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, 1998
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, 1998
183,814 shares of Class B Common Stock (including options to
acquire 7,012 shares of Class B Common Stock exercisable
within 60 days of such date) as of May 12, 1998
CINEMARK USA, INC. AND SUBSIDIARIES
Index
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of March 31, 1998 (unaudited)
and December 31, 1997 3
Condensed Consolidated Statements of Income
(unaudited) for the three month
periods ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash
Flows (unaudited) for the three month
periods ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II OTHER INFORMATION
Item 5. Other Information 13
Item 6(b). Reports on Form 8-K 13
SIGNATURES 17
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
(Unaudited)
--------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $59,379,969 $31,788,380
Temporary cash investments 341,156 331,156
Inventories 3,299,744 2,234,231
Receivables from affiliates and other 18,317,862 31,452,216
--------------------------------------------
Total current assets 81,338,731 65,805,983
THEATRE PROPERTIES AND EQUIPMENT 637,077,238 644,192,945
Less accumulated depreciation and amortization (103,568,475) (95,251,013)
--------------------------------------------
Theatre properties and equipment - net 533,508,763 548,941,932
OTHER ASSETS:
Certificates of deposit 1,525,852 1,525,852
Investments in and advances to affiliates 19,922,122 23,931,120
Intangible assets - net 6,197,453 4,413,301
Deferred charges and other - net 23,177,073 16,978,652
--------------------------------------------
Total other assets 50,822,500 46,848,925
--------------------------------------------
TOTAL $665,669,994 $661,596,840
============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $918,544 $380,730
Accounts payable and accrued expenses 64,636,038 76,656,443
Income taxes payable 2,632,709 -
--------------------------------------------
Total current liabilities 68,187,291 77,037,173
LONG-TERM LIABILITIES:
Senior credit agreements 62,000,000 185,000,000
Senior subordinated notes - Cinemark USA, Inc. 380,294,578 276,360,038
Deferred lease expenses 13,414,021 13,064,630
Deferred gain and other 22,228,734 2,483,533
Deferred income taxes 11,473,203 10,937,029
--------------------------------------------
Total long-term liabilities 489,410,536 487,845,230
MINORITY INTERESTS IN SUBSIDIARIES 32,839,970 26,732,561
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, 234,013 shares issued 49,537,547 49,537,547
Additional paid-in capital 9,867,974 10,201,882
Unearned compensation - stock options (2,159,769) (1,534,791)
Retained earnings 54,237,796 47,096,688
Treasury stock, 57,211 Class B shares at cost (24,198,890) (24,198,890)
Cumulative foreign currency translation adjustment (12,052,476) (11,120,575)
--------------------------------------------
Total shareholders' equity 75,232,197 69,981,876
--------------------------------------------
TOTAL $665,669,994 $661,596,840
============================================
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,
1998 1997
REVENUES:
Admissions $78,306,293 $64,993,000
Concessions 42,545,553 35,200,205
Other 3,370,197 2,789,039
---------------------------------------------------
Total 124,222,043 102,982,244
COSTS AND EXPENSES:
Cost of operations:
Film rentals 37,779,034 31,280,794
Concession supplies 6,572,624 5,420,860
Salaries and wages 14,713,094 12,988,452
Facility leases 12,541,150 9,143,746
Advertising 2,697,320 2,926,454
Utilities and other 16,213,640 14,195,285
---------------------------------------------------
Total 90,516,862 75,955,591
General and administrative expenses 7,080,937 5,144,489
Depreciation and amortization 7,698,423 5,316,516
---------------------------------------------------
Total 105,296,222 86,416,596
---------------------------------------------------
OPERATING INCOME 18,925,821 16,565,648
OTHER INCOME (EXPENSE):
Interest expense (7,725,738) (7,224,465)
Amortization of debt issue cost (165,328) (174,509)
Amortization of bond discount (35,292) (18,625)
Interest Income 1,218,477 262,389
Other gains and losses 442,158 4,785
Foreign currency exchange gain (loss) (279,734) 32,863
Minority interests in subsidiaries (351,243) 26,239
Equity in income of affiliates 215,137 111,691
---------------------------------------------------
Total (6,681,563) (6,979,632)
---------------------------------------------------
INCOME BEFORE INCOME TAXES 12,244,258 9,586,016
INCOME TAXES 5,103,150 4,472,809
---------------------------------------------------
NET INCOME $7,141,108 $5,113,207
===================================================
EARNINGS PER SHARE:
Net income
Basic $40.05 $28.49
===================================================
Diluted $38.28 $27.21
===================================================
Basic:
Weighted average common shares outstanding 178,302 179,491
===================================================
Diluted:
Weighted average common shares outstanding 178,302 179,491
Common equivalent shares for stock options 8,235 8,442
---------------------------------------------------
Weighted average shares outstanding 186,537 187,933
===================================================
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,
1998 1997
OPERATIONS:
Net Income $7,141,108 $5,113,207
Noncash items in net income:
Depreciation 7,414,717 5,054,744
Amortization 449,034 436,281
Deferred lease expenses 349,391 377,273
Amortization of prepaid leases 100,704 114,282
Deferred income tax expense 536,174 (127,106)
Debt issued for accrued interest - 1,110,400
Amortization of debt discount and premium (15,460) 18,625
Amortized compensation - stock options 221,022 193,748
Equity in income of affiliate (215,137) (111,691)
Minority interests 351,243 (26,239)
Other gains (442,158) (5,618)
Cash from (used for) operating working capital:
Inventories (1,035,477) (234,901)
Tax and other receivables 13,164,361 2,152,378
Accounts payable and accrued expenses (13,643,687) (13,601,754)
Income taxes payable 2,632,709 2,982,481
---------------------------------------------------
Net cash from operations 17,008,544 3,446,110
INVESTING ACTIVITIES:
Additions to theatre properties (105,192,681) (25,655,857)
Sale of theatre properties 131,485,148 -
Increase in deferred issue costs and other assets (8,248,689) (1,696,138)
Increase in advances to affiliates 4,224,135 (9,297,354)
---------------------------------------------------
Net cash from (used for) investing activities 22,267,913 (36,649,349)
FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes 103,950,000 -
Decrease in long-term debt (190,785,858) (7,932)
Increase in long-term debt 78,716,477 35,000,000
Investment in partnership (2,536,553) -
Purchase of treasury stock - (469,452)
Minority investment in subsidiaries, net 293,523 792,407
Decrease in theatre development advance (390,556) (396,095)
---------------------------------------------------
Net cash from (used for) financing activities (10,752,967) 34,918,928
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (931,901) (18,353)
---------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,591,589 1,697,336
CASH AND CASH EQUIVALENTS:
Beginning of period 31,788,380 14,081,226
---------------------------------------------------
End of period $59,379,969 $15,778,562
===================================================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $16,758,977 $10,001,479
===================================================
Cash paid for income taxes $10,845 $61,378
===================================================
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, 1997 included in the Annual Report filed on Form 10-K by the Company under
the Securities Exchange Act of 1934 on March 31, 1998.
Operating results for the three months ended March 31, 1998 are not
necessarily indicative of the results to be achieved for the full year.
2. FAS 130 - Comprehensive Net Income
Beginning in 1998, the Company adopted SFAS 130 "Reporting Comprehensive
Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in the financial statements.
The following components are reflected in the Company's comprehensive income:
Three Months Ended
March 31,
1998 1997
Net income $7,141,108 $5,113,207
Foreign currency translation adjustment (931,901) (18,353)
----------- -----------
Comprehensive income $6,209,207 $5,094,854
=========== ===========
6
3. Reporting Segments
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, Mexico, Brazil and Ecuador. In prior years, foreign operations
did not meet the requirements for disclosure. Information about the Company's
operations in different geographic areas for the three months ended March 31,
1998 is as follows:
Other Foreign
United States Subsidiaries Eliminations Consolidated
Total revenues $107,087,437 $17,683,384 ($548,778) $124,222,043
=============== =============== ============== ===============
Operating income $17,445,475 $1,443,809 $36,537 $18,925,821
=============== =============== ============== ===============
Identifiable assets $638,503,545 $125,227,581 ($112,488,916) $651,242,210
=============== =============== ============== ===============
7
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,
1998 1997
----------- ----------
Revenues:
Admissions 63.0 63.1
Concessions 34.3 34.2
Other 2.7 2.7
----- -----
Total revenues 100.0 100.0
Cost of operations 72.9 73.8
General and administrative expenses 5.7 5.0
Depreciation and amortization 6.2 5.2
Operating income 15.2 16.1
Interest expense 6.4 7.0
Income before income taxes 9.9 9.3
Net income 5.8 5.0
Revenues
Revenues for the quarter ended March 31, 1998 increased to $124.2 million
from $103.0 million for the quarter ended March 31, 1997, a 20.6% increase. The
increase in revenues for the first quarter is primarily attributable to a 16.1%
increase in attendance as the result of the net addition of 227 screens since
the first quarter of 1997 and a combined increase of 3.9% in admissions and
concessions per patron. Revenues per average screen increased 3.5 % to $72,602
for the first quarter of 1998 from $70,151 for the first quarter of 1997.
Cost of Operations
Cost of operations, as a percentage of revenues, decreased to 72.9% in the
first quarter of 1998 from 73.8% in the first quarter of 1997. The decrease as
a percentage of revenues resulted from decreases during the quarter in salaries
and wages as a percentage of revenues to 11.8% in 1998 from 12.6% in 1997 and a
decrease in utilities and other as a percentage of revenues to 13.1% in 1998
from 13.8% in 1997. The decreases were partially offset by an increase in
facility lease expense as a percentage of revenues to 10.1% in 1998 from 8.9%
in 1997.
8
General and Administrative Expenses
General and administrative expenses, as a percentage of revenues,
increased to 5.7% in the first quarter of 1998 from 5.0% in the first quarter
of 1997. The absolute level of general and administrative expenses increased to
$7.1 million in the first quarter of 1998 from $5.1 million in the first
quarter of 1997. The increase in general and administrative expenses is
attributed to costs (primarily salaries and wages and consulting services)
associated with the Company's expansion program.
Depreciation and Amortization
Depreciation and amortization increased 44.8% to $7.7 million in the first
quarter of 1998 from $5.3 million in the first quarter of 1997. The increase is
a result of the net addition of $127.3 million in theatre property and
equipment since the first quarter of 1997, a 32.0% 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 16.1% during the first quarter of 1998 to $9.1 million
(including capitalized interest to properties under construction) from $7.8
million (including capitalized interest) in the first quarter of 1997 (including
capitalized interest). The increase in interest costs incurred for the first
quarter of 1998 was due principally to an increase in average debt outstanding
resulting from borrowings under the Company's Credit Facility and the issuance
of the Senior Subordinated Notes.
Income Taxes
Income taxes increased to $5.1 million for the first quarter of 1998 from
$4.5 million in the first quarter of 1997. The Company's effective tax rate for
the first quarter of 1998 was 41.7% compared to 46.7% for the first quarter of
1997. The effective rates reflect a reduction in overall foreign losses which
are fully reserved and a reduction in other permanent differences, primarily
goodwill.
Net Income
Net income of $7.1 million for the first quarter of 1998 and $5.1 million
for the first quarter of 1997 included the consolidated income of Cinemark
International of $1.0 million (net of minority interest) and the consolidated
losses of Cinemark International of $.7 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.
9
The Company's theatres are typically equipped with modern projection and
sound equipment, with approximately 77% 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. As of May 12, 1998, the Company opened
in the U.S. seven theatres (110 screens), opened a four screen expansion to one
theatre and has 16 theatres (266 screens) under construction or scheduled to
begin construction by the end of 1998. Certain of these theatres will be
megaplexes which may cost in excess of $15 million per theatre. The Company
also plans to open approximately 300 screens in the U.S. in 1999. The Company
currently estimates that its capital expenditures for the development of these
approximately 680 screens in the U.S. in 1998 and 1999 will be approximately
$350 million. As of May 12, 1998, the Company had expended approximately $102.7
million toward the development of these screens. The Company plans to fund
capital expenditures for its development from cash flow from operations and
borrowings under the Credit Facility. Actual expenditures for theatre
development and acquisitions during 1998 and 1999 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 the Company's $125 million
12% Senior Notes due 2002 ("Senior Notes") pursuant to a tender offer, to
reduce borrowings under the Company's Credit Facility and for general corporate
purposes.
In January 1997, the Company repurchased an aggregate of 267 shares of
Class B common stock from a retiring employee for approximately $.5 million. In
April 1997, the Company repurchased an aggregate of 1,242 additional shares of
Class B Common Stock issued to option holders upon the exercise of options in
April 1996. The aggregate purchase price for such shares was $2.2 million. In
May and June 1997, options to acquire an aggregate of 737 shares of Class B
Common Stock were repurchased by the Company for an aggregate purchase price of
$1.3 million.
On June 26, 1997, the Company issued the Series D Notes due 2008 which
bear interest at a rate of 9-5/8% per annum, payable semi-annually on February
1 and August 1 of each year. The Series D Notes were issued at 103.0% of the
principal face amount. The net proceeds to the Company from the issuance of the
Series D Notes (net of fees and expenses) was approximately $77.1 million. The
proceeds of the Series D Notes were applied to reduce the Company's
indebtedness under the Credit Facility.
On January 14, 1998, the Company issued $105 million aggregate principal
amount of 8-1/2% Series A Senior Subordinated Notes due 2008 (the "Series A
Notes") pursuant to Rule 144A (the "Offering"). The net proceeds of the
Offering were used by the Company to reduce the Company's indebtedness under
the then existing credit facility. The Company exchanged the Series A Notes on
March 17, 1998 for 8-1/2% Series B Senior Subordinated Notes.
On February 12, 1998, the Company replaced its existing credit facility
with a reducing, revolving credit agreement ("Credit Facility") through a group
of banks for which Bank of America National Trust and Savings Association acts
as Administrative Agent. The Credit Facility provides for loans to the Company
of up to $350.0 million in the aggregate. The Credit Facility is a reducing
revolving credit facility; therefore, at the end of each quarter during the
10
calendar year 2001, 2002, 2003, 2004 and 2005, the aggregate commitment is
reduced in the amount of $8,750,000, $11,812,500, $13,125,000, $12,031,000 and
$6,562,500, respectively. 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 May 12, 1998, the Company had borrowed $70 million under the Credit
Facility and the effective interest rate on such borrowings was 6.7% per annum.
On February 24, 1998, the Company completed a sale leaseback transaction
with affiliates of Primus Capital L.L.C. (the "Sale Leaseback"). Pursuant to
the Sale Leaseback, the Company sold the land, buildings and site improvements
of twelve theatre properties to special purpose entities formed by Primus
Capital L.L.C. 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 at a fixed
aggregate monthly rental payment of $1.12 million or $13.4 million annually.
In 1992, the Company formed Cinemark International, Inc. To develop and
acquire theatres in international markets. As of May 12, 1998, Cinemark
International operated 31 theatres (306 screens) principally in Latin America.
The following table summarizes Cinemark International's holdings in each
international market, the number of theatres and screens in such markets as of
May 12, 1998 and the number of theatres and screens under construction in 1998.
Year of Ownership Operating 1998 Construction
Country Formation % Theatres/Screens Theatres/Screens
- ------- ---------------------------------------------------------------------------
Mexico 1992 95% 14 theatres (151 screens) 4 theatres (32 screens)
Chile 1992 50% 3 theatres (25 screens) 4 theatres (34 screens)
Argentina 1995 25% 3 theatres (28 screens) 3 theatres (28 screens)
Argentina 1997 100% 3 theatres (31 screens)
Brazil 1996 60% 6 theatres (64 screens) 5 theatres (55 screens)
Ecuador 1996 60% 2 theatres (16 screens)
Peru 1996 50% 1 theatre (12 screens) 2 theatres (16 screens)
Central America 1997 50% 2 theatres (10 screens) 2 theatres (14 screens)
Total 31 theatres (306 screens) 23 theatres (210 screens)
Cinemark International plans to invest up to an additional $75 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 be debt or
equity financing to be provided by third parties directly to Cinemark
International or its subsidiaries.
11
On November 18, 1997, Cinemark International executed a credit agreement
with Bank of America National Trust and Savings Association for itself and as
Administrative Agent as amended in December 1997 (the "Cinemark International
Credit Agreement"). The Cinemark International Credit Agreement is a revolving
credit facility and provides for a loan to Cinemark International of up to $30
million in the aggregate. The Cinemark International Credit Agreement is
secured by a pledge of substantially all of the stock of Cinemark Mexico and an
unconditional guaranty of Cinemark Mexico. Pursuant to the terms of the
Cinemark International Credit Agreement, funds borrowed bear interest at a rate
per annum equal to the Offshore Rate (as defined in the Cinemark International
Credit Agreement) or the Base Rate (as defined in the Cinemark International
Credit Agreement) as the case may be, plus the Applicable Margin (as defined in
the Cinemark International Credit Agreement). As of May 12, 1998 Cinemark
International has borrowed $30 million under the Cinemark International Credit
Agreement and the effective interest rate on such borrowings was 7.2% per
annum, the proceeds of which were used to repurchase all of the outstanding 12%
Senior Subordinated PIK Notes of Cinemark Mexico.
12
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, 1998
Condensed Consolidating Statement of
Income (unaudited) for the three months
ended March 31, 1998
Condensed Consolidating Statement of Cash Flow (unaudited)
for the three months ended March 31, 1998
Item 6(b). Reports on Form 8-K
No reports have been filed by Registrant during the quarter for
which this report is filed.
13
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 1998
(Unaudited)
Restricted Unrestricted
Subsidiaries Subsidiaries Eliminations TOTAL
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $38,412,917 $20,967,052 $ - $59,379,969
Temporary cash investments - 341,156 - 341,156
Inventories 1,712,087 1,587,657 - 3,299,744
Receivables from affiliates and other 2,329,761 18,066,172 (2,078,071) 18,317,862
---------------------------------------------------------------
Total current assets 42,454,765 40,962,037 (2,078,071) 81,338,731
THEATRE PROPERTIES AND EQUIPMENT 549,737,223 87,340,015 - 637,077,238
Less accumulated depreciation and amortization (97,853,130) (5,715,345) - (103,568,475)
---------------------------------------------------------------
Theatre properties and equipment - net 451,884,093 81,624,670 - 533,508,763
OTHER ASSETS:
Certificates of deposit 1,525,852 - - 1,525,852
Investments in and advances to affiliates 77,359,557 15,186,480 (72,623,915) 19,922,122
Intangible assets - net 8,341,718 - (2,144,265) 6,197,453
Deferred charges and other - net 18,499,440 4,677,633 - 23,177,073
---------------------------------------------------------------
Total other assets 105,726,567 19,864,113 (74,768,180) 50,822,500
---------------------------------------------------------------
TOTAL $600,065,425 $142,450,820 ($76,846,251) $665,669,994
===============================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $363,736 $554,808 $ - $918,544
Accounts payable and accrued expenses 58,794,556 7,919,234 (2,077,752) 64,636,038
Income taxes payable 2,632,709 - - 2,632,709
---------------------------------------------------------------
Total current liabilities 61,791,001 8,474,042 (2,077,752) 68,187,291
LONG-TERM LIABILITIES:
Senior credit agreement 32,000,000 30,000,000 - 62,000,000
Senior subordinated notes - Cinemark USA, Inc. 380,294,578 - - 380,294,578
Deferred lease expenses 12,765,810 648,211 - 13,414,021
Deferred gain and other 20,609,725 1,619,009 - 22,228,734
Deferred income taxes 11,449,439 23,764 - 11,473,203
---------------------------------------------------------------
Total long-term liabilities 457,119,552 32,290,984 - 489,410,536
MINORITY INTERESTS IN SUBSIDIARIES 5,922,675 26,917,295 - 32,839,970
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 49,537,547 1,000 (1,000) 49,537,547
Additional paid-in capital 9,867,974 92,988,088 (92,988,088) 9,867,974
Unearned compensation - stock options (2,159,769) (2,159,769)
Retained earnings (deficit) 54,237,796 (6,167,849) 6,167,849 54,237,796
Treasury stock, 57,211 Class B shares (24,198,890) - - (24,198,890)
Cumulative foreign currency translation adjustment (12,052,476) (12,052,740) 12,052,740 (12,052,476)
---------------------------------------------------------------
Total shareholders' equity 75,232,197 74,768,499 (74,768,499) 75,232,197
---------------------------------------------------------------
TOTAL $600,065,425 $142,450,820 ($76,846,251) $665,669,994
===============================================================
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Suboridinated Notes dated August 15, 1996.
14
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
Restricted Unrestricted
Subsidiaries Subsidiaries Eliminations TOTAL
REVENUES:
Admissions $ 66,229,638 $ 12,076,655 $ -- $ 78,306,293
Concessions 37,056,872 5,488,681 -- 42,545,553
Other 3,800,927 118,048 (548,778) 3,370,197
-------------------------------------------------------------
Total 107,087,437 17,683,384 (548,778) 124,222,043
COSTS AND EXPENSES:
Cost of operations:
Film rentals 32,128,479 5,650,555 -- 37,779,034
Concession supplies 4,746,307 1,826,317 -- 6,572,624
Salaries and wages 13,205,721 1,507,373 -- 14,713,094
Facility leases 10,698,890 1,842,260 -- 12,541,150
Advertising 2,145,715 551,605 -- 2,697,320
Utilities and other 14,221,762 1,991,928 (50) 16,213,640
------------------------------------------------------------
Total 77,146,874 13,370,038 (50) 90,516,862
General and administrative expenses 5,444,628 2,185,087 (548,778) 7,080,937
Depreciation and amortization 6,729,116 1,003,524 (34,217) 7,698,423
------------------------------------------------------------
Total 89,320,618 16,558,649 (583,045) 105,296,222
------------------------------------------------------------
OPERATING INCOME 17,766,819 1,124,735 34,267 18,925,821
OTHER INCOME (EXPENSE):
Interest expense (7,084,867) (640,871) -- (7,725,738)
Amortization of debt issue costs
and debt discount (184,995) (15,625) -- (200,620)
Interest Income 120,671 1,097,806 -- 1,218,477
Other gains (losses) 599,467 (157,309) -- 442,158
Foreign currency exchange loss -- (279,734) -- (279,734)
Minority interests (53,100) (298,143) -- (351,243)
Equity in income of affiliates 1,121,534 127,471 (1,033,868) 215,137
-----------------------------------------------------------
Total (5,481,290) (166,405) (1,033,868) (6,681,563)
-----------------------------------------------------------
INCOME BEFORE INCOME TAXES 12,285,529 958,330 (999,601) 12,244,258
INCOME TAXES 5,144,421 (41,271) -- 5,103,150
-----------------------------------------------------------
NET INCOME $ 7,141,108 $ 999,601 $ (999,601) $ 7,141,108
============================================================
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Suboridinated Notes dated August 15, 1996.
15
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
Restricted Unrestricted
Subsidiaries Subsidiaries Eliminations TOTAL
OPERATIONS:
Net income $7,141,108 $999,601 ($999,601) $7,141,108
Noncash items in net income:
Depreciation 6,445,625 969,092 - 7,414,717
Amortization 433,194 50,057 (34,217) 449,034
Deferred lease expenses 295,680 53,711 - 349,391
Amortization of prepaid - 100,704 - 100,704
Deferred income tax (expense) benefit 512,410 23,764 - 536,174
Amortization of debt discount and premiums (15,460) - - (15,460)
Amortized compensation - stock options 221,022 - - 221,022
Equity in income (loss) of affiliate (1,087,267) (127,471) 999,601 (215,137)
Minority interests 53,100 298,143 - 351,243
Gain on sale of assets (599,467) 157,309 - (442,158)
Cash from (used for) operating working capital (2,678,113) 3,796,019 - 1,117,906
-----------------------------------------------------------------------------------
Net cash from operations 10,721,832 6,320,929 (34,217) 17,008,544
INVESTING ACTIVITIES:
Additions to theatre properties (85,347,013) (19,845,668) - (105,192,681)
Sale of theatre properties 131,485,148 - - 131,485,148
Decrease (increase) in deferred issue costs
and other assets (9,830,175) 1,547,269 34,217 (8,248,689)
Decrease (increase) in advances to affiliates (416,120) 4,140,255 500,000 4,224,135
-----------------------------------------------------------------------------------
Net cash from (used for) investing activities 35,891,840 (14,158,144) 534,217 22,267,913
FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes 103,950,000 - - 103,950,000
Decrease in long-term debt (190,785,858) - - (190,785,858)
Increase in long-term debt 78,242,660 473,817 - 78,716,477
Investment in partnership (2,536,553) - - (2,536,553)
Minority investment in subsidiaries, net - 293,523 - 293,523
Decrease in theatre development advance (390,556) - - (390,556)
Cinemark USA investment in Cinemark
International - 500,000 (500,000) -
-----------------------------------------------------------------------------------
Net cash from (used for) financing activities (11,520,307) 1,267,340 (500,000) (10,752,967)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (23,668) (908,233) - (931,901)
-----------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 35,069,697 (7,478,108) - 27,591,589
CASH AND CASH EQUIVALENTS:
Beginning of period 3,343,220 28,445,160 - 31,788,380
-----------------------------------------------------------------------------------
End of period $38,412,917 $20,967,052 $59,379,969
===================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $16,208,463 $550,514 - $16,758,977
===================================================================================
Cash paid for income taxes $10,845 - - $10,845
===================================================================================
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Suboridinated Notes dated August 15, 1996.
16
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, 1998
/Jeffrey J. Stedman/
------------------------
Jeffrey J. Stedman
Vice President and
Chief Financial Officer
17