SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
CINEMARK USA, INC.
(Exact name of Registrant as specified in its charter)
Texas 75-2206284
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
3900 Dallas Parkway
Suite 500
Plano, Texas 75093
(Address of principal executive offices)
Registrant's Telephone Number, including area code: (972) 665-1000
Securities Registered pursuant to Section 12(b) of the Act:
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:
As of November 10, 1999, 1,500 shares of Class A Common Stock and
184,842 shares of Class B Common Stock (including options to acquire 7,980
shares of Class B Common Stock exercisable within 60 days of such date) were
outstanding.
CINEMARK USA, INC. AND SUBSIDIARIES
Index
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1999 (unaudited)
and December 31, 1998 3
Condensed Consolidated Statements of Income
(unaudited) for the three and nine month
periods ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash
Flows (unaudited) for the nine month
periods ended September 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 20
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
(Unaudited)
----------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 12,480,885 $ 25,645,868
Inventories 4,220,544 3,591,705
Co-op advertising and other receivables 19,107,264 12,414,288
Income tax receivable 3,745,956 3,032,642
Prepaid expenses and other 3,489,079 2,457,952
----------------------------------
Total current assets 43,043,728 47,142,455
THEATRE PROPERTIES AND EQUIPMENT 1,065,826,524 888,242,478
Less accumulated depreciation and amortization (173,616,523) (138,550,648
----------------------------------
Theatre properties and equipment - net 892,210,001 749,691,830
OTHER ASSETS:
Certificates of deposit - 4,056,096
Investments in and advances to affiliates 2,364,018 29,811,533
Goodwill - net 18,684,207 13,495,195
Deferred charges and other - net 54,903,525 38,475,525
----------------------------------
Total other assets 75,951,750 85,838,349
----------------------------------
TOTAL $1,011,205,479 $882,672,634
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 10,416,815 $ 337,895
Accounts payable and accrued expenses 111,201,363 94,725,816
----------------------------------
Total current liabilities 121,618,178 95,063,711
LONG-TERM LIABILITIES:
Senior credit agreements 375,868,050 251,037,528
Senior subordinated notes 380,251,816 380,273,198
Deferred lease expenses 15,786,288 14,578,747
Deferred gain on sale leaseback 4,055,111 6,803,542
Deferred income taxes 22,915,936 16,114,342
----------------------------------
Total long-term liabilities 798,877,201 668,807,357
MINORITY INTERESTS IN SUBSIDIARIES 24,292,748 43,001,950
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, 234,073 shares issued 49,537,607 49,537,607
Additional paid-in-capital 13,790,731 13,773,691
Unearned compensation - stock options (3,357,514) (4,221,326)
Retained earnings 62,953,752 58,105,217
Treasury stock, 57,211 Class B shares at cost (24,198,890) (24,198,890)
Accumulated other comprehensive income (32,308,349) (17,196,698)
-----------------------------------
Total shareholders' equity 66,417,352 75,799,616
-----------------------------------
TOTAL $1,011,205,479 $882,672,634
===================================
See accompanying Notes to Condensed Consolidated Financial Statements.
3
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1999 1998 1999 1998
--------------------------------- --------------------------------
REVENUES
Admissions $ 136,571,435 $ 103,913,412 $ 343,608,982 $ 265,366,057
Concessions 65,430,836 54,972,765 166,884,681 141,863,239
Other 8,551,785 5,738,849 23,194,450 12,591,513
---------------------------------- --------------------------------
Total 210,554,056 164,625,026 533,688,113 419,820,809
COSTS AND EXPENSES:
Cost of operations
Film rentals and advertising 73,130,909 55,512,785 183,490,925 142,467,211
Concession supplies 11,848,441 9,392,262 28,855,519 22,922,612
Salaries and wages 21,965,254 18,716,250 62,575,802 50,172,697
Facility leases 22,257,551 16,814,790 65,002,951 44,280,349
Utilities and other 27,202,248 20,353,739 74,134,044 54,740,591
--------------------------------- --------------------------------
Total 156,404,403 120,789,826 414,059,241 314,583,460
General and administrative expenses 8,378,683 8,472,756 24,879,571 23,398,154
Depreciation and amortization 13,955,873 9,634,104 37,916,476 25,495,192
Asset impairment loss 1,550,000 - 1,550,000 -
--------------------------------- --------------------------------
Total 180,288,959 138,896,686 478,405,288 363,476,806
OPERATING INCOME 30,265,097 25,728,340 55,282,825 56,344,003
OTHER INCOME (EXPENSE)
Interest expense (15,289,827) (10,889,544) (41,764,049) (29,480,236)
Amortization of debt issue cost (225,175) (168,429) (632,845) (529,911)
Amortization of bond discount (43,625) (43,625) (130,875) (122,542)
Interest income 550,260 345,721 1,834,129 2,527,511
Gain (loss) on sale of assets and other (891,712) 7,681 (891,475) 1,060,178
Foreign currency exchange gain (loss) 121,730 (389,956) 121,350 (1,098,791)
Equity in income of affiliates (35,771) 1,337,954 77,355 1,200,756
Minority interests in subsidiaries (890,448) (579,285) 100,362 415,634
---------------------------------- -------------------------------
Total (16,704,568) (10,379,483) (41,286,048) (26,027,401)
---------------------------------- -------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF AN ACCOUNTING CHANGE 13,560,529 15,348,857 13,996,777 30,316,602
Income taxes 5,253,301 5,876,811 6,179,605 11,414,880
---------------------------------- -------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
AN ACCOUNTING CHANGE 8,307,228 9,472,046 7,817,172 18,901,722
Cumulative effect of a change in an accounting principle
- net of tax benefit of $417,570 - - (2,968,637) -
---------------------------------- --------------------------------
NET INCOME $ 8,307,228 $ 9,472,046 $ 4,848,535 $ 18,901,722
================================== ================================
EARNINGS PER SHARE:
Basic:
Income before cumulative effect of an
accounting change $ 46.58 $ 53.12 $ 43.83 $ 106.01
Cumulative effect of an accounting change - - (16.64) -
---------------------------------- --------------------------------
Net Income $ 46.58 $ 53.12 $ 27.18 $ 106.01
================================== ================================
Diluted:
Income before cumulative effect of an
accounting change $ 43.32 $ 50.78 $ 40.76 $ 101.33
Cumulative effect of an accounting change - - (15.48) -
---------------------------------- --------------------------------
Net Income $ 43.32 $ 50.78 $ 25.28 $ 101.33
================================== ================================
COMMON SHARES OUTSTANDING:
Basic:
Weighted average common shares outstanding 178,362 178,302 178,362 178,302
================================== ================================
Diluted:
Weighted average common shares outstanding 178,362 178,302 178,362 178,302
Common equivalent shares for stock options 13,409 8,235 13,409 8,235
---------------------------------- --------------------------------
Weighted average shares outstanding 191,771 186,537 191,771 186,537
================================== ================================
See accompanying Notes to Condensed Consolidated Financial Statements.
4
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
--------------------------------------
OPERATING ACTIVITIES:
Net Income (loss) $ 4,848,535 $ 18,901,722
Noncash items in net income:
Depreciation 37,145,230 24,385,578
Amortization - goodwill and other assets 1,404,091 1,109,614
Loss on impairment of assets 1,550,000 -
Amortization of gain on sale leaseback (164,190) -
Deferred lease expenses 1,207,541 1,166,329
Amortization of prepaid leases 758,756 363,982
Deferred income tax expense 6,801,594 8,861,349
Amortization of debt discount and premium (21,382) (29,714)
Amortized compensation - stock options 887,662 669,875
Loss on sale of assets and other 891,475 38,613
Equity in income of affiliates (77,355) (1,200,756)
Minority interests in income (loss) of subsidiaries (100,362) (415,634)
Cumulative effect of an accounting change 3,386,207 -
Cash provided by (used for) operating working capital:
Inventories (628,839) (971,176)
Co-op advertising and other receivables (6,692,976) (4,504,814)
Prepaid expenses and other (1,789,883) 4,326,629
Accounts payable and accrued expenses 15,354,955 (9,627,967)
Income tax receivable/payable (713,314) -
---------------------------------------
Net cash provided by operating activities 64,047,745 43,073,630
INVESTING ACTIVITIES:
Additions to Theatre properties and equipment (169,383,765) (284,656,008)
Proceeds on sale of theatre properties and equipment 1,472,410 133,802,332
Decrease in certificates of deposit 4,056,096 -
Decrease in investments in and advances to affiliates 9,394,870 4,022,390
Increase in goodwill, deferred charges and other (18,727,756) (8,092,464)
--------------------------------------
Net cash used for investing activities (173,188,145) (154,923,750)
FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes - 103,950,000
Decrease in long-term debt (19,385,516) (203,446,337)
Increase in long-term debt 136,576,424 192,396,139
Minority investment in subsidiaries, net (21,103,840) 7,839,071
--------------------------------------
Net cash provided by financing activities 96,087,068 100,738,873
EFFECT OF EXCHANGE RATE CHANGES ON CASH (111,651) (67,019)
--------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,164,983) (11,178,266)
CASH AND CASH EQUIVALENTS:
Beginning of period 25,645,868 31,788,380
--------------------------------------
End of period $ 12,480,885 $ 20,610,114
======================================
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, 1998 included in the Annual Report filed on Form 10-K by the
Company under the Securities Exchange Act of 1934 on March 30, 1999.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be achieved for the full year.
2 Foreign Currency Translation
The accumulated other comprehensive income in shareholders' equity of
$32,308,349 and $17,196,698 at September 30, 1999 and December 31, 1998,
respectively, primarily relates to the unrealized adjustments from translating
the financial statements of Cinemark Brasil, S.A., Cinemark de Mexico, S.A. de
C.V. and Cinemark Chile, S.A..
In 1998, the Company was required to utilize the U.S. dollar as the
functional currency of Cinemark de Mexico for U.S. reporting purposes instead of
the peso due to the highly inflationary economy of Mexico. Thus, devaluations in
the peso during the first nine months of 1998 that affected the Company's
investment were charged to exchange gain or loss rather than to the accumulated
other comprehensive income account.
In 1999, the economy of Mexico reverted back to a non highly
inflationary status in which the peso again became the functional currency of
Cinemark de Mexico resulting in certain assets, liabilities and equity accounts
being restated at the current exchange rate. Thus, changes in the peso have been
recorded in the accumulated other comprehensive income account during the first
nine months of 1999.
3. FAS 130 - Comprehensive 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 Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
Net income $ 8,307,228 $ 9,472,046 $4,848,535 $18,901,722
Foreign currency translation adjustment (1,701,936) 100,246 (15,111,651) (7,822,687)
------------- ----------- ------------- ------------
Comprehensive income (loss) $6,605,292 $9,572,292 $(10,263,116) $11,079,035
============= =========== ============= ============
6
4. Income Taxes
Beginning January 1, 1999, management plans to reinvest the
undistributed earnings of its foreign subsidiaries located in Mexico, Peru and
Argentina. For years beginning after 1998, the Company adopted the exception
allowed under APB Opinion #23 for these foreign subsidiaries. As a result,
deferred U.S. federal income taxes are not provided on the undistributed
earnings of these foreign subsidiaries. The cumulative amount of undistributed
earnings on which the Company has not recognized income taxes is $6.9 million.
5. Accounting for Start-up Activities and Organization Costs
On January 1, 1999 the Company adopted Statement of Position (SOP) 98-5
requiring start-up activities and organization costs to be expensed as incurred.
The Company's practice had been to capitalize organization costs associated with
the organization of new entities as well as costs associated with forming
international joint ventures as deferred charges and to amortize them over the
anticipated life of the respective entity or venture. The adoption of this new
accounting pronouncement resulted in the aggregate write-off of the unamortized
organization costs of $3,386,207 on January 1, 1999. This charge was recorded as
a cumulative effect of a change in accounting principle as a one-time non-cash
charge to income of $2,968,637 (net of tax) in the first quarter of 1999 as
follows:
United States $152,966
Mexico -
Brazil 552,488
Other Foreign Countries 2,263,183
-----------
$2,968,637
===========
6. Supplemental Cash Flow Information
The following is provided as supplemental information to the
consolidated statement of cash flows:
Nine Months Ended September 30,
1999 1998
Cash paid for interest $53,093,218 $37,797,868
Cash paid for income taxes $ 2,506,399 $ 3,750,500
In December 1998, the Company acquired an additional 45% equity interest
in its Chilean operating Company for $7.625 million. As a result of the
additional equity interest acquired, Chile was consolidated with the Company's
operations effective January 1, 1999. The assets and liabilities of this former
equity interest that are included in the consolidation as of January 1, 1999 are
as follows:
Theatre properties and equipment, net $26,350,993
Goodwill 3,621,050
Net other assets 3,371,491
Long-term debt (17,718,534)
------------
Investment in affiliate $15,625,000
============
The Company's Central American operating entities (Nicaragua, Costa
Rica, El Salvador and Honduras) were consolidated with the Company's operations
effective January 1, 1999. The assets and liabilities of these former equity
interests that are included in the consolidation as of January 1, 1999 are as
follows:
Theatre properties and equipment, net $4,306,176
Net other assets 693,824
Minority interest (2,495,000)
-----------
Investment in affiliate $2,505,000
===========
7
7. 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, Canada, Argentina, Brazil, Central America, Chile,
Ecuador and Peru. Revenues and long-lived assets in the United States and other
countries for the nine months ended September 30 are as follows:
Other Foreign
United States Mexico Brazil Countries Eliminations Consolidated
1999
Total revenues $417,705,026 $41,860,493 $29,081,211 $47,093,441 $(2,052,058) $533,688,113
=============== =============== =============== ================ ============== ==================
Long-lived assets,
net $706,172,108 $58,760,210 $50,162,857 $77,114,826 - $892,210,001
=============== =============== =============== ================ ============== ==================
1998
Total revenues $360,772,455 $34,984,815 $21,159,308 $4,031,173 $(1,126,942) $419,820,809
=============== =============== =============== ================ ============== ==================
Long-lived assets,
net $550,723,801 $34,408,937 $57,906,759 $25,150,171 - $668,189,668
=============== =============== =============== ================ ============== ==================
8
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 % of Revenues
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Admissions 64.9 63.1 64.4 63.2
Concessions 31.1 33.4 31.3 33.8
Other 4.0 3.5 4.3 3.0
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Cost of operations 74.3 73.4 77.6 74.9
General and administrative expenses 4.0 5.2 4.7 5.6
Depreciation and amortization 6.6 5.8 7.1 6.1
Asset impairment loss 0.8 0.0 0.3 0.0
Operating income 14.4 15.6 10.4 13.4
Interest expense 7.3 6.6 7.8 7.0
Income (loss) before income taxes and
Cumulative effect of an accounting change 6.4 9.3 2.6 7.2
Income (loss) before cumulative effect
Of an accounting change 3.9 5.8 1.5 4.5
Net income (loss) 3.9 5.8 0.9 4.5
Revenues
Revenues for the quarter ended September 30, 1999 increased to $210.6
million from $164.6 million for the quarter ended September 30, 1998, a 27.9%
increase. The Company generated revenues for the nine month period ended
September 30, 1999 (the "1999 period") of $533.7 million as compared to $419.8
million for the nine month period ended September 30, 1998 (the "1998 period"),
a 27.1% increase. The increase in revenues are primarily attributable to a 27.5%
increase in attendance in the third quarter of 1999 as compared to the third
quarter of 1998 and a 24.9% increase in attendance for the 1999 period versus
the 1998 period as the result of the net addition of 544 screens since the third
quarter of 1998. Revenues per average screen have decreased 11.6% to $83,728 for
the third quarter of 1999 as compared to $94,748 for the third quarter of 1998.
Revenues per average screen have decreased 4.2% to $221,080 for the 1999 period
from $230,836 for the 1998 period. Admissions and concessions revenues per
patron in the third quarter of 1999 and for the 1999 period remained flat as
compared to the prior year.
Cost of Operations
Cost of operations, as a percentage of revenues, increased to 74.3% in
the third quarter of 1999 from 73.4% in the third quarter of 1998. The increase
as a percentage of revenues resulted from an increase in concession supplies as
a percentage of concession revenues to 18.1% in the third quarter of 1999 from
17.1% in the third quarter of 1998 as a result of the greater number of
international theatres in operation, an increase in facility lease expense as a
percentage of revenues to 10.6% in the third quarter of 1999 from 10.2% in the
third quarter of 1998 and an increase in utilities and other expenses as a
percentage of revenues to 12.9% in the third quarter of 1999 from 12.4% in the
third quarter of 1998. These increases were partially offset by a decrease in
salaries and wages expense as a percentage of revenues to 10.4% in the third
quarter of 1999 from 11.4% in the second quarter of 1998.
9
Cost of operations, as a percentage of revenues, increased to 77.6% in
the 1999 period from 74.9% for the same period in 1998. The increase as a
percentage of revenues resulted from an increase in concession expense as a
percentage of concession revenues to 17.3% in the 1999 period from 16.2% in the
1998 period as a result of the greater number of international theatres in
operation, an increase in facility lease expense as a percentage of revenues to
12.2% in the 1999 period from 10.5% in the 1998 period partially as a result of
the two sale leaseback transactions which occurred in the first and fourth
quarters of 1998 and an increase in utilities and other expenses as a percentage
of revenues to 13.9% in the 1999 period from 13.0% in the 1998 period. These
increases were partially offset by a decrease in film rental and advertising
costs as a percentage of admissions revenues to 53.4% in the 1999 period from
53.7% in the 1998 period and a decrease in salaries and wages expense as a
percentage of revenues to 11.7% in the 1999 period from 12.0% in the 1998
period.
General and Administrative Expenses
General and administrative expenses, as a percentage of revenues,
declined to 4.0% in the third quarter of 1999 as compared to 5.2% in the third
quarter of 1998. General and administrative expenses as a percentage of revenues
also decreased in the nine month period ended September 30, 1999 to 4.7% from
5.6% for the same period in 1998. The decrease in general and administrative
expenses as a percentage of revenues is reflective of the Company's expanding
base of theatre operations.
The absolute level of general and administrative expenses increased to
$24.9 million in the 1999 period from $23.4 million in the 1998 period. The
increase in the absolute level of 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 45.8% to $14.0 million in the
third quarter of 1999 from $9.6 million in the third quarter of 1998. For the
1999 period, depreciation and amortization increased 48.6% to $37.9 million from
$25.5 million in the 1998 period. The increase is a result of the net addition
of $280 million in theatre property and equipment since the third quarter of
1998, a 35.6% 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.
Asset Impairment Loss
The Company recorded asset impairment charges of $1.55 million in the
third quarter of 1999 pursuant to Statement of Financial Standards No. 121 (FASB
121). In accordance with FASB 121, the Company wrote down the assets of certain
theatres to their fair value.
Interest Expense
Interest costs incurred, including amortization of debt issue cost and
bond discount, increased 36.7% during the third quarter of 1999 to $16.4 million
(including capitalized interest to properties under construction) from $12.0
million (including capitalized interest). Interest costs incurred in the 1999
period, including amortization of debt issue cost and bond discount, increased
34.9% to $46.0 million (including capitalized interest to properties under
construction) from $34.1 million (including capitalized interest) in the 1998
period. The increase in interest costs incurred for the third quarter of 1999
and the 1999 period was due principally to an increase in the average debt
outstanding resulting from borrowings under the Company's Credit Facility and an
increase in interest rates.
10
Income Taxes
Income tax expense of $6.2 million was recorded for the 1999 period as
compared to income tax expense of $11.4 million in the 1998 period. The
Company's effective tax rate for the 1999 period was 44.2% compared to 37.7% in
the 1998 period. The increase is due to the increase in the local country
foreign taxes and losses in certain foreign countries which are subject to a
valuation allowance.
Cumulative Effect of a Change in an Accounting Principle
The Company recorded a cumulative effect of a change in accounting
principle of $3.0 million (net of tax) in the first quarter of 1999 resulting
from the write off of the unamortized start-up activities and organization costs
due to the adoption of Statement of Position (SOP) 98-5.
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 80% 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 November 10, 1999, the Company has opened
14 theatres (218 screens) and has 7 theatres (123 screens) under construction or
scheduled to open in the United States by the end of 1999. Certain of these
theatres will be megaplexes which may cost in excess of $15 million per theatre.
The Company also plans to open approximately 175 screens in the U.S. in 2000.
The Company currently estimates that its capital expenditures for the
development of these approximately 525 screens in the U.S. in 1999 and 2000 will
be approximately $260 million. As of November 10, 1999, the Company had expended
approximately $188 million toward the development of these screens. The Company
plans to fund capital expenditures for its development from cash flow from
operations, sale leaseback transactions and borrowings under the Credit
Facility. Actual expenditures for theatre development and acquisitions during
1999 and 2000 are subject to change based upon the availability of attractive
opportunities for expansion of the Company's theatre circuit.
In August 1996, the Company issued $200 million principal amount of
Series B Senior Subordinated Notes which bear interest at a rate of 9-5/8% per
annum (the "Series B Notes"), payable semi-annually on February 1 and August 1
of each year. The Series B Notes were issued at 99.553% of the principal face
amount (a discount of $4.47 per $1,000 principal amount). The net proceeds to
the Company from the issuance of the Series B Notes (net of discount, fees and
expenses) were approximately $193.2 million. The proceeds from the Series B
Notes were used to repurchase 98.7% of the Company's $125 million aggregate
principal amount 12% Senior Notes due 2002 ( the "Senior Notes") pursuant to a
tender offer which expired on August 15, 1996. The Senior Notes were purchased
at a premium of $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 June 2, 1997 the Company redeemed the
remaining outstanding Senior Notes ($1.6 million). The Senior Notes were
redeemed at a premium of $1,060 per $1,000 principal amount, plus accrued and
unpaid interest up to the date of redemption.
In June 1997, the Company issued $75 million principal amount of Series
D Senior Subordinated Notes due 2008 which bear interest at a rate of 9-5/8% per
annum (the "Series D Notes"), payable semi-annually on February 1 and August 1
of each year. The Series D Notes were issued at 103% of the principal face
amount (a premium of $30.00 per $1,000 principal amount). The net proceeds to
the Company from the issuance of the Series D Notes (net of fees and expenses)
were approximately $77.1 million. The proceeds of the Series D Notes were
utilized to reduce the Company's indebtedness under the Credit Facility.
11
In January 1998, the Company issued $105 million aggregate principal
amount of 8-1/2% Series A Senior Subordinated Notes due 2008 which bear interest
at a rate of 8-1/2% per annum (the "Series A Notes"), payable semi-annually on
February 1 and August 1 of each year pursuant to Rule 144A (the "Offering"). The
Series A Notes were issued at 99.0% of the principal face amount (a discount of
$10.00 per $1,000 principal amount). The net proceeds of the Offering of $103.9
million (net of discount, fees and expenses) were utilized by the Company to
reduce the Company's indebtedness under the Credit Facility. The Company
exchanged the Series A Notes on March 17, 1998 for 8-1/2% Series B Senior
Subordinated Notes (the "8-1/2% Series B Notes") which have been registered
under the Securities Act of 1933, as amended.
In February 1998, the Company replaced its existing credit facility with
a reducing, revolving credit agreement (the "Credit Facility") through a group
of banks for which Bank of America National Trust and Savings Association acts
as Administrative Agent. The Credit Facility provides for loans to the Company
of up to $350 million in the aggregate.
The Credit Facility is a reducing revolving credit facility, with
commitments automatically reduced each calendar quarter by $8,750,000,
$11,812,500, $13,125,000, $12,031,000 and $6,562,500 in calendar year 2001,
2002, 2003, 2004 and 2005, 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 are secured by a pledge of a
majority of the issued and outstanding capital stock of the Company, and the
credit agreement requires that the Company maintains certain financial ratios;
restricts the payment of dividends, payment of subordinated debt prior to
maturity and issuance of preferred stock and other indebtedness; and other
restrictive covenants. Pursuant to the terms of the Credit Facility, funds
borrowed 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 November 10, 1999, the Company had borrowed $320 million
under the Credit Facility. The effective interest rate on such borrowings as of
November 10, 1999 is 8.2% per annum.
In February 1998, the Company completed a sale leaseback transaction
(the "Sale Leaseback") pursuant to which the Company sold the land, buildings
and site improvements of 12 theatre properties to special purpose entities for
an aggregate purchase price equal to approximately $131.5 million.
Simultaneously with the sale, the Company entered into operating leases for such
properties for a base term equal to approximately 20 years at a fixed aggregate
monthly rental payment of $1.1 million or $13.4 million annually.
In October 1998, the Company completed another sale leaseback
transaction (the "Second Sale Leaseback") pursuant to which the Company sold the
land, buildings and site improvements of one theatre property to a special
purpose entity for an aggregate purchase price equal to approximately $13.9
million. Simultaneously with the sale, the Company entered into an operating
lease for the property for a base term equal to approximately 20 years at a
fixed monthly rental payment of $119,000 or $1.4 annually.
12
In 1992, the Company formed Cinemark International to develop and
acquire theatres in international markets. As of November 10, 1999, Cinemark
International, through its affiliates, operated 63 theatres (564 screens)
principally in Latin America. The following table summarizes the Company's and
Cinemark International's holdings in each international market, the number of
theatres and screens in such market as of November 10, 1999 and the number of
theatres and screens under construction in 1999.
Year of Operating 1999 Planned Openings
Country Formation Ownership % Theatres/Screens Theatres/Screens
- ------- --------- ----------- ---------------- ---------------------
Mexico 1992 95% 20 theatres (192 screens)
Chile 1992 98% 11 theatres (89 screens)
Argentina 1995 100% 5 theatres (44 screens)
Argentina 1997 100% 2 theatres (15 screens)
Brazil 1996 60% 15 theatres (147 screens) 2 theatres (16 screens)
Ecuador 1996 60% 2 theatres (16 screens) existing theatre (3 screens)
Peru 1996 100% 2 theatres (21 screens)
Central America 1997 50% 7 theatres (45 screens)
United Kingdom 1998 100% N/A
Taiwan 1998 51% N/A
Colombia 1998 50% N/A
Germany 1999 100% N/A
Total 64 theatres (569 screens) 2 theatres (19 screens)
The Company, through Cinemark International and its affiliates, plans to
invest up to an additional $100 million in international ventures, principally
in Latin America, over the next 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 August 1998, the Company formed Cinemark Investments Corporation for
the purpose of financing its Brazilian operations by investing in foreign fixed
rate notes issued by Cinemark Brasil S.A., an indirect Brazilian subsidiary of
the Company. In September 1998, Cinemark Investments Corporation executed a
credit agreement with Bank of America that provides Cinemark Investments
Corporation up to $20 million in the aggregate under a revolving line of credit
facility (the Cinemark Investments Credit Agreement). The Cinemark Investments
Credit Agreement is secured by an assignment of certain fixed rate notes issued
by Cinemark Brasil S.A. to Cinemark Investments Corporation and an unconditional
guaranty by the Company. Pursuant to the terms of the Cinemark Investments
Credit Agreement, funds borrowed bear interest at a rate per annum equal to the
Offshore Rate or the Base Rate (both defined in the Cinemark Investments Credit
Agreement) as the case may be. As of November 10, 1999, Cinemark Investments
Corporation had borrowed $20 million under the Cinemark Investments Credit
Agreement, the proceeds of which were used to purchase fixed rate notes issued
by Cinemark Brasil S.A. bearing interest at 13.25%. The effective interest rate
on such borrowings as of November 10, 1999 is 8.6% per annum.
In September 1998, the Company incorporated Cinemark Theatres U.K.
Ltd., an English company, to develop state-of-the-art multiplex theatres in
the United Kingdom. Cinemark Theatres U.K. Ltd. is a wholly-owned
subsidiary of the Company. Cinemark Theatres U.K. Ltd. expects to begin
construction on 1 theatre (10 screens) in 2000.
In September 1998, Cinemark International entered into a joint venture
agreement with Core Pacific Ltd. to develop state-of-the-art multiplex theatres
in Taiwan, Republic of China. The joint venture will conduct its business
through Cinemark-Core Pacific Ltd. which is 50.5% owned by Cinemark
International and 49.5% owned by Core Pacific Ltd. Cinemark-Core Pacific Ltd.
expects to begin construction on four theatres (32 screens) during 2000.
13
In November 1998, Cinemark Mexico executed a credit agreement with Bank
of America National Trust and Savings Association for itself and as
Administrative Agent (the Cinemark Mexico Credit Agreement). The Cinemark Mexico
Credit Agreement is a revolving credit facility and provides for a loan to
Cinemark Mexico of up to $30 million in the aggregate. The Cinemark Mexico
Credit Agreement is secured by a pledge of 65% of the stock of Cinemark de
Mexico S.A. de C.V. and an unconditional guaranty by the Company. Pursuant to
the terms of the Cinemark Mexico Credit Agreement, funds borrowed bear interest
at a rate per annum equal to the Offshore Rate (as defined in the Cinemark
Mexico Credit Agreement) or the Base Rate (as defined in the Cinemark Mexico
Credit Agreement), as the case may be, plus the Applicable Margin (as defined in
the Cinemark Mexico Credit Agreement). Cinemark Mexico borrowed $30 million
under the Cinemark Mexico Credit Agreement, the proceeds of which were used to
repay an intercompany loan of Cinemark Mexico from Cinemark International.
Cinemark International used the proceeds of such repayment to repay all
outstanding indebtedness under its then existing credit facility. The effective
interest rate on such borrowings as of November 10, 1999 is 6.6% per annum.
In December 1998, Cinemark International entered entered into a joint
venture agreement with Casa Editorial El Tiempo S.A., Tempora S.A. and
Prodiscos S.A. to develop state-of-the-art multiplex theatres in Colombia.
The joint venture will conduct its business through Cinemark Colombia S.A.
which is owned 50.1% by Cinemark International, and the remaining 49.9% is
collectively owned by Casa Editorial El Tiempo S.A., Tempora S.A. and Prodiscos
S.A. Cinemark Colombia S.A. expects to begin construction on one theatre
(10 screens) during 1999.
In September 1999, Cinemark International, through its wholly owned
subsidiary Cinemark Germany GmbH, executed a lease agreement for a movie theatre
in Herne, Germany. The theatre is scheduled to open in December 2000.
In September 1999, Cinemark International acquired all of the shares of
its Argentine joint venture partner, Prodecine S.A., which held the remaining
50% of the shares of Cinemark Argentina S.A. Cinemark International paid $2.75
million in cash and delivered the following promissory notes bearing interest at
the rate of 10% per annum: (a) totalling US$2.5 million due January 2000, (b)
totalling US$2.5 million due April 2000, (c) totalling A$2.5 million pesos due
July 2000, (c) totalling A$3.5 million pesos due October 2000.
Year 2000 Compliance
The Company recognizes that the arrival of the Year 2000 poses a unique
worldwide challenge to the ability of all systems to recognize the date change
from December 31, 1999 to January 1, 2000, and like other companies, has been
assessing and updating its computer applications and business processes to
ensure their continued functionality.
The Year 2000 compliance effort undertaken by the Company was initially
structured around a process of assessment, modification and testing. At the
present time, the necessary modifications to the day-to-day operating and
reporting systems for all theatres have been successfully completed to ensure
Year 2000 compliance. The necessary modifications to the financial reporting and
operational databases associated with the U.S. corporate office and the various
international corporate offices to ensure Year 2000 compliance have also been
completed. The costs to modify these existing systems to ensure Year 2000
compliance were less than $100,000 in the aggregate.
Since the core business of the Company centers around the collection of
cash at the theatre box office, an unanticipated Year 2000 computer failure
should not have an adverse impact on the Company's ability to continue with
day-to-day operations. The impact from a system failure from a practical
standpoint should only affect the financial reporting and operational analysis
that is presently performed at the corporate office.
In the most reasonably likely worst case scenario, the Company could
return to a manual system of recording daily admissions revenues from a
day-to-day operating standpoint.
14
The Company operates a large number of geographically dispersed theatres
and has a large supplier base and believes that this will mitigate any adverse
impact. The Company has initiated formal communications with its significant
suppliers, customers and critical business partners to determine the extent to
which the Company may be vulnerable in the event that those parties fail to
properly remediate their own Year 2000 issues. The Company has taken steps to
monitor the progress made by those parties and intends to test critical system
interfaces as the Year 2000 approaches. The Company has developed appropriate
contingency plans in the event that a significant exposure is identified
relative to the dependencies on third-party systems. While the Company is not
presently aware of any such significant exposure, there can be no guarantee that
the systems of third-parties on which the Company relies will be converted in a
timely manner or that a failure to properly convert by another company would not
have a material adverse effect on the Company.
The Company also purchased a new Year 2000 compliant financial
reporting and distribution system that was made operational on January 4, 1999.
The decision to purchase this new system at a cost of more than $1 million was
made by management in order to effectively handle the increasing financial
reporting and analysis needs of the Company in the years to come as the Company
continues at its rapid growth rate.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has limited exposure to financial market risks, including
changes in interest rates and other relevant market prices. The Company does not
have any derivative financial instruments in place as of September 30, 1999.
An increase or decrease in interest rates would affect interest costs
relating to the Company's variable rate credit facilities. The Company and/or
its subsidiaries are currently parties to three such credit facilities. At
September 30, 1999, there was an aggregate of approximately $347 million of
variable rate debt outstanding under these facilities. The facilities are priced
with a variable rate based on LIBOR or a base rate, plus, in each case, an
applicable margin. The Company has no interest rate swaps or other hedging
facilities relating to these credit facilities. These facilities represent
approximately 45% of the Company's outstanding long-term debt. Changes in
interest rate do not have a direct impact on interest expense relating to the
remaining fixed rate debt facilities.
The Company is also exposed to market risk arising from changes in
foreign currency exchange rates as a result of its international operations.
Currency fluctuations result in the Company's reporting exchange gain or losses
or cumulative unrealized translation adjustments relating to its international
subsidiaries depending on the inflationary environment of the country in which
the Company operates.
15
PART II. Other Information
Item 1. Legal Proceedings
The Company currently is a defendant in certain litigation proceedings
alleging certain violations of the Americans with Disabilities Act of 1990
relating to the accessibility of certain theatre seating to patrons using
wheelchairs. In August 1998, the judge presiding over one of these cases granted
plaintiffs motion for summary judgement ruling the Company's stadium theatre
design is in violation of the ADA. The Company is appealing this ruling.
Although the Company cannot predict the outcome of the appeal or the outcome of
the other cases, management believes that the Company's potential liability with
respect to such proceedings is not material in the aggregate to the Company's
financial position, results of operations and cash flows.
Reference is also made to Item 3 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.
Item 2. Change in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
There have not been any matters submitted to a vote of security holders
during the first nine months of 1999 through the solicitation of proxies or
otherwise.
Item 5. Other Information
The Company intends that this report be governed by the "safe harbor"
provision of the Private Securities Litigation Reform Act of 1995 (the "PSLR
Act") with respect to statements that may be deemed to be forward-looking
statements under the PSLR Act. Such forward-looking statements may include, but
are not limited to, the Company and any of its subsidiaries' long-term theatre
strategy. Actual results could differ materially from those indicated by such
forward-looking statements due to a number of factors.
Item 6. Exhibits and Reports on Form 8-K
a) Supplemental schedules specified by the Senior Notes indenture:
Condensed Consolidating Balance Sheet
(unaudited) as of September 30, 1999
Condensed Consolidating Statement of
Income (unaudited) for the nine months
ended September 30, 1999
Condensed Consolidating Statement of Cash Flow
(unaudited) for the nine months ended September 30,
1999
b) Reports on Form 8-K
No reports have been filed by Registrant during the
quarter for which this report is filed.
16
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
-------------- --------------- ------------ --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,728,204 $ 3,752,681 $ - $ 12,480,885
Inventories 3,094,700 1,125,844 - 4,220,544
Co-op advertising and other receivables (13,488,917) 32,944,877 (348,696) 19,107,264
Tax receivable 3,715,812 30,144 - 3,745,956
Prepaid expenses and other 3,219,705 269,374 - 3,489,079
------------------------------------------------------------------
Total current assets 5,269,504 38,122,920 (348,696) 43,043,728
THEATRE PROPERTIES AND EQUIPMENT 965,884,147 99,942,377 - 1,065,826,524
Less accumulated depreciation and amortization (161,108,362) (12,508,161) - (173,616,523)
------------------------------------------------------------------
Theatre properties and equipment - net 804,775,785 87,434,216 - 892,210,001
OTHER ASSETS:
Certificates of deposit - - - -
Investments in and advances to affiliates 111,981,121 22,085,057 (131,702,160) 2,364,018
Goodwill - net 10,457,348 8,226,859 - 18,684,207
Deferred charges and other - net 45,975,945 8,927,580 - 54,903,525
------------------------------------------------------------------
Total other assets 168,414,414 39,239,496 (131,702,160) 75,951,750
------------------------------------------------------------------
TOTAL $ 978,459,703 $ 164,796,632 $(132,050,856) $ 1,011,205,479
==================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 276,718 $10,140,097 $ - 10,416,815
Accounts payable and accrued expenses 99,570,450 11,917,092 (286,179) 111,201,363
------------------------------------------------------------------
Total current liabilities 99,847,168 22,057,189 (286,179) 121,618,178
LONG-TERM LIABILITIES:
Senior credit agreements 334,680,439 41,187,611 - 375,868,050
Senior subordinated debt 380,251,816 - - 380,251,816
Deferred lease expenses 15,538,016 248,272 - 15,786,288
Deferred gain on sale leaseback 4,055,111 - - 4,055,111
Deferred income taxes 22,914,899 1,037 - 22,915,936
------------------------------------------------------------------
Total long-term liabilities 757,440,281 41,436,920 - 798,877,201
MINORITY INTERESTS IN SUBSIDIARIES 5,827,014 18,465,734 - 24,292,748
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, 234,073 shares issued 70,801,404 10,901,000 (32,164,797) 49,537,607
Additional paid-in-capital 13,790,731 99,599,880 (99,599,880) 13,790,731
Unearned compensation - stock options (3,357,514) - - (3,357,514)
Retained earnings 69,622,693 (6,143,941) (525,000) 62,953,752
Treasury stock, 57,211 Class B shares at cost (24,198,890) - - (24,198,890)
Distributions - (525,000) 525,000 -
Other accumulated comprehensive income (11,313,199) (20,995,150) - (32,308,349)
------------------------------------------------------------------
Total shareholders' equity 115,345,240 82,836,789 (131,764,677) 66,417,352
------------------------------------------------------------------
TOTAL $ 978,459,703 $ 164,796,632 $(132,050,856) $ 1,011,205,479
==================================================================
Note: "Restricted Group" and "Unrestricted Group" are defined in the Indenture
for the Senior Subordinated Notes.
17
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
-------------- --------------- ------------- -------------
REVENUES:
Admissions $ 304,365,878 $39,243,104 $ - $343,608,982
Concessions 153,984,726 12,899,955 - 166,884,681
Other 21,625,929 2,061,367 (492,846) 23,194,450
-----------------------------------------------------------------
Total 479,976,533 54,204,426 (492,846) 533,688,113
COSTS AND EXPENSES:
Cost of operations
Film rentals and advertising 163,756,598 19,734,327 - 183,490,925
Concession supplies 24,580,460 4,275,059 - 28,855,519
Salaries and wages 57,029,193 5,546,609 - 62,575,802
Facility leases 55,921,174 9,081,777 - 65,002,951
Utilities and other 68,640,648 5,986,242 (492,846) 74,134,044
-----------------------------------------------------------------
Total 369,928,073 44,624,014 (492,846) 414,059,241
General and administrative expenses 19,824,901 5,054,670 - 24,879,571
Depreciation and amortization 31,082,163 6,834,313 - 37,916,476
Asset impairment loss 1,550,000 - - 1,550,000
-----------------------------------------------------------------
Total 422,385,137 56,512,997 (492,846) 478,405,288
OPERATING INCOME 57,591,396 (2,308,571) - 55,282,825
OTHER INCOME (EXPENSE)
Interest expense (39,077,411) (2,686,638) - (41,764,049)
Amortization of debt issue cost (560,970) (71,875) - (632,845)
Amortization of bond discount (130,875) - - (130,875)
Dividend income 525,000 - (525,000) -
Interest income 1,193,869 640,260 - 1,834,129
Gain (loss) on sale of assets and other (1,032,535) 141,060 - (891,475)
Foreign currency exchange gain 92,719 28,631 - 121,350
Equity in income of affiliates 1,726 75,629 - 77,355
Minority interests in subsidiaries (1,340,814) 1,441,176 - 100,362
-----------------------------------------------------------------
Total (40,329,291) (431,757) (525,000) (41,286,048)
-----------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 17,262,105 (2,740,328) (525,000) 13,996,777
Income taxes 5,081,463 1,098,142 - 6,179,605
-----------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF AN ACCOUNTING CHANGE 12,180,642 (3,838,470) (525,000) 7,817,172
Cumulative effect of a change in accounting principle
- net of tax benefit (500,857) (2,467,780) - (2,968,637)
-----------------------------------------------------------------
NET INCOME $ 11,679,785 $ (6,306,250) $ (525,000) $ 4,848,535
=================================================================
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
18
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
--------------- -------------- -------------- -------------
OPERATING ACTIVITIES:
Net Income (loss) $ 11,679,785 $ (6,306,250) $ (525,000) $ 4,848,535
Noncash items in net income:
Depreciation 30,368,295 6,776,935 - 37,145,230
Amortization - goodwill and other assets 1,345,279 58,812 - 1,404,091
Loss on impairment of assets 1,550,000 - - 1,550,000
Amortization of gain on sale leaseback (164,190) - - (164,190)
Deferred lease expenses 1,076,846 130,695 - 1,207,541
Amortization of prepaid leases 690,150 68,606 - 758,756
Deferred income tax expense 6,802,957 (1,363) - 6,801,594
Amortization of debt discount and premium (21,382) - - (21,382)
Amortized compensation - stock options 887,662 - - 887,662
Loss on sale of assets and other 1,032,535 (141,060) - 891,475
Equity in income of affiliates (1,726) (75,629) - (77,355)
Minority interests in income (loss) of subsidiaries 1,340,814 (1,441,176) - (100,362)
Cumulative effect of an accounting change 500,857 2,885,350 - 3,386,207
Cash provided by (used for) operating working capital:
Inventories 2,135 (630,974) - (628,839)
Co-op advertising and other receivables (3,628,733) (3,064,243) - (6,692,976)
Prepaid expenses and other (1,363,465) (426,418) - (1,789,883)
Accounts payable and accrued expenses 10,353,548 5,001,407 - 15,354,955
Income tax receivable/payable (713,314) - - (713,314)
---------------------------------------------------------------
Net cash provided by (used for) operating activities 61,738,053 2,834,692 (525,000) 64,047,745
INVESTING ACTIVITIES:
Additions to Theatre properties and equipment (158,287,069) (11,096,696) - (169,383,765)
Proceeds on sale of theatre properties and equipment 966,423 505,987 - 1,472,410
Decrease in certificates of deposit 2,244,854 1,811,242 - 4,056,096
Decrease (increase) in other assets, investments in
and advances to affiliates (18,852,588) 8,994,702 525,000 (9,332,886)
---------------------------------------------------------------
Net cash provided by (used for) investing activities (173,928,380) 215,235 525,000 (173,188,145)
FINANCING ACTIVITIES:
Decrease in long-term debt (17,301,048) (2,084,468) - (19,385,516)
Increase in long-term debt 123,020,565 13,555,859 - 136,576,424
Minority investment in subsidiaries, net (2,126,903) (18,976,937) - (21,103,840)
---------------------------------------------------------------
Net cash provided by (used for) financing activities 103,592,614 (7,505,546) - 96,087,068
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (111,651) - (111,651)
---------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,597,713) (4,567,270) - (13,164,983)
CASH AND CASH EQUIVALENTS:
Beginning of period 17,325,917 8,319,951 - 25,645,868
---------------------------------------------------------------
End of period $ 8,728,204 $ 3,752,681 $ - $12,480,885
===============================================================
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
19
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 10, 1999
/s/Jeffrey J. Stedman
---------------------
Jeffrey J. Stedman
Senior Vice President and
Chief Financial Officer
20