSIDIARIES 1,506,750 740,582
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, 233,176 shares issued 49,536,710 49,536,710
Additional paid-in capital 9,182,880 9,182,880
Unearned compensation - stock options (2,240,969) (2,434,717)
Retained earnings 37,504,798 32,391,591
Treasury stock, 55,232 and 54,965 Class B shares
at cost, respectively (20,653,868) (20,184,416)
Cumulative foreign currency translation adjustment (11,147,804) (11,129,451)
-------------------------------
Total shareholders' equity 62,181,762 57,362,612
-------------------------------
TOTAL $ 463,845,844 $ 432,905,467
===============================
See accompanying Notes to Condensed Consolidated Financial Statements.
3
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED MARCH 31,
1997 1996
REVENUES:
Admissions $ 64,993,000 $ 45,223,088
Concessions 35,200,205 24,642,015
Other 2,789,039 3,860,576
------------------------------
Total 102,982,244 73,725,679
COSTS AND EXPENSES:
Cost of operations:
Film rentals 31,280,794 20,583,089
Concession supplies 5,420,860 4,322,254
Salaries and wages 12,988,452 9,809,227
Facility leases 9,143,746 8,003,834
Advertising 2,926,454 2,131,164
Utilities and other 14,195,285 10,756,692
------------------------------
Total 75,955,591 55,606,260
General and administrative expenses 5,144,489 4,255,857
Depreciation and amortization 5,316,516 4,354,984
------------------------------
Total 86,416,596 64,217,101
------------------------------
OPERATING INCOME 16,565,648 9,508,578
OTHER INCOME (EXPENSE):
Interest expense (7,224,465) (4,928,553)
Amortization of debt issue cost (174,509) (158,814)
Amortization of bond discount (18,625) (45,085)
Interest Income 262,389 167,484
Other gains and losses 4,785 --
Foreign currency exchange gain (loss) 32,863 (14,374)
Minority interests in subsidiaries 26,239 55,388
Equity in income of affiliates 111,691 157,220
-------------------------------
Total (6,979,632) (4,766,734)
-------------------------------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS 9,586,016 4,741,844
INCOME TAXES 4,472,809 1,890,205
-------------------------------
INCOME BEFORE EXTRAORDINARY ITEMS 5,113,207 2,851,639
EXTRAORDINARY ITEMS:
Loss on early extinguishments of debt, net of
income tax benefit of $273,834 -- (334,685)
------------------------------
NET INCOME $ 5,113,207 $ 2,516,954
==============================
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Before extraordinary item $ 27.21 $ 16.82
==============================
Net income $ 27.21 $ 14.85
==============================
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 187,933 169,515
==============================
See accompanying Notes to Condensed Consolidated Financial Statements.
4
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
1997 1996
OPERATIONS:
Net Income $ 5,113,207 $ 2,516,954
Loss on early extinguishments of debt -- 608,519
Noncash items in net income:
Depreciation 5,054,744 3,549,958
Amortization 436,281 1,008,925
Deferred lease expenses 377,273 352,145
Amortization of prepaid leases 114,282 --
Deferred income tax expense (127,106) --
Debt issued for accrued interest 1,110,400 34,871
Amortization of debt discount 18,625 --
Amortized compensation - stock options 193,748 325,607
Equity in income of affiliate (111,691) (157,220)
Minority interests (26,239) (55,388)
Other gains (5,618) --
Cash from (used for) operating working capital:
Inventories (234,901) 12,087
Tax and other receivables 2,152,378 (624,118)
Accounts payable and accrued expenses (13,601,754) (2,051,593)
Income taxes payable 2,982,481 (195,000)
----------------------------
Net cash from operations 3,446,110 5,325,747
INVESTING ACTIVITIES:
Additions to theatre properties (25,655,857) (23,906,425)
Increase in temporary cash investments (3,000) (3,500)
Increase in deferred issue costs and other assets (1,693,138) (1,691,430)
Increase in advances to affiliates (9,297,354) (248,138)
----------------------------
Net cash used for investing activities (36,649,349) (25,849,493)
FINANCING ACTIVITIES:
Decrease in long-term debt (7,932) (35,006,703)
Increase in long-term debt 35,000,000 14,500,000
Decrease in notes payable to related parties -- (2,086,513)
Net proceeds from common stock issuance -- 38,561,000
Purchase of treasury stock (469,452) --
Minority investment in subsidiaries, net 792,407 --
Decrease in theatre development advance (396,095) (356,046)
----------------------------
Net cash from financing activities 34,918,928 15,611,738
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (18,353) 360,420
----------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,697,336 (4,551,588)
CASH AND CASH EQUIVALENTS:
Beginning of period 14,081,226 13,649,724
----------------------------
End of period $ 15,778,562 $ 9,098,136
============================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 10,001,479 $ 2,716,638
============================
Cash paid for income taxes $ 61,378 $ 1,771,739
============================
See accompanying Notes to Condensed Consolidated Financial Statements.
5
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, 1996 included in the Annual Report filed on Form 10-K by the Company under
the Securities Exchange Act of 1934 on March 31, 1997.
Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results to be achieved for the full year.
2. FAS 52 - HIGHLY INFLATIONAL ECONOMIES
Beginning in 1997, generally accepted accounting principles require that
the U.S. dollar be used as the functional currency of the Company's Mexican
subsidiary for U.S. reporting purposes. As a result, fluctuations in the
peso during 1997 affecting the Company's investment in Mexico to be charged
to exchange gain or loss rather than to the cumulative adjustment account.
3. FAS 128 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share", which will be effective for the Company for the quarter and annual
period ended December 31, 1997. SFAS No. 128 requires expanded disclosure of
earnings per share, including presentation of basic and diluted earnings per
share computations for income from continuing operations. The Company's
computations of primary and fully diluted earnings per share under APB Opinion
No. 15 for the three months ended March 31, 1997 and 1996 approximate the
computation of diluted earnings per share under SFAS No. 128.
6
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
MARCH 31,
1997 1996
Revenues:
Admissions 63.1 61.3
Concessions 34.2 33.4
Other 2.7 5.2
--- ---
Total revenues 100.0 100.0
Cost of operations 73.8 75.4
General and administrative expenses 5.0 5.8
Depreciation and amortization 5.2 5.9
Operating income 16.1 12.9
Interest expense 7.0 7.0
Income before income taxes
and extraordinary items 9.3 6.4
Net income 5.0 3.4
REVENUES
Revenues for the quarter ended March 31, 1997 increased to $103.0 million
from $73.7 million for the quarter ended March 31, 1996, an 39.7% increase. The
increase in revenues for the first quarter is primarily attributable to a 27.9%
increase in attendance as the result of the net addition of 224 screens since
the first quarter of 1996 and strong industry performance during the first
quarter of 1997. Revenues were also positively affected by a combined increase
of 11.8% in admission and concession revenues per patron. Revenues per average
screen increased 18.8% to $70,151 in the 1997 period from $59,075 in the 1996
period.
COST OF OPERATIONS
Cost of operations, as a percentage of revenues, decreased to 73.8% in the
first quarter of 1997 from 75.4% in the first quarter of 1996. The decrease as
a percentage of revenues resulted from decreases during the quarter in
concession supplies as a percentage of concession revenues to 15.4% in 1997
from 17.5% in 1996, a decrease in salaries and wages as a percentage of
revenues to 12.6% in 1997 from 13.3% in 1996, a decrease in facility leases as
a percentage of revenues to 8.9% in 1997 from 10.9% in 1996 and a decrease in
utilities and other as a percentage of revenues to 13.8% in 1997 from 14.6% in
1996. These decreases were partially offset by an increase during the quarter
in film rentals as a percentage of admission revenues to 48.1% in 1997 from
45.5% in 1996.
7
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, as a percentage of revenues,
decreased to 5.0% in the first quarter of 1997 from 5.8% in the first quarter
of 1996. The absolute level of general and administrative expenses increased to
$5.1 million in the first quarter of 1997 from $4.3 million in the first
quarter of 1996. The decrease, as a percentage of revenues, is attributed to a
larger revenue base resulting from screen additions and a strong slate of films
in the quarter. The increase in general and administrative expenses is
attributed to costs (primarily salaries and wages) associated with the
Company's expansion program.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased 22.1% to $5.3 million in the first
quarter of 1997 from $4.4 million in the first quarter of 1996. The increase is
a result of the net addition of $153.2 million in theatre property and
equipment since the first quarter of 1996, a 62.6% 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.
INTEREST EXPENSE
Interest costs incurred, including amortization of debt issue cost and
debt discount, increased 37.6% during the first quarter of 1997 to $7.8 million
(including capitalized interest to properties under construction) from $5.7
million in the first quarter of 1996 (including capitalized interest). The
increase in interest costs incurred for the first quarter of 1997 was due
principally to an increase in average debt outstanding resulting from
borrowings under the Company's Credit Facility and Senior Subordinated Notes.
INCOME TAXES
Income taxes increased to $4.5 million for the first quarter of 1997 from
$1.9 million in the first quarter of 1996. The Company's effective tax rate for
the first quarter of 1997 was 46.7% compared to 40.0% for the first quarter of
1996. The change in the effective tax rate was 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.
NET INCOME
Net income of $5.1 million for the first quarter of 1997 and net income of
$2.5 million for the first quarter of 1996 included the consolidated losses of
Cinemark International of $.7 million (net of minority interest) and $.6
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 65% of the screens operated by the Company
having been built in the 1990's. The Company's investing activities have been
principally in connection with new theatre openings and acquisitions of
existing theatres and theatre circuits. During 1997, the Company has opened in
the U.S. four theatres (43 screens). As of May 12, 1997, the Company expects to
open an additional 13 theatres (180 screens) in the U.S. during 1997 of which
8
9 theatres (134 screens) are under construction. Certain of these theatres
will be megaplexes which may cost in excess of $15 million per theatre.
The Company currently estimates that its capital expenditures for the
development of these screens in 1997 will be approximately $110 million.
As of May 12, 1997, the Company had expended approximately $19.9 million
toward the development of these screens. Actual expenditures for theatre
development and acquisitions during 1997 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 proceeds
were utilized to reduce borrowings under the Company's Credit Facility and for
general corporate purposes.
On December 12, 1996, the Company replaced its existing credit facility
with the new credit facility ("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 $225.0 million in the aggregate. The Credit Facility is a reducing
revolving credit facility at the end of each quarter during the calendar
year 2000, 2001, 2002 and 2003, requiring reductions in the aggregate
commitment in the amount of $8,437,500, $11,250,000, $14,062,500 and
$22,500,000, respectively. The Company is required to prepay all loans
outstanding in excess of the aggregate commitment as a majority of the issued
and outstanding capital stock of the Company. As of May 12, 1997, the Company
had borrowed $120 million under the Credit Facility. 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 May 12, 1997, the interest
rate was 7.06%.
In 1992, the Company formed Cinemark International, Inc. (f/k/a
Cinemark II, Inc.) ("Cinemark International") to develop and acquire theatres
in international markets. As of May 12, 1997, the Company has contributed
$48.7 million to the capital of Cinemark International to fund theatre
development principally in Latin America. Cinemark International plans
to invest up to an additional $50 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 of May 12, 1997, Cinemark
International and New Wave Investments AVV, an unaffiliated Aruba corporation
owned by Mexican citizens ("New Wave"), own 95.6% (95.0% on a fully diluted
basis, including the exercise of outstanding warrants) and 4.4% (4.4% on a
9
fully diluted basis, including the exercise of outstanding warrants),
respectively, of the common stock of Cinemark Mexico. At of May 12, 1997,
the Company operated eleven theatres (114 screens) and had three theatres
(35 screens) under commitment with executed leases which will begin
construction during the remainder of 1997. 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 with
detachable warrants.
Cinemark International entered into a joint venture agreement in November
1992 with a Chilean theatre operator. Cinemark Chile, S.A. currently operates
two theatres (13 screens), and as of May 12, 1997, plans to begin construction
on three theatres (32 screens) during the remainder of 1997. In December 1995,
Cinemark entered into a joint venture agreement with Argentine theatre
operators to develop state-of-the-art multiplex theatres in Argentina. The
joint venture's business is conducted through Cinemark Argentina, S.A., which
is owned by Cinemark Argentina Holdings, S.A. Cinemark International owns 50%
of Cinemark Argentina Holdings, S.A. Cinemark Argentina opened its first
theatre (8 screens) on May 8, 1997 and plans to begin construction on three
additional theatres (27 screens) during 1997. In January 1997, Cinemark
International and its Chilean partner entered into a joint venture agreement to
develop state-of-the-art multiplex theatres in Peru. The joint venture conducts
its business through Cinemark del Peru, S.A., which is 50% owned by Cinemark
International and 50% owned by Cinemark's Chilean partner. Cinemark del Peru,
S.A. expects to open one theatre (12 screens) during 1997.
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 open
its first theatre (12 screens) in the second quarter of 1997. Additionally,
Cinemark Brazil expects to begin construction on six theatres (64 screens)
during 1997.
In September 1996, Cinemark International entered into a joint venture
agreement with a prominent Ecuadorian company, to develop state-of-the-art
multiplex theatres in Ecuador. The joint venture conducts its business through
Cinemark del Ecuador, S.A. ("Cinemark Ecuador") which is 60% owned by Cinemark
International. Cinemark Ecuador expects to open two theatres (16 screens)
during 1997.
In March 1997, Cinemark International entered into a joint venture
agreement with Shochiku Co., Ltd., a Japanese distributor, exhibitor and
producer of movies ("Shochiku") to develop state-of-the-art multiplex theatres
in Japan. The joint venture will conduct its business through Shochiku Cinemark
Theatres, which is 26.7% owned by Cinemark International, 26.7% owned by
Shochiku, and the remaining 46.6% owned by a consortium of prominent Japanese
companies. Shochiku Cinemark Theatres opened its first theatre (7 screens) in
March 1997.
Cinemark Mexico Exchange Offer
As of September 30, 1996, Cinemark Mexico had outstanding (i) $22.4
million aggregate principal amount of Cinemark Mexico Notes and (ii) warrants
to purchase 379,073 shares of common stock of the Company (the "Warrants"). On
September 30, 1996, Cinemark Mexico completed the Exchange Offer pursuant to
which Cinemark Mexico and the holders of all of the Cinemark Mexico Notes
exchanged all of the Cinemark Mexico Notes for a new issuance of the New Mexico
Notes. The form and terms of the New Mexico Notes are identical in all material
respects to the Cinemark Mexico Notes except that interest on the New Mexico
Notes may, on each interest payment date from February 1, 1997 through and
including February 1, 2000, be paid at the option of Cinemark Mexico in cash or
through the issuance of additional notes of the same series
10
(the "Additional Notes"). If the Company elects to pay accrued interest in
Additional Notes in lieu of cash, interest during the relevant interest period
shall accrue at the rate of 13% per annum. Holders of Warrants to purchase
22,222 shares of Common Stock of Cinemark Mexico elected not to participate
in the Exchange Offer. The purpose of the Exchange Offer was to exchange New
Securities for all outstanding Cinemark Mexico Notes in order to improve
Cinemark Mexico's and Cinemark de Mexico's financial and operating flexibility.
The Company exercised its option to pay Additional Notes for the interest
period ended February 1, 1997.
In connection with the Exchange Offer, the Company obtained the consent
of the holders of the Cinemark Mexico Notes to amend the Indenture. The Company
executed that certain Third Supplemental Indenture dated September 30, 1996
(the "Third Supplemental Indenture") which, among other things, (i) provided
for the issuance of the New Mexico Notes and the Additional Notes and (ii)
amended certain restrictions relating to financial ratios with which the
Company must comply. 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.
11
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Supplemental schedules specified by the Senior Notes indenture:
Condensed Consolidating Balance Sheet
(unaudited) as of March 31, 1997
Condensed Consolidating Statement of
Income (unaudited) for the three months
ended March 31, 1997
Condensed Consolidating Statement of Cash
Flow (unaudited) for the three months
ended March 31, 1997
ITEM 6(B) REPORTS ON FORM 8-K
No reports have been filed by Registrant during the quarter for
which this report is filed.
12
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 1997
(Unaudited)
Restricted Unrestricted
Subsidiaries Subsidiaries Eliminations TOTAL
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,213,529 $ 9,565,033 $ -- $ 15,778,562
Temporary cash investments -- 304,408 -- 304,408
Inventories 1,217,736 313,488 -- 1,531,224
Tax and other receivables 24,271,387 3,153,598 (18,306,910) 9,118,075
----------------------------------------------------------------
Total current assets 31,702,652 13,336,527 (18,306,910) 26,732,269
THEATRE PROPERTIES AND EQUIPMENT 439,977,260 36,524,244 -- 476,501,504
Less accumulated depreciation and amortization (75,769,772) (2,704,914) -- (78,474,686)
----------------------------------------------------------------
Theatre properties and equipment - net 364,207,488 33,819,330 -- 398,026,818
OTHER ASSETS:
Certificates of deposit 1,525,852 -- -- 1,525,852
Investments in and advances to affiliates 14,244,448 14,178,470 (12,963,881) 15,459,037
Intangible assets - net 7,488,119 -- (2,281,133) 5,206,986
Deferred charges and other - net 11,452,181 5,442,701 -- 16,894,882
----------------------------------------------------------------
Total other assets 34,710,600 19,621,171 (15,245,014) 39,086,757
----------------------------------------------------------------
TOTAL $ 430,620,740 $ 66,777,028 $ (33,551,924) $ 463,845,844
================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 994,981 $ -- $ -- $ 994,981
Accounts payable and accrued expenses 40,362,543 21,862,840 (16,857,714) 45,367,669
Income taxes payable 2,982,481 -- -- 2,982,481
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Total current liabilities 44,340,005 21,862,840 (16,857,714) 49,345,131
LONG-TERM LIABILITIES:
Senior credit agreement 105,000,000 -- -- 105,000,000
12% senior notes-Cinemark USA, Inc. 1,630,000 -- -- 1,630,000
9.625% senior subordinated notes - Cinemark USA, Inc. 199,155,667 -- -- 199,155,667
12% senior subordinated notes-Cinemark Mexico (USA), Inc. -- 26,821,300 -- 26,821,300
Deferred lease expenses 11,544,267 413,635 -- 11,957,902
Theatre development advance 447,829 -- -- 447,829
Deferred income taxes 5,951,158 1,297,541 (1,449,196) 5,799,503
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Total long-term liabilities 323,728,921 28,532,476 (1,449,196) 350,812,201
MINORITY INTERESTS IN SUBSIDIARIES 370,052 1,136,698 -- 1,506,750
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, 233,176 shares issued 49,536,710 1,000 (1,000) 49,536,710
Additional paid-in capital 9,182,880 31,014,208 (31,014,208) 9,182,880
Unearned compensation - stock options (2,240,969) -- -- (2,240,969)
Retained earnings (deficit) 37,504,798 (4,597,181) 4,597,181 37,504,798
Treasury stock, 55,232 Class B shares (20,653,868) -- -- (20,653,868)
Cumulative foreign currency translation adjustment (11,147,804) (11,173,013) 11,173,013 (11,147,804)
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Total shareholders' equity 62,181,762 15,245,014 (15,245,014) 62,181,762
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TOTAL $ 430,620,740 $ 66,777,028 $ (33,551,924) $ 463,845,844
================================================================
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
13
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
Restricted Unrestricted
Subsidiaries Subsidiaries Eliminations TOTAL
REVENUES:
Admissions $ 60,798,004 $ 4,194,996 $ -- $ 64,993,000
Concessions 32,946,080 2,254,125 -- 35,200,205
Other 2,850,446 255,926 (317,333) 2,789,039
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Total 96,594,530 6,705,047 (317,333) 102,982,244
COSTS AND EXPENSES:
Cost of operations:
Film rentals 29,404,679 1,876,115 -- 31,280,794
Concession supplies 4,618,876 801,984 -- 5,420,860
Salaries and wages 12,175,843 812,609 -- 12,988,452
Facility leases 8,309,023 834,723 -- 9,143,746
Advertising 2,822,898 103,556 -- 2,926,454
Utilities and other 13,130,597 1,064,688 -- 14,195,285
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Total 70,461,916 5,493,675 -- 75,955,591
General and administrative expenses 4,550,605 911,217 (317,333) 5,144,489
Depreciation and amortization 5,074,533 276,200 (34,217) 5,316,516
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Total 80,087,054 6,681,092 (351,550) 86,416,596
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OPERATING INCOME 16,507,476 23,955 34,217 16,565,648
OTHER INCOME (EXPENSE):
Interest expense (6,249,575) (974,890) -- (7,224,465)
Amortization of debt issue costs and debt discount (166,403) (26,731) -- (193,134)
Interest Income 63,192 199,197 -- 262,389
Other gains 4,785 -- -- 4,785
Foreign currency exchange gain -- 32,863 -- 32,863
Minority interests (7,876) 34,115 -- 26,239
Equity in income (loss) of affiliates (574,986) 61,691 624,986 111,691
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Total (6,930,863) (673,755) 624,986 (6,979,632)
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INCOME (LOSS) BEFORE INCOME TAXES 9,576,613 (649,800) 659,203 9,586,016
INCOME TAXES 4,463,406 9,403 -- 4,472,809
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NET INCOME (LOSS) $ 5,113,207 $ (659,203) $ 659,203 $ 5,113,207
================================================================
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
14
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
Restricted Unrestricted
Subsidiaries Subsidiaries Eliminations TOTAL
OPERATIONS:
Net income (loss) $ 5,113,207 $ (659,203) $ 659,203 $ 5,113,207
Noncash items in net income (loss):
Depreciation 4,779,152 275,592 -- 5,054,744
Amortization 443,159 27,339 (34,217) 436,281
Deferred lease expenses 295,680 81,593 -- 377,273
Amortization of prepaid leases -- 114,282 -- 114,282
Deferred income tax (expense) benefit (2,773,484) 1,197,182 1,449,196 (127,106)
Debt issued for accrued interest -- 1,110,400 -- 1,110,400
Amortization of debt discount 18,625 -- -- 18,625
Amortized compensation - stock option 193,748 -- -- 193,748
Equity in income (loss) of affiliate 609,203 (61,691) (659,203) (111,691)
Minority interests 7,876 (34,115) -- (26,239)
Other gains (5,618) -- -- (5,618)
Cash from (used for) operating working capital (21,301,271) 14,048,671 (1,449,196) (8,701,796)
-------------------------------------------------------------
Net cash from (used for) operations (12,619,723) 16,100,050 (34,217) 3,446,110
INVESTING ACTIVITIES:
Additions to theatre properties (18,432,255) (7,223,602) -- (25,655,857)
Increase in temporary cash investments -- (3,000) -- (3,000)
Decrease (increase) in deferred issue costs
and other assets 81,764 (1,809,119) 34,217 (1,693,138)
Decrease (increase) in advances to affiliates 1,862 (9,299,216) -- (9,297,354)
-------------------------------------------------------------
Net cash used for investing activities (18,348,629) (18,334,937) 34,217 (36,649,349)
FINANCING ACTIVITIES:
Decrease in long-term debt (7,932) -- -- (7,932)
Increase in long-term debt 35,000,000 -- -- 35,000,000
Purchase of treasury stock (469,452) -- -- (469,452)
Minority investment in subsidiaries, net -- 792,407 -- 792,407
Decrease in theatre development advance (396,095) -- -- (396,095)
-------------------------------------------------------------
Net cash from financing activities 34,126,521 792,407 -- 34,918,928
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (1,015) (17,338) -- (18,353)
-------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,157,154 (1,459,818) -- 1,697,336
CASH AND CASH EQUIVALENTS:
Beginning of period 3,056,375 11,024,851 -- 14,081,226
-------------------------------------------------------------
End of period $ 6,213,529 $ 9,565,033 -- $ 15,778,562
=============================================================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 9,997,626 $ 3,853 -- $ 10,001,479
=============================================================
Cash paid for income taxes $ 61,378 -- -- $ 61,378
=============================================================
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
CINEMARK USA, INC.
Registrant
DATE: May 12, 1997
/Jeffrey J. Stedman/
-----------------------
Jeffrey J. Stedman
Vice President and
Chief Financial Officer
16