UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
SECURITIES EXCHANGE ACT OF 1934
Commission File Number:
(Exact name of registrant as specified in its charter)
|
||
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
|
|
|
||
(Address of principal executive offices) |
|
(Zip Code) |
Registrant's telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading Symbol(s) |
Name of each exchange on which registered |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
☒ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|
|
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 29, 2021,
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
|
|
|
|
Page |
|
|
|||
|
|
|
|
|
|
Item 1. |
|
4 |
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (unaudited) |
|
4 |
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (unaudited) |
|
8 |
|
|
|
|
|
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
32 |
|
|
|
|
|
|
Item 3. |
|
45 |
|
|
|
|
|
|
|
Item 4. |
|
45 |
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
Item 1. |
|
46 |
|
|
|
|
|
|
|
Item 1A. |
|
46 |
|
|
|
|
|
|
|
Item 6. |
|
47 |
|
|
|
|
|
|
|
48 |
|||
2
Cautionary Statement Regarding Forward-Looking Statements
Certain matters within this Quarterly Report on Form 10Q include “forward–looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The “forward-looking statements” may include our current expectations, assumptions, estimates and projections about our business and our industry. They may include statements relating to future revenues, expenses and profitability, the future development and expected growth of our business, projected capital expenditures, attendance at movies generally or in any of the markets in which we operate, the number or diversity of popular movies released and our ability to successfully license and exhibit popular films, national and international growth in our industry, competition from other exhibitors and alternative forms of entertainment and determinations in lawsuits in which we are defendants. Forward-looking statements can be identified by the use of words such as “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict, including, among others, the impacts of COVID-19. Such risks and uncertainties could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. For a description of the risk factors, please review the “Risk Factors” section or other sections, or incorporated by reference to, the Company’s Annual Report on Form 10-K filed February 26, 2021 and the Current Report on Form 8-K filed March 4, 2021. All forward-looking statements are expressly qualified in their entirety by such risk factors. We undertake no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Assets |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Inventories |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Current income tax receivable |
|
|
|
|
|
|
||
Prepaid expenses and other |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Theatre properties and equipment |
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
|
|
|
|
||
Theatre properties and equipment, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Investment in NCM |
|
|
|
|
|
|
||
Investments in affiliates |
|
|
|
|
|
|
||
Deferred charges and other assets, net |
|
|
|
|
|
|
||
Total other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Liabilities and equity |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
$ |
|
|
$ |
|
||
Current portion of operating lease obligations |
|
|
|
|
|
|
||
Current portion of finance lease obligations |
|
|
|
|
|
|
||
Current income tax payable |
|
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term liabilities |
|
|
|
|
|
|
||
Long-term debt, less current portion |
|
|
|
|
|
|
||
Operating lease obligations, less current portion |
|
|
|
|
|
|
||
Finance lease obligations, less current portion |
|
|
|
|
|
|
||
Long-term deferred tax liability |
|
|
|
|
|
|
||
Long-term liability for uncertain tax positions |
|
|
|
|
|
|
||
NCM screen advertising advances |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total long-term liabilities |
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
||
Cinemark Holdings, Inc.'s stockholders' equity: |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in-capital |
|
|
|
|
|
|
||
Treasury stock, |
|
|
( |
) |
|
|
( |
) |
Retained earnings (deficit) |
|
|
( |
) |
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total Cinemark Holdings, Inc.'s stockholders' equity |
|
|
|
|
|
|
||
Noncontrolling interests |
|
|
|
|
|
|
||
Total equity |
|
|
|
|
|
|
||
Total liabilities and equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(in thousands, except per share data, unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Admissions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Concession |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Film rentals and advertising |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Concession supplies |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and wages |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Facility lease expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Utilities and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring costs |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
(Gain) loss on disposal of assets and other |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Foreign currency exchange loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions from NCM |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distributions from DCIP |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Interest expense - NCM |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Equity in loss of affiliates |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total other expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Net income (loss) attributable to noncontrolling interests |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net loss attributable to Cinemark Holdings, Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per share attributable to Cinemark Holdings, Inc.'s common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $ |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Foreign currency translation adjustments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total other comprehensive income (loss), net of tax |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total comprehensive loss, net of tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Comprehensive (income) loss attributable to noncontrolling interests |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Comprehensive loss attributable to Cinemark Holdings, Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to cash used for operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization of intangible and other assets |
|
|
|
|
|
|
||
Amortization of debt issue costs |
|
|
|
|
|
|
||
Non-cash accretion on convertible notes |
|
|
|
|
|
|
||
Interest accrued on NCM screen advertising advances |
|
|
|
|
|
|
||
Amortization of NCM screen advertising advances and other deferred revenues |
|
|
( |
) |
|
|
( |
) |
Amortization of accumulated losses for amended swap agreements |
|
|
|
|
|
|
||
Impairment of long-lived assets |
|
|
|
|
|
|
||
Share based awards compensation expense |
|
|
|
|
|
|
||
(Gain) loss on disposal of assets and other |
|
|
|
|
|
( |
) |
|
Loss on extinguishment of debt |
|
|
|
|
|
— |
|
|
Non-cash rent expense |
|
|
( |
) |
|
|
|
|
Equity in loss of affiliates |
|
|
|
|
|
|
||
Deferred income tax expenses |
|
|
( |
) |
|
|
( |
) |
Distributions from equity investees |
|
|
|
|
|
|
||
Changes in assets and liabilities and other |
|
|
|
|
|
( |
) |
|
Net cash used for operating activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Investing activities |
|
|
|
|
|
|
||
Additions to theatre properties and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of theatre properties and equipment and other |
|
|
|
|
|
|
||
Investment in joint ventures and other, net |
|
|
|
|
|
( |
) |
|
Net cash used for investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Financing activities |
|
|
|
|
|
|
||
Dividends paid to stockholders |
|
|
|
|
|
( |
) |
|
Payroll taxes paid as a result of stock withholdings |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of convertible notes |
|
|
|
|
|
|
||
Proceeds from issuance of senior notes |
|
|
|
|
|
|
||
Proceeds from other borrowings |
|
|
|
|
|
|
||
Redemption of senior notes |
|
|
( |
) |
|
|
— |
|
Repayments of long-term debt |
|
|
( |
) |
|
|
( |
) |
Payment of debt issue costs |
|
|
( |
) |
|
|
( |
) |
Fees paid related to debt refinancing |
|
|
( |
) |
|
|
— |
|
Purchase of convertible note hedges |
|
|
|
|
|
( |
) |
|
Proceeds from warrants issued |
|
|
|
|
|
|
||
Payments on finance leases |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
( |
) |
|
Net cash provided by (used for) financing activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Increase (decrease) in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Cash and cash equivalents: |
|
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
|
||
End of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The accompanying notes are an integral part of the condensed consolidated financial statements.
7
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company and its subsidiaries operate in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay.
The accompanying condensed consolidated balance sheet as of December 31, 2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates. Majority-owned subsidiaries of which the Company has control are consolidated while those affiliates of which the Company owns between
These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2020, included in the Annual Report on Form 10-K filed February 26, 2021 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be achieved for the full year.
As the Company has previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread. As a movie exhibitor that operates spaces where patrons gather in close proximity, the Company continues to be impacted by the pandemic. To comply with government mandates at the initial outbreak of the COVID-19 pandemic, the Company temporarily closed all of its theatres in the U.S. and Latin America in March of 2020, implemented temporary personnel and salary reductions, halted non-essential operating and capital expenditures, and negotiated modified timing and/or abatement of contractual payments with landlords and other major suppliers until its theatres reopened. In addition, the Company suspended its quarterly dividend.
As of September 30, 2021, all of the Company's domestic and international theatres were open. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours in certain locations as well as the Company’s focus on initiatives to enhance productivity. The Company continues to limit capital expenditures to essential activities and projects. The Company worked with landlords and other vendors during the nine months ended September 30, 2021 to extend payment terms as it reopened theatres and continues to recover from the impacts of the COVID-19 pandemic.
Based on the Company’s current estimates of recovery, it believes it has, and will generate, sufficient cash to sustain operations. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on the Company’s business, results of operations, cash flows and financial condition.
Restructuring Charges
During June 2020, Company management approved and announced a restructuring plan to realign its operations to create a more efficient cost structure (referred to herein as the “Restructuring Plan”). The Restructuring Plan primarily included a permanent headcount reduction at its domestic corporate office and the permanent closure of certain domestic and international theatres.
8
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table summarizes activity recorded during the nine months ended September 30, 2021:
|
|
U.S. Operating Segment |
|
|
International Operating Segment |
|
|
Consolidated |
|
|||||||||||||||||||||
|
|
Employee-related Costs |
|
Facility Closure Costs |
|
Total Charges |
|
|
Employee-related Costs |
|
Facility Closure Costs |
|
Total Charges |
|
|
Employee-related Costs |
|
Facility Closure Costs |
|
Total Charges |
|
|||||||||
Balance at December 31, 2020 |
|
$ |
|
$ |
|
$ |
|
|
$ |
— |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||||
Amounts paid |
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
( |
) |
Reserve adjustments |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
( |
) |
|
( |
) |
Balance at March 31, 2021 |
|
$ |
|
$ |
|
$ |
|
|
$ |
— |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||||
Amounts paid |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
( |
) |
|
( |
) |
Reserve adjustments |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
( |
) |
|
( |
) |
Balance at June 30, 2021 |
|
$ |
|
$ |
|
$ |
|
|
$ |
— |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||||
Reserve adjustments |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
— |
|
|
( |
) |
|
( |
) |
Balance at September 30, 2021 |
|
$ |
|
$ |
|
$ |
|
|
$ |
— |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||||
Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”) and ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”). The purpose of ASU 2020-04 is to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. More specifically, the amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of ASU 2020-04 and ASU 2021-01 and their impact on its condensed consolidated financial statements.
Lease Deferrals and Abatements
Upon the temporary closure of theatres in March 2020, the Company initiated discussions with landlords to negotiate the deferral of rent and other lease-related payments with certain of its landlords. The amendments signed with the landlords involved varying concessions, including the abatement of rent payments during closure, alternative rent terms during closure, deferral of all or a portion of rent payments to later periods and deferrals of rent payments to later periods combined with an early exercise of an existing renewal option or extension of the lease term. In some cases, the Company was entitled to rent-free periods while theatres were closed due to local regulations in certain locations.
In April 2020, the FASB staff released guidance indicating that in response to the COVID-19 crisis, an entity would not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. The election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
The Company elected to not remeasure the related lease liabilities and right-of-use assets for those leases where the concessions and deferrals did not result in a significant change in total payments under the lease and where the remaining lease term did not change as a result of the negotiation. For those leases that were renewed or extended as a result of the negotiation to defer rent payments, the Company recalculated the related lease liability and right-of-use asset based on the new terms. Total remaining deferred payments as of September 30, 2021 were $
9
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30 |
|
|
September 30 |
|
||||||||||
Lease Cost |
Classification |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Operating lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment (1) |
Utilities and other |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Real Estate (2)(3) |
Facility lease expense |
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of leased assets |
Depreciation and amortization |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest on lease liabilities |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
||||
Total finance lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table represents the minimum cash lease payments recorded as lease expense, interest expense and a reduction of lease liabilities, as well as the non-cash addition of lease assets for the periods indicated.
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
Other Information |
|
2021 |
|
|
2020 |
|
||
Contractual cash payments included in the measurement of lease liabilities(1) |
|
|
|
|
|
|
||
Cash outflows for operating leases |
|
$ |
|
|
$ |
|
||
Cash outflows for finance leases - operating activities |
|
$ |
|
|
$ |
|
||
Cash outflows for finance leases - financing activities |
|
$ |
|
|
$ |
|
||
Non-cash amount of leased assets obtained in exchange for: |
|
|
|
|
|
|
||
Operating lease liability additions, net |
|
$ |
|
|
$ |
|
||
As of September 30, 2021, the Company had signed lease agreements with total contractual minimum lease payments of approximately $
10
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company’s patrons have the option to purchase movie tickets well in advance of a movie showtime or right before the movie showtime, or at any point in between those two timeframes depending on seat availability. The Company recognizes such admissions revenues when the showtime for a purchased movie ticket has passed. Concession revenues are recognized when products are sold to the consumer. Other revenues primarily consist of screen advertising and screen rental revenues, promotional income, studio trailer placements and transactional fees. Except for NCM screen advertising advances discussed below in Note 9, these revenues are generally recognized when the Company has performed the related services. The Company sells gift cards and discount ticket vouchers, the proceeds from which are recorded as deferred revenues. Deferred revenues for gift cards and discount ticket vouchers are recognized when they are redeemed for concession items or, if redeemed for movie tickets, when the showtime has passed. The Company offers a subscription program in the U.S. whereby patrons can pay a monthly fee to receive a monthly credit for use towards a future movie ticket purchase. The Company records the monthly subscription program fees as deferred revenues and records admissions revenues when the showtime for a movie ticket purchased with a credit has passed. The Company has loyalty programs in the U.S. and many of its international locations that either have a prepaid annual membership fee or award points to customers as purchases are made. For those loyalty programs that have an annual membership fee, the Company recognizes the fee collected as other revenues on a straight-line basis over the term of the membership. For those loyalty programs that award points to customers based on their purchases, the Company records a portion of the original transaction proceeds as deferred revenues based on the number of reward points issued to customers and recognizes the deferred revenues when the customer redeems such points. The value of loyalty points issued is based on the estimated fair value of the rewards offered. The Company generally records breakage revenue on gift cards and discount ticket vouchers based on redemption activity and historical experience with unused balances. The Company also records breakage revenue generally upon the expiration of loyalty points and subscription credits. Advances collected on concession and other contracts are deferred and recognized during the period in which the Company satisfies the related performance obligations, which may differ from the period in which the advances are collected.
Accounts receivable as of September 30, 2021 and December 31, 2020 included approximately $
Disaggregation of Revenue
The following tables present revenues for the three and nine months ended September 30, 2021 and 2020, disaggregated based on major type of good or service and by reportable operating segment and disaggregated based on timing of revenue recognition.
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
September 30, 2021 |
|
|
September 30, 2021 |
|
||||||||||||||
|
U.S. |
|
International |
|
|
|
|
U.S. |
|
International |
|
|
|
||||||
|
Operating |
|
Operating |
|
|
|
|
Operating |
|
Operating |
|
|
|
||||||
Major Goods/Services |
Segment (1) |
|
Segment |
|
Consolidated |
|
|
Segment (1) |
|
Segment |
|
Consolidated |
|
||||||
Admissions revenues |
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||
Concession revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Screen advertising, screen rental and promotional revenues (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenues |
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
September 30, 2020 |
|
|
September 30, 2020 |
|
||||||||||||||
|
U.S. |
|
International |
|
|
|
|
U.S. |
|
International |
|
|
|
||||||
|
Operating |
|
Operating |
|
|
|
|
Operating |
|
Operating |
|
|
|
||||||
Major Goods/Services |
Segment (1) |
|
Segment |
|
Consolidated |
|
|
Segment (1) |
|
Segment |
|
Consolidated |
|
||||||
Admissions revenues |
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||
Concession revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Screen advertising, screen rental and promotional revenues (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenues |
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||
11
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
|
September 30, 2021 |
|
|
September 30, 2021 |
|
||||||||||||||
|
|
U.S. |
|
International |
|
|
|
|
U.S. |
|
International |
|
|
|
||||||
|
|
Operating |
|
Operating |
|
|
|
|
Operating |
|
Operating |
|
|
|
||||||
Timing of Recognition |
|
Segment (1) |
|
Segment |
|
Consolidated |
|
|
Segment (1) |
|
Segment |
|
Consolidated |
|
||||||
Goods and services transferred at a point in time |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||
Goods and services transferred over time (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
|
September 30, 2020 |
|
|
September 30, 2020 |
|
||||||||||||||
|
|
U.S. |
|
International |
|
|
|
|
U.S. |
|
International |
|
|
|
||||||
|
|
Operating |
|
Operating |
|
|
|
|
Operating |
|
Operating |
|
|
|
||||||
Timing of Recognition |
|
Segment (1) |
|
Segment |
|
Consolidated |
|
|
Segment (1) |
|
Segment |
|
Consolidated |
|
||||||
Goods and services transferred at a point in time |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||
Goods and services transferred over time (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
||||||
Deferred Revenues
The following table presents changes in the Company’s NCM screen advertising advances and deferred revenues for the nine months ended September 30, 2021.
|
|
NCM screen advertising advances (1) |
|
|
Other |
|
||
Balance at January 1, 2021 |
|
$ |
|
|
$ |
|
||
Amounts recognized as accounts receivable |
|
|
— |
|
|
|
|
|
Cash received from customers in advance |
|
|
— |
|
|
|
|
|
Common units received from NCM |
|
|
|
|
|
— |
|
|
Interest accrued related to significant financing component |
|
|
|
|
|
— |
|
|
Revenue recognized during period |
|
|
( |
) |
|
|
( |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
|
( |
) |
Balance at September 30, 2021 |
|
$ |
|
|
$ |
|
||
The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of September 30, 2021 and when the Company expects to recognize this revenue.
|
|
Twelve Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||||||
Remaining Performance Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|||||||||||||
Other deferred revenues |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
12
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table presents computations of basic and diluted loss per share:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss attributable to Cinemark Holdings, Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Loss allocated to participating share-based awards (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator (shares in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average common stock outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common equivalent shares for restricted stock units (2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common equivalent shares for convertible notes and warrants (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Diluted common equivalent shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic loss per share attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted loss per share attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The Company considers its unvested share-based payment awards, which contain non-forfeitable rights to dividends, participating securities, and includes such participating securities in its computation of loss per share pursuant to the two-class method. Basic loss per share for the two classes of stock (common stock and unvested restricted stock) is calculated by dividing net loss by the weighted average number of shares of common stock and unvested restricted stock outstanding during the reporting period. Diluted loss per share is calculated using the weighted average number of shares of common stock plus the potentially dilutive effect of common equivalent shares outstanding determined under both the two-class method and the treasury stock method.
The impact of the 4.50% Convertible Senior Notes on diluted loss per share is calculated under the if-converted method, which assumes conversion of the notes at the beginning of the period. The if-converted value of the
As stated in Note 13 of the Company’s Annual Report on Form 10-K filed February 26, 2021, the Company entered into hedge transactions with, and sold warrants to, counterparties in connection with the issuance of the 4.50% Convertible Senior Notes. The hedge transactions are generally expected to reduce the potential dilution of any conversion of the 4.50% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 4.50% Convertible Senior Notes, as the case may be. The warrants could have a dilutive effect on earnings per share to the extent that the price of the Company’s common stock during a given measurement period exceeds the strike price (initially $
Senior Secured Credit Facility
Cinemark USA, Inc. has a senior secured credit facility that includes a $
13
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
credit line matures on
On April 17, 2020, in conjunction with the issuance of the 8.750% Secured Notes discussed below, the Company obtained a waiver of the leverage covenant from the majority of revolving lenders under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020. The waiver is subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.
On August 21, 2020, the Company further amended the waiver of the leverage covenant to extend through the fiscal quarter ending September 30, 2021. The amendment also (i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, (ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits the Company to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver, and (iv) makes such other changes to permit the issuance of the 4.50% Convertible Senior Notes discussed below.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from
5.875% Senior Notes
On March 16, 2021, Cinemark USA, Inc. issued $
The 5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior debt and are senior in right of payment to all of Cinemark USA, Inc.’s and its guarantors’ existing and future senior subordinated debt. The 5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the collateral securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 5.875% Senior Notes.
The indenture to the 5.875% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. Upon a change of control, as defined in the indenture, the Company would be required to make an offer to repurchase the 5.875% Senior Notes at a price equal to
5.250% Senior Notes
On June 15, 2021, Cinemark USA, Inc. issued $
14
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
issue costs of approximately $
The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s
The indenture to the 5.25% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. Upon a change of control, as defined in the indenture, the Company would be required to make an offer to repurchase the 5.25% Senior Notes at a price equal to
4.875% Senior Notes
On May 21, 2021, Cinemark USA, Inc. issued a conditional notice of optional redemption to redeem the $
The Company recorded a loss on extinguishment of debt of $
5.125% Senior Notes
On March 16, 2021, Cinemark USA, Inc. completed a tender offer to purchase its previously outstanding 5.125% Senior Notes, of which $
The Company recorded a loss on extinguishment of debt of $
15
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Additional Borrowings of International Subsidiaries
During the nine months ended September 30, 2021, certain of the Company’s international subsidiaries borrowed an aggregate of $
|
|
Loan Amounts |
|
|
|
|
|
|
|
|
Loan Description |
|
(in USD) |
|
|
Interest Rates |
|
Covenants |
|
Maturity |
|
Peru bank loan |
|
$ |
|
|
|
Negative covenants |
|
|||
Brazil bank loan |
|
$ |
|
|
|
Negative covenants |
|
|||
Additionally, the Company deposited cash into a collateral account to support the issuance of bank letters of credit to the lenders for the international loans noted above. The total amount deposited during the nine months ended September 30, 2021 was $
Interest Rate Swap Agreements
Below is a summary of the Company’s interest rate swap agreements designated as cash flow hedges as of September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
||
|
|
|
|
|
|
|
|
|
|
|
Fair Value at |
|
||
Notional |
|
|
|
|
|
|
|
|
|
|
September 30, |
|
||
Amount |
|
|
Effective Date |
|
Pay Rate |
|
Receive Rate |
|
Expiration Date |
|
2021 (1) |
|
||
$ |
|
|
|
|
|
|
$ |
|
||||||
$ |
|
|
|
|
|
|
|
|
||||||
$ |
|
|
|
|
|
|
|
|
||||||
$ |
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
||
Upon amending the interest rate swap agreements effective March 31,2020, the Company determined that the interest payments hedged with the agreements are still probable to occur, therefore the loss that accumulated on the swaps prior to the amendments of $
The fair values of the amended interest rate swaps and the new interest rate swap are recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. The changes in fair value are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged items affect earnings. The valuation technique used to determine fair value is the income approach. Under this approach, the Company uses projected future interest rates, which fall in Level 2 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35, as provided by counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under the agreements.
Adoption of ASU 2020-06
ASU 2020-06 simplifies the guidance on an issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature of such debt. Instead, they will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models reduces reported interest expense and increases reported net income for entities that have issued a convertible instrument within the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method is no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.
16
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company adopted ASU 2020-06 under the modified retrospective method effective January 1, 2021. As a result of the adoption, the entire $
Fair Value of Long-Term Debt
The Company estimates the fair value of its long-term debt using the market approach, which utilizes quoted market prices that fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC 820, Fair Value Measurement (“ASC Topic 820”). The carrying value of the Company’s long-term debt, excluding unamortized debt discounts and debt issue costs, was $
17
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is a summary of changes in stockholders’ equity attributable to Cinemark Holdings, Inc., noncontrolling interests and total equity for the three and nine months ended September 30, 2021 and 2020:
|
|
Common Stock |
|
Treasury Stock |
|
Additional Paid-In-Capital |
|
Retained Earnings (Deficit) |
|
Accumulated Other Comprehensive Loss |
|
Total Cinemark Holdings, Inc. Stockholders’ Equity |
|
Noncontrolling Interests |
|
Total Equity |
|
||||||||
Balance at January 1, 2021 |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
||||||
Impact of adoption of ASU 2020-06, net of deferred taxes of $ |
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Issuance of share based awards and share based awards compensation expense |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Stock withholdings related to share based awards that vested during the three months ended March 31, 2021 |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Adjustment to accrued dividends on unvested restricted stock unit awards |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
Balance at March 31, 2021 |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|||||
Issuance of share based awards and share based awards compensation expense |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Stock withholdings related to share based awards that vested during the three months ended June 30, 2021 |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Adjustment to accrued dividends on unvested restricted stock unit awards related to forfeitures |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
|
( |
) |
|
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Balance at June 30, 2021 |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|||||
Share based awards and share based awards compensation expense |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
||||
Stock withholdings related to share based awards that vested during the three months ended September 30, 2021 |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
|
( |
) |
|
Unrealized gain to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
Balance at September 30, 2021 |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|||||
18
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Common Stock |
|
Treasury Stock |
|
Additional Paid-In-Capital |
|
Retained Earnings |
|
Accumulated Other Comprehensive Loss |
|
Total Cinemark Holdings, Inc. Stockholders’ Equity |
|
Noncontrolling Interests |
|
Total Equity |
|
||||||||
Balance at January 1, 2020 |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
||||||
Issuance of share based awards and share based awards compensation expense |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Stock withholdings related to share based awards that vested during the three months ended March 31, 2020 |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Dividends paid to stockholders, $ |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Dividends paid to noncontrolling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Dividends accrued on unvested restricted stock unit awards (1) |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
|
( |
) |
|
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
Balance at March 31, 2020 |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Issuance of share based awards and share based awards compensation expense |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Stock withholdings related to share based awards that vested during the three months ended June 30, 2020 |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
Balance at June 30, 2020 |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
||||||
Issuance of share based awards and share based awards compensation expense |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||||||
Stock withholdings related to share based awards that vested during the three months ended September 30, 2020 |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Issuance of convertible senior notes, net of allocated debt issue costs |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Tax impact of convertible notes issued |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Call options purchased |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Proceeds from issuance of warrants |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Unrealized gain to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
Balance at September 30, 2020 |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
||||||
19
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:
|
|
Investment |
|
NCM Screen Advertising Advances |
|
Distributions |
|
Equity in |
|
Other |
|
Interest |
|
Cash |
|
|||||||
Balance as of January 1, 2021 |
|
$ |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
||||||
Receipt of common units due to annual common unit adjustment ("CUA") |
|
|
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Screen rental revenues earned under ESA (1) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
|
|
Interest accrued related to significant financing component |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
Receipt under tax receivable agreement |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
Equity in loss |
|
|
( |
) |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
Amortization of screen advertising advances |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
Balance as of and for the nine months ended September 30, 2021 |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
||||
Investment in National CineMedia
NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising to our theatres. The Company does not recognize undistributed equity in the earnings on its original NCM membership units (referred to herein as the Company’s Tranche 1 Investment) until NCM’s future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company recognizes cash distributions it receives from NCM on its Tranche 1 Investment as a component of earnings as Distributions from NCM. The Company believes that the accounting model provided by ASC Topic 323-10-35-22 for recognition of equity investee losses in excess of an investor’s basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.
Common Unit Adjustments
The Company also periodically receives consideration in the form of common units from NCM. Annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated. The common units received are recorded at estimated fair value as an increase in the Company’s investment in NCM with an offset to NCM screen advertising advances.
During March 2021, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company received an additional
As of September 30, 2021, the Company owned a total of
20
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Exhibitor Services Agreement
As discussed above, the Company’s domestic theatres are part of the in-theatre digital network operated by NCM under the ESA. NCM provides advertising to the Company’s theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres. The Company receives monthly theatre access fees for participation in the NCM network for participation in the NCM network generally on a per patron and per screen basis. These fees earned under the ESA are reflected in other revenue on the condensed consolidated income statement.
Prior to September 17, 2019, the ESA was accounted for under ASC Topic 606, Revenue from Contracts with Customers. Effective September 17, 2019, the Company signed an amendment to the ESA, under which the Company will provide incremental advertising time to NCM and has extended the term through February 2041. Since the agreement was amended, the Company was required to evaluate the revised contract under ASC Topic 842, Leases, and as a result, determined that the ESA met the definition of a lease. The Company leases nonconsecutive periods of use of its domestic theatre screens to NCM for purposes of showing third party advertising content. The lease, which is classified as an operating lease, generally requires variable lease payments based on the number of patrons attending the showtimes during which such advertising is shown. The lease agreement is considered short-term due to the fact that the nonconsecutive periods of use, or advertising time slots, are set on a weekly basis. The revenues earned under the ESA, both before and after the amendment, are reflected in other revenue on the consolidated income statement.
The recognition of revenue related to the NCM screen advertising advances are recorded through February 2041.
|
|
Twelve Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||||||
Remaining Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|||||||||||||
NCM screen advertising advances (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Significant Financing Component
In connection with the completion of the NCMI initial public offering, the Company amended and restated its ESA with NCM and received approximately $
Effective September 17, 2019, upon the Company’s evaluation and determination that ASC Topic 842 applies to the amended ESA, the Company determined it acceptable to apply the significant financing component guidance from ASC Topic 606 by analogy as the economic substance of the agreement represents a financing arrangement.
21
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
NCM Financial Information
Below is summary financial information for NCM for the periods indicated:
|
|
Three Months Ended |
|
|
Three Months ended |
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
||||
|
|
September 30, 2021 |
|
|
September 24, 2020 |
|
|
September 30, 2021 |
|
|
September 24, 2020 |
|
||||
Gross revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
As of |
|
|
As of |
|
||
|
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||
Current assets |
|
$ |
|
|
$ |
|
||
Noncurrent assets |
|
$ |
|
|
$ |
|
||
Current liabilities |
|
$ |
|
|
$ |
|
||
Noncurrent liabilities |
|
$ |
|
|
$ |
|
||
Members deficit |
|
$ |
( |
) |
|
$ |
( |
) |
Digital Cinema Implementation Partners LLC (“DCIP”)
On February 12, 2007, the Company, AMC and Regal (the “Exhibitors”) entered into a joint venture known as DCIP to facilitate the implementation of digital cinema in the Company’s theatres and to establish agreements with major motion picture studios for the financing of digital cinema. As of September 30, 2021, the Company had a
Effective November 1, 2020, the Company amended the master equipment lease agreement (“MELA”) with Kasima LLC, which is an indirect subsidiary of DCIP, resulting in the termination of the MELA. Upon termination of the MELA, the Company received a distribution of the digital projection equipment that it previously leased. As the fair value of the distributed projectors was greater than the Company’s investment in DCIP at the time of the distribution, the investment in DCIP was reduced to zero at the time of the distribution. The Company does not recognize undistributed equity in the earnings or loss of its investment in DCIP until such time that future net earnings, less distributions received, surpass the amount of the excess distribution.
22
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is summary financial information for DCIP for the periods indicated:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
||||
Gross revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
As of |
|
|||||
|
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||
Current assets |
|
$ |
|
|
$ |
|
||
Noncurrent assets |
|
$ |
|
|
$ |
|
||
Current liabilities |
|
$ |
|
|
$ |
|
||
Noncurrent liabilities |
|
$ |
|
|
$ |
|
||
Members' equity (deficit) |
|
$ |
|
|
$ |
( |
) |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
||||
Equipment lease payments (1)(2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Warranty reimbursements from DCIP (2) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
Management service fees (2) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Distributions from DCIP (3) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Other Investment Activity
Below is a summary of activity for each of the Company’s other investments for the nine months ended September 30, 2021:
|
|
AC JV, |
|
DCDC |
|
FE Concepts |
|
Other |
|
Total |
|
|||||
Balance at January 1, 2021 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Equity income (loss) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
( |
) |
||
Other |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Balance at September 30, 2021 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Below is a summary of transactions with each of the Company’s other investees for the nine months ended September 30, 2021:
|
|
|
Nine Months Ended |
|
|||||
Investee |
Transactions |
|
September 30, 2021 |
|
|
September 30, 2020 |
|
||
AC JV, LLC |
Event fees paid (1) |
|
$ |
|
|
$ |
|
||
DCDC |
Content delivery fees paid (1) |
|
$ |
|
|
$ |
|
||
FE Concepts |
Theatre service fees received (2) |
|
$ |
( |
) |
|
$ |
( |
) |
23
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Treasury Stock
Treasury stock represents shares of common stock repurchased or withheld by the Company and not yet retired. The Company has applied the cost method in recording its treasury shares.
|
|
Number of |
|
|
|
|
||
|
|
Treasury |
|
|
|
|
||
|
|
Shares |
|
|
Cost |
|
||
Balance at January 1, 2021 |
|
|
|
|
$ |
|
||
Restricted stock withholdings (1) |
|
|
|
|
|
|
||
Restricted stock forfeitures |
|
|
|
|
|
|
||
Balance at September 30, 2021 |
|
|
|
|
$ |
|
||
As of September 30, 2021, the Company had no plans to retire any shares of treasury stock.
Restricted Stock
During the nine months ended September 30, 2021, the Company granted
Below is a summary of restricted stock activity for the nine months ended September 30, 2021:
|
|
Shares of |
|
|
Weighted |
|
||
|
|
Restricted |
|
|
Grant Date |
|
||
|
|
Stock |
|
|
Fair Value |
|
||
Outstanding at January 1, 2021 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2021 |
|
|
|
|
$ |
|
||
Unvested restricted stock at September 30, 2021 |
|
|
|
|
$ |
|
||
|
|
Nine Months Ended |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Compensation expense recognized during the period |
|
$ |
|
|
$ |
|
||
Fair value of restricted shares that vested during the period |
|
$ |
|
|
$ |
|
||
Income tax benefit (cost) related to restricted stock awards |
|
$ |
( |
) |
|
$ |
|
|
As of September 30, 2021, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $
24
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Restricted Stock Units
The Company did not grant any restricted stock units during the nine months ended September 30, 2021.
During the nine months ended September 30, 2021, the Compensation Committee of the Company’s Board of Directors evaluated the impact of the COVID-19 pandemic on the performance metric used for the restricted stock unit awards granted during February 2019 and February 2020 and determined that the COVID-19 pandemic significantly impacted the Company’s ability to meet the performance metric. The Compensation Committee made a discretionary decision to certify the vest of the 2019 and 2020 restricted stock unit awards at target based upon the unforeseen, external circumstances beyond management’s control, the projected macroeconomic conditions through 2021 and beyond, and the uncertain timing as to the recovery of the Company’s industry. The requirement to satisfy the applicable service period under the restricted stock unit awards was not changed.
Below is a summary of restricted stock unit activity for the nine months ended September 30, 2021:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Number of restricted stock unit awards that vested during the period |
|
|
|
|
|
|
||
Fair value of restricted stock unit awards that vested during the period |
|
$ |
|
|
$ |
|
||
Accumulated dividends paid upon vesting of restricted stock unit awards |
|
$ |
|
|
$ |
|
||
Compensation expense recognized during the period |
|
$ |
|
|
$ |
|
||
Income tax benefit (cost) related to stock unit awards |
|
$ |
( |
) |
|
$ |
|
|
A summary of the Company’s goodwill is as follows:
|
|
U.S. |
|
|
International |
|
|
|
|
|||
Balance at January 1, 2021 (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign currency translation adjustments |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2021 (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
A summary of the Company’s intangible assets is as follows:
25
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Balance at |
|
Additions (1) |
|
Amortization |
|
Foreign Currency Translation Adjustments |
|
Balance at September 30, 2021 |
|
|||||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross carrying amount |
|
$ |
|
$ |
— |
|
$ |
— |
|
$ |
( |
) |
$ |
|
||
Accumulated amortization |
|
|
( |
) |
― |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Total net intangible assets with finite lives |
|
$ |
|
$ |
— |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Tradename and other |
|
|
|
|
|
|
— |
|
|
( |
) |
|
|
|||
Total intangible assets, net |
|
$ |
|
$ |
|
$ |
(1,994 |
) |
$ |
( |
) |
$ |
|
|||
The estimated aggregate future amortization expense for intangible assets is as follows:
For the three months ended December 31, 2021 |
|
$ |
|
|
For the twelve months ended December 31, 2022 |
|
|
|
|
For the twelve months ended December 31, 2023 |
|
|
|
|
For the twelve months ended December 31, 2024 |
|
|
|
|
For the twelve months ended December 31, 2025 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
The Company performed long-lived asset impairment evaluations at the end of each quarter during the nine months ended September 30, 2021. The following table is a summary of the evaluations performed by asset classification:
|
Asset |
|
Impairment |
|
Valuation |
|
Valuation |
|
Category |
|
Test Type |
|
Approach |
|
Multiple |
|
|
|
|
|
|
|
|
First and Second Quarters |
|
|
|
|
|
|
|
|
Goodwill |
|
Qualitative |
|
N/A |
|
|
|
Tradename Intangible Assets |
|
Qualitative |
|
N/A |
|
|
|
Other Long-lived Assets |
|
Qualitative |
|
N/A |
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
|
|
|
|
|
|
|
Goodwill |
|
Qualitative |
|
N/A |
|
|
|
Tradename Intangible Assets |
|
Qualitative |
|
N/A |
|
|
|
Other Long-lived Assets |
|
Quantitative (1) |
|
Market |
|
|
Goodwill – The Company evaluates goodwill for impairment as follows:
Tradename Intangible assets – The Company evaluates tradename intangible assets for impairment as follows:
Other Long-lived Assets– The Company evaluates other long-lived assets for impairment as follows:
26
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table is a summary of the impairment recorded as a result of the evaluations performed during the three and nine months ended September 30, 2021 and 2020:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
U.S. Segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Theatre properties |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Theatre operating lease right-of-use assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost method investment |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
U.S. total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
International segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Theatre properties |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Theatre operating lease right-of-use assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Intangible assets |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
International total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company determines fair value measurements in accordance with ASC Topic 820, which establishes a fair value hierarchy under which an asset or liability is categorized based on the lowest level of input significant to its fair value measurement. The levels of input defined by ASC Topic 820 are as follows:
Level 1 – quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date;
Level 2 – other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3 – unobservable and should be used to measure fair value to the extent that observable inputs are not available.
Below is a summary of liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of September 30, 2021 and December 31, 2020:
|
|
|
|
Carrying |
|
|
Fair Value Hierarchy |
|
||||||||||
Description |
|
As of, |
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Interest rate swap liabilities (1) |
|
September 30, 2021 |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap liabilities (1) |
|
December 31, 2020 |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
27
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The accumulated other comprehensive loss account in stockholders’ equity of $
As of September 30, 2021, all foreign countries where the Company has operations, other than Argentina, are non-highly inflationary, and the local currency is the same as the functional currency in all of the locations. Thus, any fluctuation in the currency results in a cumulative foreign currency translation adjustment recorded to accumulated other comprehensive loss. The Company deemed Argentina to be highly inflationary beginning July 1, 2018. A highly inflationary economy is defined as an economy with a cumulative inflation rate of approximately
Below is a summary of the impact of translating the September 30, 2021 and 2020 financial statements of the Company’s international subsidiaries:
|
|
|
|
|
|
|
|
Other Comprehensive Loss for |
|
||||||
|
|
Exchange Rate as of |
|
|
Nine Months Ended |
|
|||||||||
Country |
|
September 30, 2021 |
|
|
December 31, 2020 |
|
|
September 30, 2021 |
|
September 30, 2020 |
|
||||
Brazil |
|
|
|
|
|
|
|
$ |
( |
) |
$ |
( |
) |
||
Chile |
|
|
|
|
|
|
|
|
( |
) |
|
( |
) |
||
Colombia |
|
|
|
|
|
|
|
|
( |
) |
|
( |
) |
||
Peru |
|
|
|
|
|
|
|
|
( |
) |
|
( |
) |
||
All other |
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
|
|
|
|
|
|
|
|
$ |
( |
) |
$ |
( |
) |
||
The following is provided as supplemental information to the condensed consolidated statements of cash flows:
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid (refunds received) for income taxes, net |
|
$ |
( |
) |
|
$ |
( |
) |
Cash deposited in restricted accounts (1) |
|
$ |
|
|
$ |
— |
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
||
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment (2) |
|
$ |
( |
) |
|
$ |
( |
) |
Interest expense - NCM (see Note 9) |
|
$ |
( |
) |
|
$ |
( |
) |
Investment in NCM – receipt of common units (see Note 9) |
|
$ |
|
|
$ |
|
||
Dividends accrued on unvested restricted stock unit awards |
|
$ |
|
|
$ |
( |
) |
|
28
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company manages its international market and its U.S. market as separate reportable operating segments, with the international segment consisting of operations in Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues. The Company uses Adjusted EBITDA, as shown in the reconciliation table below, as the primary measure of segment profit and loss to evaluate performance and allocate its resources. The Company does not report total assets by segment because that information is not used to evaluate the performance of or allocate resources between segments.
Below is a breakdown of selected financial information by reportable operating segment:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
International |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total Adjusted EBITDA |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table sets forth a reconciliation of net loss to Adjusted EBITDA:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expense, net (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash distributions from DCIP (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Cash distributions from other equity investees (4) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring costs |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Loss on disposal of assets and other |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-cash rent expense |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Share based awards compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
29
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Financial Information About Geographic Areas
Below is a breakdown of selected financial information by geographic area:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
Revenues |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Brazil |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other international countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
As of |
|
|
As of |
|
||
Theatre Properties and Equipment-net |
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||
U.S. |
|
$ |
|
|
$ |
|
||
Brazil |
|
|
|
|
|
|
||
Other international countries |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The Company manages a theatre for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns
Walter Hebert, Mr. Mitchell’s brother-in-law, previously served as the Executive Vice President – Purchasing of the Company and retired in July 2021. Mr. Hebert now serves as a consultant to the Company until July 2022. During the nine months ended September 30, 2021, the Company has paid Mr. Hebert $
The Company has an Aircraft Time Sharing Agreement with Copper Beech Capital, LLC (“Copper Beech”) to use, on occasion, a private aircraft owned by Copper Beech. Copper Beech is owned by Mr. Mitchell and his wife, Tandy Mitchell. The private aircraft is used by Mr. Mitchell and other executives who accompany Mr. Mitchell to business meetings for the Company. The Company reimburses Copper Beech for the actual costs of fuel usage and the expenses of the pilots, landing fees, storage fees and similar expenses incurred during the trip. For the nine months ended September 30, 2021 and 2020, the aggregate amounts paid to Copper Beech for the use of the aircraft was $
The Company leases
The Company has a
30
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
From time to time, the Company is involved in various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, patent claims, landlord-tenant disputes, contractual disputes with landlords over certain termination rights or the right to discontinue rent payments due to the COVID-19 pandemic and other contractual disputes, some of which are covered by insurance. The Company believes its potential liability with respect to proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.
Cinemark Holdings, Inc., et al vs Factory Mutual Insurance Company. The Company filed suit on November 18, 2020, in the District Court, 471st Judicial District, Collin County, Texas. On December 22, 2020, the case was moved to the US District Court for the Eastern District of Texas, Sherman Division. The Company submitted a claim under its property insurance policy issued by Factory Mutual Insurance Company (the “FM Policy”) for losses sustained as a result of the COVID-19 pandemic and the forced closure of the Company’s theatres pursuant to orders issued by various government agencies. Factory Mutual Insurance Company (“FM”) denied the Company’s claim. The Company is seeking damages resulting from FM’s breach of contract, FM’s bad faith conduct and a declaration of the parties’ rights under the FM Policy. The Company cannot predict the outcome of this litigation.
Intertrust Technologies Corporation (“Intertrust”) v. Cinemark Holdings, Inc., Regal, AMC, et al. This case was filed against the Company on August 7, 2019 in the Eastern District of Texas – Marshall Division alleging patent infringement. The Company firmly maintains that the contentions of the Plaintiff are without merit and will vigorously defend itself against the lawsuit. Although the Company does not believe that it has infringed on any of Intertrust’s patents, it cannot predict the outcome of this litigation.
31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes and schedules included elsewhere in this report.
Recent Developments
As we have previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread. As a movie exhibitor that operates spaces where patrons gather in close proximity, we continue to be impacted by the pandemic. To comply with government mandates at the initial outbreak of the COVID-19 pandemic, we temporarily closed all of our theatres in the U.S. and Latin America in March of 2020, implemented temporary personnel and salary reductions, halted non-essential operating and capital expenditures, and negotiated modified timing and/or abatement of contractual payments with landlords and other major suppliers until our theatres reopened. In addition, we suspended our quarterly dividend.
As of September 30, 2021, all of our domestic and international theatres were open. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours in certain locations as well as our focus on initiatives to enhance productivity. We continue to limit capital expenditures to essential activities and projects. We worked with landlords and other vendors during the nine months ended September 30, 2021 to extend payment terms as it reopened theatres and continues to recover from the impacts of the COVID-19 pandemic.
Based on our current estimates of recovery, we believe we have, and will generate, sufficient cash to sustain operations. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on our business, results of operations, cash flows and financial condition.
General Information
We are a leader in the motion picture exhibition industry, with theatres in the U.S., Brazil, Argentina, Chile, Colombia, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. As of September 30, 2021, we managed our business under two reportable operating segments – U.S. markets and international markets. See Note 17 to our condensed consolidated financial statements.
We generate revenues primarily from filmed entertainment box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as transactional fees, vendor marketing promotions, studio trailer placements, meeting rentals and electronic video games located in some of our theatres. We also offer alternative entertainment, such as live and pre-recorded sports programs, concert events, the Metropolitan Opera, in-theatre gaming and other special events in our theatres. In-theatre advertising for our domestic theatres is provided by National CineMedia. In our international locations, our Flix Media subsidiaries provide screen advertising and alternative content for our international circuit and to other international exhibitors.
Films leading the box office during the nine months ended September 30, 2021 included new releases Shang-Chi and the Legend of the Ten Rings, Black Widow, F9: The Fast Saga, A Quiet Place Part II, Jungle Cruise, Free Guy, Godzilla vs. Kong, Cruella, Space Jam: A New Legacy and The Conjuring: The Devil Made Me Do It. Films currently scheduled for release during the remainder of 2021 include Venom: Let There Be Carnage, Eternals, Ghostbusters: Afterlife, The Matrix Resurrections, No Time to Die, Encanto, Sing 2, Halloween Kills, Dune, West Side Story and the Marvel sequel Spider-man; No Way Home, among other films.
Film rental and advertising costs are variable in nature and fluctuate with admissions revenues. Film rental costs as a percentage of revenues are generally higher for periods in which more blockbuster films are released. The Company also receives virtual print fees from studios for certain of its international locations, which are included as a contra-expense in film rentals and advertising costs. Promotional expenses are generally variable in nature and primarily include the placement of film-specific social and digital media spots promoting film content currently playing in our theatres. Advertising costs, which are expensed as incurred, are primarily related to campaigns for new and renovated theatres, loyalty and membership programs and brand advertising that vary depending on the timing of such campaigns.
Concession supplies expenses are variable in nature and fluctuate with our concession revenues and product mix. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates.
Salaries and wages for our theatres generally move in relation to revenues as theatre staffing is adjusted to respond to changes in attendance and also include a fixed cost component (i.e. the minimum staffing costs to operate a theatre during non-peak periods). In some international locations, staffing levels are also subject to local regulations.
Facility lease expenses are primarily fixed costs at the theatre level as most of our facility leases require fixed monthly minimum rent payments. Certain leases are subject to percentage rent only, while others are subject to percentage rent in addition to their fixed monthly rent if a target annual performance level is achieved. Facility lease expenses as a percentage of revenues are also affected by the number of theatres under operating leases, the number of theatres under finance leases and the number of owned theatres.
32
Utilities and other costs include both fixed and variable costs and primarily consist of utilities, expenses for projection and sound equipment maintenance and monitoring, credit card fees, third party ticket sales commissions, property taxes, janitorial costs, repairs, maintenance and security services.
General and administrative expenses are primarily fixed in nature and consist of the costs to support the overall management of the Company, including base, incentive compensation and benefits for our corporate office personnel, facility expenses for our corporate offices, consulting fees, professional fees, cloud-based software licensing fees, travel expenses, supplies and other costs that are not specifically associated with the operations of our theatres.
Results of Operations
The following table sets forth, for the periods indicated, certain operating data and the percentage of revenues represented by certain items reflected in our condensed consolidated statements of income.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Operating data (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Admissions |
|
$ |
225.5 |
|
|
$ |
14.9 |
|
|
$ |
435.1 |
|
|
$ |
307.4 |
|
Concession |
|
|
164.2 |
|
|
|
9.1 |
|
|
|
313.5 |
|
|
|
199.6 |
|
Other |
|
|
45.1 |
|
|
|
11.5 |
|
|
|
95.2 |
|
|
|
81.1 |
|
Total revenues |
|
$ |
434.8 |
|
|
$ |
35.5 |
|
|
$ |
843.8 |
|
|
$ |
588.1 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Film rentals and advertising |
|
|
117.0 |
|
|
|
8.2 |
|
|
|
216.8 |
|
|
|
165.2 |
|
Concession supplies |
|
|
28.2 |
|
|
|
2.7 |
|
|
|
54.2 |
|
|
|
39.9 |
|
Salaries and wages |
|
|
67.6 |
|
|
|
20.2 |
|
|
|
149.2 |
|
|
|
116.6 |
|
Facility lease expense |
|
|
68.8 |
|
|
|
67.1 |
|
|
|
200.8 |
|
|
|
214.5 |
|
Utilities and other |
|
|
81.7 |
|
|
|
43.3 |
|
|
|
192.0 |
|
|
|
178.7 |
|
General and administrative expenses |
|
|
38.6 |
|
|
|
30.4 |
|
|
|
111.8 |
|
|
|
99.4 |
|
Depreciation and amortization |
|
|
67.2 |
|
|
|
62.6 |
|
|
|
202.3 |
|
|
|
191.4 |
|
Impairment of long-lived assets |
|
|
7.5 |
|
|
|
24.6 |
|
|
|
7.5 |
|
|
|
41.2 |
|
Restructuring costs |
|
|
(0.3 |
) |
|
|
0.6 |
|
|
|
(1.3 |
) |
|
|
20.1 |
|
(Gain) loss on disposal of assets and other |
|
|
1.0 |
|
|
|
(13.3 |
) |
|
|
7.9 |
|
|
|
(11.0 |
) |
Total cost of operations |
|
|
477.3 |
|
|
|
246.4 |
|
|
|
1,141.2 |
|
|
|
1,056.0 |
|
Operating loss |
|
$ |
(42.5 |
) |
|
$ |
(210.9 |
) |
|
$ |
(297.4 |
) |
|
$ |
(467.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating data as a percentage of total revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Admissions |
|
|
51.9 |
% |
|
|
42.0 |
% |
|
|
51.6 |
% |
|
|
52.3 |
% |
Concession |
|
|
37.8 |
% |
|
|
25.6 |
% |
|
|
37.2 |
% |
|
|
33.9 |
% |
Other |
|
|
10.3 |
% |
|
|
32.4 |
% |
|
|
11.2 |
% |
|
|
13.8 |
% |
Total revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of operations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Film rentals and advertising |
|
|
51.9 |
% |
|
NM |
|
|
|
49.8 |
% |
|
|
53.7 |
% |
|
Concession supplies |
|
|
17.2 |
% |
|
NM |
|
|
|
17.3 |
% |
|
|
20.0 |
% |
|
Salaries and wages |
|
|
15.5 |
% |
|
NM |
|
|
|
17.7 |
% |
|
|
19.8 |
% |
|
Facility lease expense |
|
|
15.8 |
% |
|
NM |
|
|
|
23.8 |
% |
|
|
36.5 |
% |
|
Utilities and other |
|
|
18.8 |
% |
|
NM |
|
|
|
22.8 |
% |
|
|
30.4 |
% |
|
General and administrative expenses |
|
|
8.9 |
% |
|
NM |
|
|
|
13.2 |
% |
|
|
16.9 |
% |
|
Total cost of operations |
|
|
109.8 |
% |
|
NM |
|
|
|
135.2 |
% |
|
|
179.6 |
% |
|
Operating income (loss) |
|
|
(9.8 |
)% |
|
NM |
|
|
|
(35.2 |
)% |
|
|
(79.6 |
)% |
|
Average screen count (month end average) |
|
|
5,876 |
|
|
|
5,975 |
|
|
|
5,890 |
|
|
|
6,068 |
|
33
Three months ended September 30, 2021 versus three months ended September 30, 2020
Three months ended September 30, 2021 – All of our domestic and international theatres were open as of September 30, 2021.
Three months ended September 30, 2020 – All of our domestic and international theatres were temporarily closed effective March 17, 2020 and March 18, 2020, respectively, as a result of the COVID-19 pandemic. We began reopening our domestic theatres in June 2020 and operated under a test-and-learn strategy to define training, communication, implementation and execution of enhanced health and safety protocols. These theatres opened to reduced operating hours with library content and “welcome back” pricing for tickets and concession products to encourage patrons to return to the movies. As of September 30, 2020, we had 252 domestic theatres and 15 international theatres reopened.
As a result of theatre closures during the three months ended September 30, 2020, the average ticket price and concession revenues per patron for our international theatres are not meaningful ("NM") for comparison to the three months ended September 30, 2021.
|
|
U.S. Operating Segment |
|
|
International Operating Segment |
Consolidated |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant |
|
|
|
|
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|||||||
Admissions revenues (1) |
|
$ |
195.3 |
|
|
$ |
14.9 |
|
|
$ |
30.2 |
|
|
$ |
0.1 |
|
|
$ |
32.2 |
|
|
$ |
225.5 |
|
|
$ |
15.0 |
|
Concession revenues (1) |
|
$ |
142.6 |
|
|
$ |
8.9 |
|
|
$ |
21.6 |
|
|
$ |
0.3 |
|
|
$ |
23.0 |
|
|
$ |
164.2 |
|
|
$ |
9.2 |
|
Other revenues (1)(2) |
|
$ |
37.6 |
|
|
$ |
10.8 |
|
|
$ |
7.5 |
|
|
$ |
0.7 |
|
|
$ |
7.9 |
|
|
$ |
45.1 |
|
|
$ |
11.5 |
|
Total revenues (1)(2) |
|
$ |
375.5 |
|
|
$ |
34.6 |
|
|
$ |
59.3 |
|
|
$ |
1.1 |
|
|
$ |
63.1 |
|
|
$ |
434.8 |
|
|
$ |
35.7 |
|
Attendance (1) |
|
|
21.5 |
|
|
|
1.9 |
|
|
|
9.2 |
|
|
|
— |
|
|
|
|
|
|
30.7 |
|
|
|
1.9 |
|
|
Average ticket price (1) |
|
$ |
9.08 |
|
|
$ |
8.01 |
|
|
$ |
3.28 |
|
|
NM |
|
|
$ |
3.50 |
|
|
$ |
7.35 |
|
|
$ |
7.96 |
|
|
Concession revenues per patron (1) |
|
$ |
6.63 |
|
|
$ |
4.79 |
|
|
$ |
2.35 |
|
|
NM |
|
|
$ |
2.50 |
|
|
$ |
5.35 |
|
|
$ |
4.87 |
|
|
Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the three months ended September 30, 2021 and 2020.
|
|
U.S. Operating Segment |
|
|
International Operating Segment |
|
|
Consolidated |
|
|||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Constant |
|
|
2021 |
|
|
2020 |
|
|||||||
Film rentals and advertising |
|
$ |
101.9 |
|
|
$ |
8.1 |
|
|
$ |
15.1 |
|
|
$ |
0.1 |
|
|
$ |
16.2 |
|
|
$ |
117.0 |
|
|
$ |
8.2 |
|
Concession supplies |
|
$ |
23.0 |
|
|
$ |
2.3 |
|
|
$ |
5.2 |
|
|
$ |
0.4 |
|
|
$ |
5.6 |
|
|
$ |
28.2 |
|
|
$ |
2.7 |
|
Salaries and wages |
|
$ |
58.0 |
|
|
$ |
15.9 |
|
|
$ |
9.6 |
|
|
$ |
4.3 |
|
|
$ |
10.1 |
|
|
$ |
67.6 |
|
|
$ |
20.2 |
|
Facility lease expense |
|
$ |
58.8 |
|
|
$ |
60.8 |
|
|
$ |
10.0 |
|
|
$ |
6.3 |
|
|
$ |
10.4 |
|
|
$ |
68.8 |
|
|
$ |
67.1 |
|
Utilities and other |
|
$ |
68.1 |
|
|
$ |
36.5 |
|
|
$ |
13.6 |
|
|
$ |
6.8 |
|
|
$ |
14.4 |
|
|
$ |
81.7 |
|
|
$ |
43.3 |
|
34
Salaries and wages increased to $58.0 million for the third quarter of 2021 as all of our theatres were open compared to only 252 theatres opened at the end of the third quarter of 2020. We also began extending operating hours to accommodate the release of new films while maintaining our focus on efficient staffing levels. Facility lease expense, which is primarily fixed in nature, reflects a slight increase in percentage rent expense and common area maintenance costs as volumes increased, partially offset by the impact of the permanent closure of certain theatres. Utilities and other costs increased to $68.1 million, as many of these costs, such as credit card fees, electricity costs, janitorial costs, repairs and maintenance and security expense are variable in nature and have increased with the improved attendance from new film content.
Salaries and wages increased to $9.6 million as reported for the third quarter of 2021 as many of our theatres reopened during the quarter. Facility lease expense increased to $10.0 million for the third quarter of 2021 reflecting payment of rent under alternative structures, such as percentage rents in place of minimum fixed rents, as theatres recover, partially offset by the impact of the permanent closure of certain theatres. Utilities and other costs increased to $13.6 million, as many of these costs are variable in nature and have increased with the improved attendance from new film content and theatre reopenings. These expenses, as reported, were also impacted by exchange rates in each of the countries in which we operate.
General and Administrative Expenses. General and administrative expenses increased to $38.6 million for the third quarter of 2021 compared to $30.4 million for the third quarter of 2020. The increase is primarily due to temporary salary reductions for corporate office staff during the third quarter of 2020 and increased incentive and share based award compensation expense as a result of certain retention measures during the third quarter of 2021.
Depreciation and Amortization. Depreciation and amortization expense increased to $67.2 million for the third quarter of 2021 compared to $62.6 million for the third quarter of 2020 primarily due to the digital projectors received in a non-cash distribution from DCIP during the fourth quarter of 2020. See Note 10 to the condensed consolidated financial statements for discussion of the non-cash distribution from DCIP.
(Gain) Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of $1.0 million during the third quarter of 2021 compared to a gain of $13.3 million during the third quarter of 2020. Activity for the third quarter of 2021 was primarily related to the removal and disposal of assets at closed theatres. Activity for the third quarter of 2020 was primarily related to a favorable litigation outcome for a case that was previously accrued.
Interest Expense. Interest expense, which includes amortization of debt issue costs and amortization of accumulated losses for swap amendments, increased to $38.0 million during the third quarter of 2021 compared to $36.6 million the third quarter of 2020. The increase was primarily due to the issuance of notes discussed at Note 7 to our condensed consolidated financial statements.
Distributions from DCIP. We recorded distributions from DCIP of $6.5 million during the third quarter of 2021. These distributions were in excess of the carrying value of our investment in DCIP, which was zero. See Note 10 to our condensed consolidated financial statements for discussion of our investment in DCIP.
Equity in Loss of Affiliates. We recorded equity in loss of affiliates of $7.1 million during the third quarter of 2021 compared to $16.1 million during the third quarter of 2020. Our equity method investees are also recovering from the impacts of the COVID-19 pandemic. See Note 2 to our condensed consolidated financial statements for additional discussion of the COVID-19 pandemic. See Notes 9 and 10 to our condensed consolidated financial statements for information about our equity investments.
Income Taxes. An income tax benefit of $(8.9) million was recorded for the third quarter of 2021 compared to an income tax benefit of $(121.1) million for the third quarter of 2020. The effective tax rate was approximately 10.3% for the third quarter of 2021 compared to 45.0% for the third quarter of 2020. The effective tax rate for the third quarter of 2021 was negatively impacted by valuation allowances related to deferred tax assets for which the ultimate realization is uncertain. The effective tax rate for third quarter of 2020 was favorably impacted by the carryback of 2020 losses to tax years that had a 35% federal tax rate under the provisions of the CARES Act. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the
35
effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.
Nine months ended September 30, 2021 (the “2021 period”) versus the nine months ended September 30, 2020 (the “2020 period”)
All of our domestic and international theatres were open as of September 30, 2021. Certain of our international theatres were temporarily closed for portions of the 2021 period.
|
|
U.S. Operating Segment |
|
|
International Operating Segment |
|
|
Consolidated |
|
|||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant |
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
% |
|
|
2021 |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
% |
|
|||||||||||
Admissions revenues (1) |
|
$ |
384.4 |
|
|
$ |
247.2 |
|
|
|
55.5 |
% |
|
$ |
50.7 |
|
|
$ |
60.2 |
|
|
|
(15.8 |
)% |
|
$ |
54.1 |
|
|
|
(10.1 |
)% |
|
$ |
435.1 |
|
|
$ |
307.4 |
|
|
|
41.5 |
% |
Concession revenues (1) |
|
$ |
275.0 |
|
|
$ |
161.7 |
|
|
|
70.1 |
% |
|
$ |
38.5 |
|
|
$ |
37.9 |
|
|
|
1.6 |
% |
|
$ |
40.8 |
|
|
|
7.7 |
% |
|
$ |
313.5 |
|
|
$ |
199.6 |
|
|
|
57.1 |
% |
Other revenues (1)(2) |
|
$ |
82.5 |
|
|
$ |
61.2 |
|
|
|
34.8 |
% |
|
$ |
12.7 |
|
|
$ |
19.9 |
|
|
|
(36.2 |
)% |
|
$ |
13.9 |
|
|
|
(30.2 |
)% |
|
$ |
95.2 |
|
|
$ |
81.1 |
|
|
|
17.4 |
% |
Total revenues (1)(2) |
|
$ |
741.9 |
|
|
$ |
470.1 |
|
|
|
57.8 |
% |
|
$ |
101.9 |
|
|
$ |
118.0 |
|
|
|
(13.6 |
)% |
|
$ |
108.8 |
|
|
|
(7.8 |
)% |
|
$ |
843.8 |
|
|
$ |
588.1 |
|
|
|
43.5 |
% |
Attendance (1) |
|
|
41.8 |
|
|
|
29.8 |
|
|
|
40.3 |
% |
|
|
15.7 |
|
|
|
17.9 |
|
|
|
(12.3 |
)% |
|
|
|
|
|
|
|
|
57.5 |
|
|
|
47.7 |
|
|
|
20.5 |
% |
||
Average ticket price (1) |
|
$ |
9.20 |
|
|
$ |
8.30 |
|
|
|
10.8 |
% |
|
$ |
3.23 |
|
|
$ |
3.36 |
|
|
|
(3.9 |
)% |
|
$ |
3.45 |
|
|
|
2.7 |
% |
|
$ |
7.57 |
|
|
$ |
6.44 |
|
|
|
17.5 |
% |
Concession revenues per patron (1) |
|
$ |
6.58 |
|
|
$ |
5.43 |
|
|
|
21.2 |
% |
|
$ |
2.45 |
|
|
$ |
2.12 |
|
|
|
15.6 |
% |
|
$ |
2.60 |
|
|
|
22.6 |
% |
|
$ |
5.45 |
|
|
$ |
4.18 |
|
|
|
30.4 |
% |
Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the nine months ended September 30, 2021 and 2020.
|
|
U.S. Operating Segment |
|
|
International Operating Segment |
|
|
Consolidated |
|
|||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Constant |
|
|
2021 |
|
|
2020 |
|
|||||||
Film rentals and advertising |
|
$ |
191.5 |
|
|
$ |
136.3 |
|
|
$ |
25.3 |
|
|
$ |
28.9 |
|
|
$ |
27.2 |
|
|
$ |
216.8 |
|
|
$ |
165.2 |
|
Concession supplies |
|
$ |
44.6 |
|
|
$ |
29.4 |
|
|
$ |
9.6 |
|
|
$ |
10.5 |
|
|
$ |
10.2 |
|
|
$ |
54.2 |
|
|
$ |
39.9 |
|
Salaries and wages |
|
$ |
126.4 |
|
|
$ |
90.5 |
|
|
$ |
22.8 |
|
|
$ |
26.1 |
|
|
$ |
24.5 |
|
|
$ |
149.2 |
|
|
$ |
116.6 |
|
Facility lease expense |
|
$ |
177.7 |
|
|
$ |
186.0 |
|
|
$ |
23.1 |
|
|
$ |
28.5 |
|
|
$ |
24.0 |
|
|
$ |
200.8 |
|
|
$ |
214.5 |
|
Utilities and other |
|
$ |
161.0 |
|
|
$ |
140.3 |
|
|
$ |
31.0 |
|
|
$ |
38.4 |
|
|
$ |
33.4 |
|
|
$ |
192.0 |
|
|
$ |
178.7 |
|
36
Salaries and wages increased to $126.4 million for the 2021 period as theatre operating hours continue to expand to service growing attendance demand. Facility lease expense, which is primarily fixed in nature, decreased $8.3 million primarily due to a decline in percentage rent expense and common area maintenance costs, as well as the permanent closure of certain theatres. Utilities and other costs increased $20.7 million, as many of these costs, such as janitorial costs, electricity costs, credit card fees and repairs and maintenance, are variable in nature and were impacted by lower attendance as a result of the temporary closures during the 2020 period.
Salaries and wages decreased $3.3 million as reported for the 2021 period as compared to the 2020 period as a result of temporary theatre closures and limited operating hours for those theatres that were open. Facility lease expense decreased $5.4 million as reported due to our negotiations with certain landlords to shift from a minimum rent structure to percentage rent while we recover from the pandemic, as well as lower percentage rent at other locations. Utilities and other costs decreased $7.3 million as reported, as many of these costs are variable in nature, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, and were impacted by the limited operating hours of our theatres as well as periodic closures during the 2021 period. These expenses, as reported, were also impacted by exchange rates in each of the countries in which we operate.
General and Administrative Expenses. General and administrative expenses increased to $111.8 million for the 2021 period compared to $99.4 million for the 2020 period. The increase is primarily due to the temporary salary reductions and furloughs for our corporate workforce during the 2020 period and increased incentive and share based award compensation expense as a result of certain retention measures during the 2021 period.
Depreciation and Amortization. Depreciation and amortization expense increased to $202.3 million for the 2021 period compared to $191.4 million for the 2020 period primarily due to the digital projectors received in a non-cash distribution from DCIP during the fourth quarter of 2020. See Note 10 to the condensed consolidated financial statements for discussion of the non-cash distribution from DCIP.
Impairment of Long-Lived Assets. We recorded asset impairment charges of $7.5 million during the 2021 period. We recorded asset impairment charges of $41.2 million during the 2020 period. The asset impairment charges recorded during the 2021 and 2020 periods were primarily a result of the prolonged impact of the COVID pandemic on our operations, as some theatres remained closed and film content continued to shift into future periods, both of which impacted our estimated future cash flows for theatres. Impairment charges for the 2021 period impacted two countries. Impairment charges for the 2020 period impacted eight countries. See Note 13 to our condensed consolidated financial statements.
Restructuring Costs. Restructuring costs were $(1.3) million during the 2021 period compared to $20.1 million during the 2020 period. The credit recorded during the 2021 period was primarily the result of settlements of lease obligations below the original estimated amounts. Charges recorded during the 2020 period related to a restructuring plan implemented during the second quarter of 2020. See Note 2 to our condensed consolidated financial statements for further discussion.
(Gain) Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of $7.9 million during the 2021 period compared to a gain of $11.0 million during the 2020 period. Activity for the 2021 period was primarily related to the write-off of certain digital projectors recently received from DCIP in a non-cash distribution that were replaced with laser projectors, partially offset by gains on the sales of excess land parcels. See Note 10 for discussion of the distribution of digital projectors from DCIP. Activity for the 2020 period was primarily due to a favorable litigation outcome for a case that was previously accrued, partially offset by the retirement of assets related to theatre remodels.
37
Interest Expense. Interest expense, which includes amortization of debt issue costs and amortization of accumulated losses for swap amendments, increased to $111.6 million during the 2021 period compared to $92.3 million for the 2020 period. The increase was primarily due to the issuance of notes discussed at Note 7 to our condensed consolidated financial statements.
Loss on Extinguishment of Debt. We recorded a loss on extinguishment of debt of $6.5 million during the 2021 period related to the early retirement of our 5.125% Senior Notes and 4.875% Senior Notes, including the write-off of unamortized debt issuance costs and legal and other fees paid. See Note 7 to our condensed consolidated financial statements.
Distributions from NCM. We recorded distributions from NCM of $0.1 million during the 2021 period compared to $7.0 million recorded during the 2020 period. These distributions were in excess of the carrying value of our Tranche 1 investment. The decrease in distributions from NCM is primarily due to the impact of theatres being temporarily closed as a result of the COVID-19 pandemic as discussed at Note 2. See Note 9 to our condensed consolidated financial statements for discussion of our investment in NCM.
Distributions from DCIP. We recorded distributions from DCIP of $6.5 million during the 2021 period. These distributions were in excess of the carrying value of our investment in DCIP, which was zero. See Note 10 to our condensed consolidated financial statements for discussion of our investment in DCIP.
Equity in Loss of Affiliates. We recorded equity in loss of affiliates of $22.1 million during the 2021 period compared to $27.7 million during the 2020 period. Our equity method investees are also recovering from the impacts of the COVID-19 pandemic. See Notes 9 and 10 to our condensed consolidated financial statements for information about our equity investments.
Income Taxes. An income tax benefit of $(15.6) million was recorded for the 2021 period compared to income tax benefit of $(222.4) million for the 2020 period. The effective tax rate was approximately 3.5% for the 2021 period compared to 37.0% for the 2020 period. As a result of continued projected losses in 2021, the effective tax rate was negatively impacted by valuation allowances related to certain foreign tax credits and deferred tax assets for which the ultimate realization is uncertain. The effective tax rate for the 2020 period was favorably impacted by the carryback of 2020 losses to tax years that had a 35% federal tax rate under the provisions of the CARES Act. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.
Liquidity and Capital Resources
Operating Activities
We primarily collect our revenues in cash, mainly through box office receipts and the sale of concessions. Our revenues are received in cash prior to the payment of related expenses; therefore, we have an operating “float” and historically have not required traditional working capital financing. However, as we reopened our theatres that were temporarily closed during March 2020, we have funded operating expenses with cash on hand and recent additional financing discussed below under Financing Activities.
Cash used for operating activities was $42.2 million for the nine months ended September 30, 2021 compared to $167.7 million for the nine months ended September 30, 2020. The decrease in cash used for operating activities was primarily a result of $136.8 million of tax refunds received during April 2021, the timing and level of revenues earned during each period and the timing of payments to vendors for expenses incurred during each period, partially offset by payments of previously deferred rent.
As discussed in Note 4 to our condensed consolidated financial statements, we negotiated the deferral of rent and other lease-related payments in 2020 and early 2021 with some of our landlords. Approximately $43.0 million in deferred lease payments remain as of September 30, 2021. Approximately $37.6 million will be repaid within one year and the remaining $5.4 million will be repaid in subsequent years.
38
Investing Activities
Our investing activities have been principally related to the development, remodel and acquisition of theatres. New theatre openings and acquisitions historically have been financed with internally generated cash and by debt financing, including borrowings under our senior secured credit facility. Cash used for investing activities was $55.1 million for the nine months ended September 30, 2021 compared to $67.5 million for the nine months ended September 30, 2020. The decrease in cash used for investing activities was primarily due to reduced capital expenditures as we continue to limit spend to essential projects.
Capital expenditures for the nine months ended September 30, 2021 and 2020 were as follows (in millions):
Period |
|
New Theatres |
|
|
Existing Theatres |
|
|
|
|
|||
Nine Months Ended September 30, 2021 |
|
$ |
24.1 |
|
|
$ |
33.1 |
|
|
$ |
57.2 |
|
Nine Months Ended September 30, 2020 |
|
$ |
18.7 |
|
|
$ |
48.9 |
|
|
$ |
67.6 |
|
We operated 524 theatres with 5,897 screens worldwide as of September 30, 2021. Theatres and screens acquired, built and closed during the three months ended September 30, 2021 were as follows:
|
|
January 1, 2021 |
|
|
Built |
|
|
Closed |
|
|
September 30, 2021 |
|
||||
U.S (42 states) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Theatres |
|
|
331 |
|
|
|
1 |
|
|
|
(8 |
) |
|
|
324 |
|
Screens |
|
|
4,507 |
|
|
|
14 |
|
|
|
(81 |
) |
|
|
4,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
International (15 countries) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Theatres |
|
|
200 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
200 |
|
Screens |
|
|
1,451 |
|
|
|
25 |
|
|
|
(19 |
) |
|
|
1,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Worldwide |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Theatres |
|
|
531 |
|
|
|
4 |
|
|
|
(11 |
) |
|
|
524 |
|
Screens |
|
|
5,958 |
|
|
|
39 |
|
|
|
(100 |
) |
|
|
5,897 |
|
As of September 30, 2021, we had the following signed commitments (costs in millions):
|
|
Theatres |
|
Screens |
|
Estimated |
|
|
Remainder of 2021 |
|
|
|
|
|
|
|
|
U.S. |
|
2 |
|
28 |
|
$ |
16.1 |
|
International |
|
— |
|
5 |
|
|
3.7 |
|
Total |
|
2 |
|
33 |
|
$ |
19.8 |
|
|
|
|
|
|
|
|
|
|
Subsequent to 2021 |
|
|
|
|
|
|
|
|
U.S. |
|
5 |
|
62 |
|
$ |
41.0 |
|
International |
|
7 |
|
50 |
|
|
22.4 |
|
Total |
|
12 |
|
112 |
|
$ |
63.4 |
|
|
|
|
|
|
|
|
|
|
Total commitments at September 30, 2021 |
|
14 |
|
145 |
|
$ |
83.2 |
|
Actual expenditures for continued theatre development, remodels and acquisitions are subject to change based upon the availability of attractive opportunities. We may fund capital expenditures for our continued development with cash flow from operations, borrowings under our senior secured credit facility, and proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.
Financing Activities
Cash used for financing activities was $12.9 million for the nine months ended September 30, 2021 compared to cash provided by financing activities of $577.5 million for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, we issued 5.875% Senior Notes and 5.25% Senior Notes, the proceeds of which were used to redeem the 5.125% Senior Notes and the 4.875% Senior Notes, respectively, as discussed further below. We paid approximately $17.3 million in debt issuance costs and
39
$2.1 million in fees related to these transactions and an amendment to our Senior Secured Credit Facility during the nine months ended September 30, 2021. During the nine months ended September 30, 2020, we borrowed $98.8 million on our revolving line-of-credit, which was repaid during the third quarter of 2020, issued the 8.750% Secured Notes discussed below and paid dividends to stockholders of $42.3 million.
We, at the discretion of the board of directors and subject to applicable law, may pay dividends on our common stock. The amount, if any, of the dividends to be paid in the future will depend upon our then available cash balance, anticipated cash needs, overall financial condition, loan agreement restrictions as discussed below, future prospects for earnings and cash flows, as well as other relevant factors. As a result of the impact of the COVID-19 pandemic, we have suspended our quarterly dividend.
We may from time to time, subject to compliance with our debt instruments, purchase our debt securities on the open market depending upon the availability and prices of such securities. Long-term debt consisted of the following as of September 30, 2021 (in millions):
Cinemark Holdings, Inc. 4.500% convertible senior notes due 2025 |
|
|
460.0 |
|
Cinemark USA, Inc. term loan |
|
$ |
634.8 |
|
Cinemark USA, Inc. 8.750% senior secured notes due 2025 |
|
|
250.0 |
|
Cinemark USA, Inc. 5.875% senior notes due 2026 |
|
|
405.0 |
|
Cinemark USA, Inc. 5.250% senior notes due 2028 |
|
|
765.0 |
|
Other debt |
|
|
28.3 |
|
Total long-term debt |
|
$ |
2,543.1 |
|
Less current portion |
|
|
20.3 |
|
Subtotal long-term debt, less current portion |
|
$ |
2,522.8 |
|
Less: Debt issuance costs, net of accumulated amortization |
|
|
45.5 |
|
Long-term debt, less current portion, net of unamortized debt issuance costs |
|
$ |
2,477.3 |
|
As of September 30, 2021, $100 million was available for borrowing under the revolving line of credit.
Contractual Obligations
During the nine months ended September 30, 2021, Cinemark USA, Inc. issued the 5.875% Senior Notes and the 5.25% Senior Notes and redeemed the 5.125% Senior Notes and the 4.875% Senior Notes. Included below is an updated summary of long-term debt obligations and related estimated scheduled interest payment obligations as of September 30, 2021, reflecting these changes.
|
|
Payments Due by Period |
|
|||||||||||||||||
|
|
(in millions) |
|
|||||||||||||||||
|
|
|
|
|
Less Than |
|
|
|
|
|
|
|
|
After |
|
|||||
Contractual Obligations |
|
Total |
|
|
One Year |
|
|
1 - 3 Years |
|
|
3 - 5 Years |
|
|
5 Years |
|
|||||
Long-term debt (1) |
|
$ |
2,543.1 |
|
|
$ |
20.3 |
|
|
$ |
21.1 |
|
|
$ |
1,730.2 |
|
|
$ |
771.5 |
|
Scheduled interest payments on long-term debt (2) |
|
$ |
605.1 |
|
|
$ |
129.2 |
|
|
$ |
255.8 |
|
|
$ |
151.3 |
|
|
$ |
68.8 |
|
There have been no other material changes in our contractual obligations previously disclosed in “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed February 26, 2021.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Senior Secured Credit Facility
Cinemark USA, Inc. has a senior secured credit facility that includes a $700.0 million term loan and a $100.0 million revolving credit line (the “Credit Agreement”). Under the amended Credit Agreement, quarterly principal payments of $1.6 million are due on the term loan through December 31, 2024, with a final principal payment of $613.4 million due on March 29, 2025. Cinemark USA, Inc. had $100.0 million available borrowing capacity on the revolving credit line as of September 30, 2021.
Interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or, if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin of 0.75% per
40
annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 1.75% per annum. Interest on the revolving credit line accrues, at our option, at: (A) a base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin that ranges from 0.50% to 1.25% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 1.50% to 2.25% per annum. The margin of the revolving credit line is determined by the consolidated net senior secured leverage ratio as defined in the Credit Agreement.
Cinemark USA, Inc.’s obligations under the Credit Agreement are guaranteed by Cinemark Holdings, Inc. and certain of Cinemark USA, Inc.’s domestic subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of Cinemark USA, Inc.’s and the guarantors’ personal property, including, without limitation, pledges of all of Cinemark USA, Inc.’s capital stock, all of the capital stock of certain of Cinemark USA, Inc.’s domestic subsidiaries and 65% of the voting stock of certain of its foreign subsidiaries.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on Cinemark USA, Inc.’s ability, and in certain instances, its subsidiaries’ and our ability, to consolidate or merge or liquidate, wind up or dissolve; substantially change the nature of its business; sell, transfer or dispose of assets; create or incur indebtedness; create liens; pay dividends or repurchase stock; and make capital expenditures and investments. If Cinemark USA, Inc. has borrowings outstanding on the revolving credit line, it is required to satisfy a consolidated net senior secured leverage ratio covenant as defined in the Credit Agreement, not to exceed 4.25 to 1. See below for discussion of recent covenant waivers.
The dividend restriction contained in the Credit Agreement prevents the Company and any of its subsidiaries from paying a dividend or otherwise distributing cash to its stockholders unless (1) the Company is not in default, and the distribution would not cause Cinemark USA, Inc. to be in default, under the Credit Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Credit Agreement, and (c) certain other defined amounts (collectively the “Applicable Amount”).
On April 17, 2020, in conjunction with the issuance of the 8.750% Secured Notes discussed below, we obtained a waiver of the leverage covenant from the majority of revolving lenders under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020. The waiver is subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.
On August 21, 2020, in conjunction with the issuance of the 4.50% Convertible Senior Notes discussed below, we further amended the waiver of the leverage covenant through the fiscal quarter ending September 30, 2021. The amendment also i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits us to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver and (iv) makes such other changes to permit the issuance of the 4.50% Convertible Senior Notes discussed below.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from November 28, 2022 to November 28, 2024.
We have four interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with the variable interest rates on the term loan outstanding under the Credit Agreement. See Note 7 of our condensed consolidated financial statements for discussion of the interest rate swaps.
At September 30, 2021, there was $634.8 million outstanding under the term loan and no borrowings were outstanding under the $100.0 million revolving line of credit. The average interest rate on outstanding term loan borrowings under the Credit Agreement as of September 30, 2021 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed above.
5.875% Senior Notes
On March 16, 2021, Cinemark USA, Inc. issued $405 million aggregate principal amount of 5.875% senior notes due 2026, at par value (the “5.875% Senior Notes”). Proceeds, after payment of fees, were used to fund a cash tender offer to purchase any and all of Cinemark USA’s 5.125% Senior Notes (the “5.125% Senior Notes”) and to redeem any of the 5.125% Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on March 15, 2026. The Company incurred debt issue costs of approximately $6.0 million in connection with the issuance, which are recorded as a reduction of long-term debt, less current on the consolidated balance sheet.
41
The 5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantors’ existing and future senior subordinated debt. The 5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the collateral securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 5.875% Senior Notes.
Prior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of the 5.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.875% Senior Notes to the date of redemption. After March 15, 2023, Cinemark USA, Inc. may redeem the 5.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
5.25% Senior Notes
On June 15, 2021, Cinemark USA, Inc. issued $765 million aggregate principal amount of 5.25% senior notes due 2028, at par value (the “5.25% Senior Notes”). Proceeds, after payment of fees, were used to redeem all of Cinemark USA’s 4.875% $755 million aggregate principal amount of Senior Notes due 2023 (the “4.875% Senior Notes”). Interest on the 5.25% Senior Notes is payable on January 15 and July 15 of each year, beginning January 15, 2022. The 5.25% Senior Notes mature on July 15, 2028.
The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s 8.750% senior secured notes due 2025, in each case to the extent of the value of the collateral securing such debt, (iv) are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA’s non-guarantor subsidiaries, and (v) are structurally senior to the 4.50% convertible senior notes due 2025 issued by Cinemark Holdings.
Prior to July 15, 2024, Cinemark USA, Inc. may redeem all or any part of the 5.25% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.25% Senior Notes to the date of redemption. On or after July 15, 2024, Cinemark USA, Inc. may redeem the 5.25% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to July 15, 2024, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.25% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture, so long as at least 60% of the principal amount of the 5.25% Senior Notes remains outstanding immediately after each such redemption.
8.750% Secured Notes
On April 20, 2020, Cinemark USA, Inc. issued $250 million 8.750% senior secured notes (the “8.750% Secured Notes”). The 8.750% Senior Notes will mature on May 1, 2025; provided, however, that if (i) on September 13, 2022, the aggregate outstanding principal amount of the 5.125% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds $50 million, the 8.750% Senior Notes will mature on September 14, 2022 and (ii) on February 27, 2023, the aggregate outstanding principal amount of the 4.875% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds $50 million, the 8.750% Senior Notes will mature on February 28, 2023. Interest on the 8.750% Senior Notes will be payable on May 1 and November 1 of each year, beginning on November 1, 2020.
The 8.750% Secured Notes are fully and unconditionally guaranteed on a joint and several senior basis by certain of the Company’s subsidiaries that guarantee, assume or in any other manner become liable with respect to any of the Company’s or its guarantors’ other debt. If the Company cannot make payments on the 8.750% Secured Notes when they are due, the Company’s guarantors must make them instead. Under certain circumstances, the guarantees may be released without action by, or the consent of, the holders of the 8.750% Secured Notes.
4.50% Convertible Senior Notes
On August 21, 2020, Cinemark Holdings, Inc. issued $460 million 4.50% convertible senior notes (the “4.50% Convertible Senior Notes”). The notes will mature on August 15, 2025, unless earlier repurchased or converted. Interest on the notes will be payable on February 15 and August 15 of each year, beginning on February 15, 2021.
42
Holders of the 4.50% Convertible Senior Notes may convert their 4.50% Convertible Senior Notes at their option at any time prior to the close of business on the business day immediately preceding May 15, 2025 only under the following circumstances: (1) during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (2) if we distribute to all or substantially all stockholders (i) rights options or warrants entitling them to purchase shares at a discount to the recent average trading price of our common stock (including due to a stockholder rights plan) or (ii) our assets or securities or rights, options or warrants to purchase the same with a per share value exceeding 10% of the trading price of our common stock, (3) upon the occurrence of specified corporate events as described further in the indenture. Beginning May 15, 2025, holders may convert their notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, or (4) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price (initially $14.35 per share), on each applicable trading day. Upon conversion of the notes, we will pay or deliver cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.
The conversion rate will initially be 69.6767 shares of our common stock per one thousand dollars principal amount of the 4.50% Convertible Senior Notes. The conversion rate will be subject to adjustment upon the occurrence of certain events. If a make-whole fundamental change as defined in the indenture occurs prior to the maturity date, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with such make-whole fundamental change.
The 4.50% Convertible Notes will be effectively subordinated to any of our, or our subsidiaries’, existing and future secured debt to the extent of the value of the assets securing such indebtedness, including obligations under the Credit Agreement. The 4.50% Convertible Notes will be structurally subordinated to all existing and future debt and other liabilities, including trade payables, including Cinemark USA’s 5.125% senior notes due 2022, 4.875% senior notes due 2023 and the 8.750% Secured Notes due 2025, or, collectively, Cinemark USA’s senior notes (but excluding all obligations under the Credit Agreement which are guaranteed by Cinemark Holdings, inc.). The 4.50% Convertible Notes rank equally in right of payment with all of our existing and future unsubordinated debt, including all obligations under the Cinemark USA, Inc. Credit Agreement, which such Credit Agreement is guaranteed by Cinemark Holdings, Inc., and senior in right of payment to any future debt that is expressly subordinated in right of payment to the notes. The 4.50% Convertible Notes are not guaranteed by any of Cinemark Holdings, Inc.’s subsidiaries.
Additional Borrowings of International Subsidiaries
As of September 30, 2021, certain of our international subsidiaries had an aggregate of $28.3 million outstanding under various local bank loans. Below is a summary of these loans:
|
|
USD Balance as of |
|
Interest Rates as of |
|
|
|
|
Loan Description |
|
September 30, 2021 |
|
September 30, 2021 |
|
Covenants |
|
Maturity |
Peru loans |
|
$5.0 million |
|
1.0% to 4.8% |
|
Negative covenants |
|
June 2023 and December 2023 |
Brazil loans |
|
$15.1 million |
|
3.6% to 8.1% |
|
Negative covenants |
|
November 2021, October 2023 and January 2029 |
Colombia loans |
|
$3.2 million |
|
3.3% to 5.9% |
|
Negative and |
|
May 2023, June 2023 and September 2025 |
Chile loans |
|
$5.0 million |
|
3.5% |
|
Negative and |
|
November 2023 |
Additionally, we deposited cash into a collateral account to support the issuance of bank letters of credit to the lenders for the international loans noted above. The total amount deposited during the nine months ended September 30, 2021 was $7.3 million. Total deposits to support bank letters of credit for the outstanding loans of our international subsidiaries is $21.1 million and is considered restricted cash as of September 30, 2021. These restricted cash amounts do not impact the Applicable Amount as defined under the Credit Agreement or the restricted payments as defined in the indentures to the notes as described above.
5.125% Senior Notes
On March 16, 2021, Cinemark USA, Inc. completed a tender offer to purchase it’s previously outstanding 5.125% Senior Notes, of which $334 million was tendered at the expiration of the offer. On March 16, 2021, Cinemark USA, Inc. also issued a notice of optional redemption to redeem the remaining $66 million principal amount of the 5.125% Senior Notes. In connection therewith, on March 16, 2021, Cinemark USA deposited with Wells Fargo Bank, N.A., as trustee for the 5.125% Senior Notes (the “Trustee”), funds sufficient to redeem all 5.125% Notes remaining outstanding on April 15, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included approximately $66 million of outstanding principal at the redemption price equal to 100% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on March 16, 2021, the indenture governing the 5.125% Senior Notes was fully satisfied and discharged.
43
4.875% Senior Notes
On May 21, 2021, Cinemark USA, Inc. issued a conditional notice of optional redemption to redeem the $755 million outstanding principal amount of the 4.875% Senior Notes. In connection therewith, Cinemark USA deposited with Wells Fargo Bank, N.A., as Trustee for the 4.875% Senior Notes (the “Trustee”), funds sufficient to redeem all 4.875% Senior Notes remaining outstanding on June 21, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included $755 million of outstanding principal at the redemption price equal to 100.000% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on June 15, 2021, the indenture governing the 4.875% Senior Notes was fully satisfied and discharged.
Covenant Compliance
The indentures governing the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes ("the indentures") contain covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. As of September 30, 2021, Cinemark USA, Inc. could have distributed up to approximately $2.9 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indentures, subject to its available cash and other borrowing restrictions outlined in the indentures. Upon a change of control, as defined in the indentures, Cinemark USA, Inc. would be required to make an offer to repurchase the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indentures allow Cinemark USA, Inc. to incur additional indebtedness if we satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of September 30, 2021 was below zero.
As of September 30, 2021, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.
44
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have exposure to financial market risks, including changes in interest rates, foreign currency exchange rates and other relevant market prices.
Interest Rate Risk
We are currently party to a variable rate debt facility. We have four interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with the variable interest rates on $600 million of the term loan outstanding under the Credit Agreement. An increase or decrease in interest rates would affect our interest expense relating to our variable rate debt. At September 30, 2021, we had an aggregate of approximately $63.1 million of variable rate debt outstanding. Based on the interest rates in effect on the variable rate debt outstanding at September 30, 2021, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $0.6 million.
The table below provides information about our fixed rate and variable rate long-term debt agreements as of September 30, 2021:
|
|
Expected Maturity for the Twelve-Month Periods Ending September 30, |
|
|
Average |
|
||||||||||||||||||||||||
|
|
(in millions) |
|
|
Interest |
|
||||||||||||||||||||||||
|
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
Thereafter |
|
Total |
|
|
Fair Value |
|
|
Rate |
|
|||||||||
Fixed rate |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
850.0 |
|
$ |
865.0 |
|
$ |
765.0 |
|
$ |
2,480.0 |
|
|
$ |
2,763.1 |
|
|
|
5.1 |
% |
Variable rate (1) |
|
|
20.3 |
|
|
13.3 |
|
|
7.8 |
|
|
15.2 |
|
|
— |
|
|
6.5 |
|
|
63.1 |
|
|
|
61.9 |
|
|
|
2.8 |
% |
Total debt |
|
$ |
20.3 |
|
$ |
13.3 |
|
$ |
7.8 |
|
$ |
865.2 |
|
$ |
865.0 |
|
$ |
771.5 |
|
$ |
2,543.1 |
|
|
$ |
2,825.0 |
|
|
|
|
|
Interest Rate Swap Agreements
All of our interest rate swap agreements qualify for cash flow hedge accounting. The fair values of the interest rate swaps are recorded on our consolidated balance sheet as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. See Note 7 to the condensed consolidated financial statements for further discussion of the interest rate swap agreements.
Foreign Currency Exchange Rate Risk
There have been no material changes in foreign currency exchange rate risk previously disclosed in “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed February 26, 2021.
Item 4. Controls and Procedures
Evaluation of the Effectiveness of Disclosure Controls and Procedures
As of September 30, 2021, we carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 that occurred during the quarter ended September 30, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
45
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Other than the discussion at Note 19, there have been no material changes from legal proceedings previously reported under “Business – Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed February 26, 2021.
Item 1A. Risk Factors
See discussion in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed February 26, 2021, as updated by risk factors included in a Form 8-K that was filed on March 4, 2021.
46
Item 6. Exhibits
|
|
|
*31.1 |
|
|
|
|
|
*31.2 |
|
|
|
|
|
*32.1 |
|
|
|
|
|
*32.2 |
|
|
|
|
|
* 101 |
|
The following material from Cinemark Holdings, Inc.’s Form 10-Q for the quarter ended September 30, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language), filed herewith: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income (Loss), (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements. |
|
|
|
* 104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* filed herewith.
47
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 thereunto duly authorized.
|
|
|
|
CINEMARK HOLDINGS, INC. |
|
|
|
|
Registrant |
|
|
|
|
|
DATE: |
|
November 5, 2021 |
|
|
|
|
|
|
|
|
|
|
|
/s/ Mark Zoradi |
|
|
|
|
Mark Zoradi |
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
/s/ Sean Gamble |
|
|
|
|
Sean Gamble |
|
|
|
|
Chief Financial Officer |
48