UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 20122015
Commission File Number 001-33401
CINEMARK HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 20-5490327 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3900 Dallas Parkway Suite 500 Plano, Texas | 75093 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (972) 665-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Common Stock, par value $0.001 per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes xþ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)15 (d) of the Act. Yes ¨ No xþ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xþ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes xþ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. xþ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | ¨ | ||||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No xþ
The aggregate market value of the voting and non-voting common equity owned by non-affiliates of the registrant on June 29, 2012,30, 2015, computed by reference to the closing price for the registrant’s common stock on the New York Stock Exchange on such date was $2,397,026,127 (104,354,642approximately $4,226,626,904 (105,218,494 shares at a closing price per share of $22.97)$40.17).
As of February 21, 2013, 114,950,41119, 2016, 115,923,909 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s definitive proxy statement, in connection with its 20132016 annual meeting of stockholders, to be filed within 120 days of December 31, 2012,2015, are incorporated by reference into Part III, Items 10-14, of this annual report on Form 10-K.
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Cautionary Statement Regarding Forward-Looking Statements
This annual report on Form 10-K includes “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, or the Exchange Act. The “forward looking statements” include our current expectations, assumptions, estimates and projections about our business and our industry. They 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.
You can identify forward-looking statements by the use of words such as “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions which are intended to identify 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 and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. In evaluating forward-looking statements, you should carefully consider the risks and uncertainties described in the “Risk Factors” section in Item 1A of this Form 10-K and elsewhere in this Form 10-K. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors contained in this Form 10-K. Forward-looking statements contained in this Form 10-K reflect our view only as of the date of this Form 10-K. 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.
Certain Definitions
Unless the context otherwise requires, all references to “we,” “our,” “us,” the “issuer” or “Cinemark” relate to Cinemark Holdings, Inc. and its consolidated subsidiaries. Unless otherwise specified, all operating and other statistical data for the U.S. include one theatre in Canada (that was sold during November 2010). All references to Latin America are to Brazil, Mexico (sold during November 2013), Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia and Guatemala.Curacao. Unless otherwise specified, all operating and other statistical data are as of and for the year ended December 31, 2012.2015.
Our Company
Cinemark Holdings, Inc. and subsidiaries, or the Company, us or our, is a leader in the motion picture exhibition industry, with theatres in the United States, or U.S., Brazil, Mexico, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia and Guatemala. We also managed additional theatres in the U.S., Brazil and Colombia during the year ended December 31, 2012.Curacao.
As of December 31, 2012,2015, we managed our business under two reportable operating segments: U.S. markets and international markets. See Note 2320 to the consolidated financial statements.
Cinemark Holdings, Inc. is a Delaware corporation incorporated on August 2, 2006. Our principal executive offices are at 3900 Dallas Parkway, Suite 500, Plano, Texas 75093. Our telephone number is (972) 665-1000. We maintain a corporate website atwww.cinemark.com.Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, are available on our website free of charge under the heading “Investor“About — Investor Relations –— Financials — SEC Filings” as soon as practicable after such reports are filed or furnished electronically to the Securities and Exchange Commission.Commission, or the SEC. Additionally, all of our filings with the SEC can be accessed on the SEC’s website at http://www.sec.gov.
Description of Business
We are one of the leaders in the motion picture exhibition industry. As of December 31, 2012,2015, we operated 465513 theatres and 5,2405,796 screens in the U.S. and Latin America and approximately 263.7280 million patrons attended our theatres worldwide during the year ended December 31, 2012. Our circuit is the third largest in the U.S. with 298 theatres and 3,916 screens in 39 states.2015. We are one of the most geographically diverse worldwide exhibitors, with theatres in fifteen countries as of December 31, 2015. As of December 31, 2015, our U.S. circuit in Latin America with 167had 337 theatres and 1,3244,518 screens in 13 countries.41 states and our international circuit had 176 theatres and 1,278 screens.
Revenues, operating income and net income attributable to Cinemark Holdings, Inc. for the year ended December 31, 2015, were $2,852.6 million, $423.2 million and $216.9 million, respectively. At December 31, 2015 we had cash and cash equivalents of $588.5 million and total long-term debt of $1,814.6 million. Approximately $579.0 million, or 32%, of our long-term debt accrues interest at variable rates and approximately $8.4 million of our long-term debt matures in 2016.
We selectively build or acquire new theatres in markets where we can establish and maintain a strong market position. During the year ended December 31, 2015, we built 22 new theatres with 182 screens and acquired three theatres with 19 screens.
We believe our portfolio of modern high-quality theatres with multiple platforms provides a preferred destination for moviegoers and contributes to our solid and consistent cash flows from operating activities. Our significant and diverse presence in the U.S. and Latin America has made us an important distribution channel for movie studios, particularly as they look to capitalize onconsidering the expanding worldwide box office. Our market leadership is attributable in large part to our senior executives, whose years of industry experience range from 16 to 54 years and who have successfully navigated us through many industry and economic cycles.
Revenues, operating income and net income attributable to Cinemark Holdings, Inc. for the year ended December 31, 2012, were $2,473.5 million, $383.7 million and $168.9 million, respectively. At December 31, 2012 we had cash and cash equivalents of $742.7 million and long-term debt of $1,764.0 million. Approximately $250.0 million, or 14%, of our long-term debt accrues interest at variable rates and approximately $9.5 million of our long-term debt matures in 2013.
Currently, 100% of our first-run domestic theatres are fully digital and weWe continue to convertdevelop and expand new platforms and market adaptive concepts for our international theatres, which are approximately 42% digital. Digital projection technology gives us greater flexibilitytheatre circuit, such as XD, Movie Bistro, Cinemark Reserve, Luxury Lounger reclining seats, D-BOX seating, CinèArts and other premium concepts.
Our XD screens represent the largest private label premium large format footprint in programming and facilitates the exhibition of live and pre-recorded alternative entertainment. We also continue to roll out our Cinemarkindustry. Our XD Extreme Digital Cinema, or XD, whichauditorium offers a premium experience auditorium concept utilizing large screens and the latest in digital projection and enhanced custom sound, technologies.
including a Barco Auro 11.1 sound system or Dolby Atmos in select locations. The XD experience includes wall-to-wall and ceiling-to-floor screens, wrap-around sound, plush seating and a maximum comfort entertainment environment for an intense sensoryimmersive experience. We charge a premium price for the XD experience. The exceptional XD technology does not require special format movie prints, which allows us the flexibility to play any available digital print we choose, including 3-D content, in the XD auditorium. We currently have 109auditorium without any print enhancements required. As of December 31, 2015, we had 210 XD auditoriums in our worldwide circuit and havewith plans to install 4015 to 5020 more XD auditoriums during 2013.
The Movie Bistro locations offer in-theatre dining with expanded food offerings, such as fresh wraps, hot sandwiches, burgers, and gourmet pizzas, and a selection of beers, wines, and frozen cocktails, all of which can be enjoyed in the comfort of the auditoriums. We currently have three domestic theatres and one international theatre with the bistro concept and we plan to expand this premium concept to two new domestic locations during 2016.
During 2010,2014, we introducedopened our NextGen concept,first Cinemark Reserve theatre in the U.S., which features wall-to-walla VIP area with luxury recliner seating and ceiling-to-floor screensother amenities, along with a wide variety of food and beverage products. We opened our second Cinemark Reserve theatre in the latest digital projectionU.S. during 2015. We have a similar VIP concept offering recliner seating in five other domestic locations and sound technologies in all22 of our international theatres, referred to locally as either Cinemark Premiere or Cinemark Prime. We plan to continue to incorporate this concept in four of our new domestic and international theatres and convert three of our existing locations during 2016.
We have incorporated Luxury Lounger reclining seats in the majority of our new domestic builds and have also repositioned some of our existing domestic theatres to offer this premium seating feature. We currently feature Luxury Loungers in 29 of our domestic theatres, representing 397 screens. We plan to offer the Luxury Loungers in approximately 20% of our domestic circuit by the end of 2016.
We currently have auditoriums throughout our worldwide circuit that offer seats with immersive cinematic motion, called D-BOX. These seats are programmed in harmony with the audio and video content of the film and makes the viewer feel as if they are part of the movie itself. We offer D-BOX seating in 96 auditoriums throughout our worldwide circuit. We expect to add D-BOX seating to 40 locations during 2016.
Our CinèArts locations provide moviegoers with the best selection of a complex. These theatres generally also have an XD auditorium, which offers the wall-to-wallart and ceiling-to-floor screenindependent cinema in a larger auditorium with enhanced custom soundcaptivating, unique environment and plush seating. Mosthas set the industry standard for providing distinct, acclaimed and award-winning films. We currently have 14 domestic theatres that are dedicated to art and independent content and 57 of our futureother domestic theatres will incorporate this NextGen concept. As of December 31, 2012, 109 screens within nine theatres have the NextGen concept. Eight of these nine theatres also has an XD screen.offer art and independent films on a limited basis.
Motion Picture Exhibition Industry Overview
Technology Platform
The motion picture exhibition industry began its conversion to digital projection technology during 2009. Digital projection technology allows filmmakers the ability to showcase imaginative works of art exactly as they were intended, with incredible realism and detail and in a range of up to 35 trillion colors. Digital features are not susceptible to scratching and fading; therefore digital presentations remain clear and sharp for every screening.detail. A digitally produced or digitally converted movie can be distributed to theatres via satellite, physical media, or fiber optic networks. The digitized movie is stored on a computer/server which “serves” it to a digital projector for each screening of the movie and due to themovie. This format enables us to more efficiently move titles between auditoriums within a theatre asto appropriately address demand increases or decreases for each title. In addition, the conversion to digital technology may reduce production
Currently, all of our first-run domestic and distribution costs as it will eliminate the need to produce and transport multiple film reels.
international theatres are fully digital. Digital projection also allows us to present 3-D content and alternative entertainment such as live and pre-recorded sports programs, concert events, the operaMetropolitan Opera, gaming events and other special presentations. Thirty-five films released during 2011 were available in 3-D format, 33 films were available in 3-D format during 2012 and at least 32 3-D films are currently expected to be released during 2013. Three-dimensional technology offers a premium experience with crisp, bright, ultra-realistic images that create an immersive film experienceimages. According to Motion Picture Association of America, or MPAA, approximately 17% and 13% of domestic box office for the patron. A premium is charged for a2013 and 2014, respectively, was generated by 3-D presentation.tickets.
The motion picture exhibition industry is also developing a distribution network that would allow for distribution of all digital content to theatres via satellite. We are participating in
During 2013, through a joint venture with certain exhibitors and distributors callednamed Digital Cinema Distribution Coalition, or DCDC, whose goal isthe motion picture exhibition industry developed a content delivery network that allows for delivery of all digital content to establish thisU.S. theatres via satellite. Delivery of content via satellite distribution network.reduces film transportation costs for both distributors and exhibitors, as a portion of the costs to produce and ship hard drives has been eliminated.
We have started to expand satellite delivery technology into some of our Latin American markets, initially for live event presentations. Approximately 59 of our international theatres have capabilities to receive live event feeds via satellite, with some of these locations also able to receive film content via satellite.
Domestic Markets
The U.S. motion picture exhibition industry has a trackset an all-time box office record during 2015 with an estimated $11.1 billion in revenues. This represents an increase of long-term growth, withapproximately 7% over 2014 and an increase of 2% over box office revenues growing at an estimated CAGR of 2.3% from 2001 to 2011. Against this background of steady long-term growth,for the exhibition industry has experienced periodic short-term increases and decreases in attendance, and consequently box office revenues. While 2012 industry statistics have not yet been published, industry sources estimate that 2012 U.S. box office revenues were approximately $10.8 billion, an approximate 6% increase over 2011, and an all-time industry record.
previous record set during 2013. The following table represents the results of a survey by Motion Picture Association of America, or MPAA published during March 2012,2015, outlining the historical trends in U.S. box office performance for the ten year period from 20022005 to 2011:2014 (industry data for 2015 has not yet been released):
Year | U.S. Box | Attendance | Average Ticket Price | U.S. Box Office Revenues ($ in billions) | Attendance (in billions) | Average Ticket Price | ||||||
2002 | $ 9.1 | 1.57 | $5.81 | |||||||||
2003 | $ 9.2 | 1.52 | $6.03 | |||||||||
2004 | $ 9.3 | 1.50 | $6.21 | |||||||||
2005 | $ 8.8 | 1.38 | $6.41 | $8.8 | 1.38 | $6.41 | ||||||
2006 | $ 9.2 | 1.40 | $6.55 | $9.2 | 1.40 | $6.55 | ||||||
2007 | $ 9.6 | 1.40 | $6.88 | $9.6 | 1.40 | $6.88 | ||||||
2008 | $ 9.6 | 1.34 | $7.18 | $9.6 | 1.34 | $7.18 | ||||||
2009 | $10.6 | 1.42 | $7.50 | $10.6 | 1.42 | $7.50 | ||||||
2010 | $10.6 | 1.34 | $7.89 | $10.6 | 1.34 | $7.89 | ||||||
2011 | $10.2 | 1.28 | $7.93 | $10.2 | 1.28 | $7.93 | ||||||
2012 | $10.8 | 1.36 | $7.96 | |||||||||
2013 | $10.9 | 1.34 | $8.13 | |||||||||
2014 | $10.4 | 1.27 | $8.17 |
Films leading the box office during the year ended December 31, 20122015 includedStar Wars: The Avengers, The Dark Knight Rises, The Hunger Games, Skyfall, The Twilight Saga: Breaking Dawn Part 2, The Hobbit: An Unexpected Journey, Dr. Suess’ The Lorax, Madagascar 3: Europe’s Most Wanted, Men in Black 3, Taken 2, Snow White and the Huntsman, Safe House, The Vow, Brave, PrometheusForce Awakens, Jurassic World,The Amazing Spider-Man, Ice Age: Continental DriftAvengers: Age of Ultron,Hunger Games: Mockingjay Part II, Furious 7, American Sniper, 50 Shades of Grey,Inside Out,Minions,SpectreandThe Bourne Legacy,Mission: Impossible 5,among other films.
The film slateFilms scheduled for 2013 currently includes sequelsrelease during 2016 include well-known franchise films such asCaptain America: Civil War,Batman V Superman: Dawn Of Justice,Finding Dory,Star Trek Beyond,and X-Men: Apocalypse; action films such asDeadpool; family films such asThe Hunger Games: Catching Fire,Secret Life Of Pets,Zootopia, Alice Through The Hobbit: The Desolation of Smaug, Iron Man 3, The Hangover 3, Monsters University, Despicable Me 2, Fast & Furious 6Looking Glass, andA Good Day to Die HardSing; and original titlesspin-off films such asMan of Steel, Oz: The Great Rogue One: A Star Wars Storyand Powerful, Oblivion, Pacific Rim, Lone Rangerthe Harry Potter spin-offFantastic Beasts And Where To Find Themand World War Z,, among other films.
International Markets
International box office revenues continue to grow. According to MPAA, international box office revenues were $22.4$26.0 billion for the year ended December 31, 2011, which2014, representing a 4% increase over 2013. International box office growth is a result of strong economies, ticket price increases and new theatre construction. According to MPAA, Latin American box office revenues were $2.6$3.0 billion for the year ended December 31, 2011, representing a 24% increase from 2010. (As of the date of this report, 2012 industry data was not yet available.)2014, consistent with 2013 performance.
Growth in Latin America is expected to continuecontinues to be fueled by a combination of robust economies, growing populations, an emerging middle class, attractive demographics (i.e., a significant teenage population), substantialcontinued retail development, and quality product from Hollywood, including an increasing number of 3-D films.and alternative content offerings. In many Latin American countries, including Brazil,
Argentina, Mexico, Colombia, Peru and Chile, successful local film product can also provide incremental box office growth opportunities.
We believe many international markets for theatrical exhibition have historically been underserved and that certain of these markets, especially those in Latin America, will continue to experience growth as additional modern stadium-styled theatresnew theatre technologies and platforms are introduced, as film and other product offerings continue to expand and the local economies continue toas ancillary revenue opportunities grow.
Drivers of Continued Industry Success
We believe the following market trends will drive the continued growth and strength of our industry:
Importance of Theatrical Success in Establishing Movie Brands and Subsequent Markets.Brands.Theatrical exhibition ishas long been the primary distribution channel for new motion picture releases. A successful theatrical release
which “brands” a film and is one of the major factors in determining itscontributors to a film’s success in “downstream” markets, such as digital downloads, DVDs, network and syndicated television, video on-demand, pay-per-view television, DVDs, and the Internet.network and syndicated television.
Increased Importance of International Markets for Box Office Success. International markets continue to be an increasingly important component of the overall box office revenues generated by Hollywood films, accounting for $22.4$26.0 billion, or approximately 69%72%, of 20112014 total worldwide box office revenues according to MPAA. (As of the date of this report, 20122015 industry data was not yet available.) With the continued growth of the international motion picture exhibition industry, we believe the relative contribution of markets outside North America will become even more significant. Many of the top U.S. films released recentlyduring 2015 also performed exceptionally well in international markets. Such films includedThe AvengersFurious 7, which grossed approximately $892.3$1,162.0 million in international markets, or 59%approximately 77% of its worldwide box office,Ice Age: Continental DriftAvengers: Age of Ultron, which grossed approximately $716.1$946.0 million in international markets, or 82%approximately 67% of its worldwide box office, andSkyfall Jurassic World, which grossed approximately $710.6$1,014.0 million in international markets, or 71%approximately 61% of its worldwide box office.
Stable Long-Term Attendance Trends.Box Office Levels.We believe that long-term trendsOver the past ten years, industry statistics have shown slight increases and decreases in motion picture attendance infrom one year to another, however domestic box office revenues have remained relatively stable during this period. The industry has not experienced highly volatile results, even during recessionary periods, demonstrating the U.S. will continuestability of the industry and its continued ability to benefit the industry. Even during the recent recessionary period, attendance levels remained stable as consumers selected the theatre as a preferred value for their discretionary income. With the motion picture exhibition industry’s transition to digital projection technology, the products offered by motion picture exhibitors continue to expand, attracting a broader base of patrons.attract consumers.
Convenient and Affordable Form of Out-Of-Home Entertainment.Movie going continues to be one of the most convenient and affordable forms of out-of-home entertainment, with an estimated average ticket price in the U.S. of $7.93$8.17 in 2011.2014. Average prices in 20112014 for other forms of out-of-home entertainment in the U.S., including sporting events and theme parks, rangeranged from approximately $27.00$28.00 to $77.00$84.00 per ticket according to MPAA. (As of the date of this report, 20122015 industry data was not yet available.)
Innovation withUsing Digital and Satellite Technology. Our industry began its conversionconverting to digital projection technology during 2009, which2009. Our domestic circuit also converted to satellite technology during 2014 and our international circuit has allowedstarted to implement satellite technology as a means to receive film and other content. Digital projection combined with satellite delivery allows exhibitors to expand their product offerings. Digital projection allowsofferings, including the presentation of 3-D content and alternative entertainment. Alternative entertainment suchmay include pre-recorded programs as well as live and pre-recorded sports programs, concert events, the operaMetropolitan Opera, e-sports gaming events and other special presentations. These additionalNew and enhanced programming alternatives may expandexpands the industry’s offerings to attract a broader customer basebase.
Introduction of New Platforms and increase patronageProduct Offerings.The motion picture exhibition industry continues to develop new movie theatre platforms and concepts to respond to varying and changing consumer preferences. In addition to changing the overall style of, and amenities offered in some theatres, concession product offerings
have continued to expand to more than just traditional popcorn and candy items. Some locations now offer hot foods, adult beverages and/or healthier snack options for exhibitors.patrons.
Competitive Strengths
We believe the following strengths allow us to compete effectively:
Experienced Management.Led by Chairman and founder Lee Roy Mitchell, Chief Executive Officer Mark Zoradi, Chief Financial Officer Sean Gamble, President and Chief Operating Officer Robert Copple and President-International Valmir Fernandes, our operational management team has many years of industry experience. Each of our international offices is led by general managers that are local citizens familiar with cultural, political and economic factors impacting each country. Our worldwide management team has successfully navigated us through many industry and economic cycles.
Disciplined Operating Philosophy.We generated operating income and net income attributable to Cinemark Holdings, Inc. of $383.7$423.2 million and $168.9$216.9 million, respectively, for the year ended December 31, 2012.2015. Our solid operating performance is a result of our disciplined operating philosophy that centers on building high quality assets,high-quality theatres, while negotiatingmaintaining favorable theatre leveltheatre-level economics, controlling operating costs and effectively reacting to economic and market changes.
Leading Position in Our U.S. Markets.We have a leading market share in most of the U.S. metropolitan and suburban markets we serve.serve, which includes a presence in 41 states. For the year ended December 31, 2012,2015, we ranked either first or second, based on box office revenues, in 2422 out of our top 30 U.S. markets, including the San Francisco Bay Area, Dallas, Houston, Salt Lake City, Sacramento, Cleveland and Sacramento.Austin.
Strategically Located in Heavily PopulatedTop Latin American Markets.Since 1993, weWe have investedcontinued to invest throughout Latin America in response to the continued growthAmerica. As of the region. We currently operate 167December 31, 2015, we operated 176 theatres and 1,3241,278 screens in 1314 countries. Our international screens generated revenues of $777.7$728.7 million, or 31.4%25.5% of our total revenues, for the year ended December 31, 2012.2015. We have successfully established a significant presence in major cities in the region, with theatres in fourteenthirteen of the fifteen largest metropolitan areas.areas in South America. We are the largest exhibitor in Brazil and Argentina. Our geographic diversity makes us an important distribution
channel tofor the movie studios. Approximately 87% of our international screens offer stadium seating. We are well-positioned with our modern, large-format theatres to take advantage of these factors for further growth and diversification of our revenues.
State-of-the-Art Theatre Circuit.We offer state-of-the-art theatres, which we believe makes our theatres a preferred destination for moviegoers in our markets. During 2012,2015, we increased the size of our circuit by adding 129built 182 new state-of-the-art screens worldwide, while closing 41 screens.worldwide. We currently have commitments to open 287184 additional new screens over the next three years. We have installed digital projection technology in 100%all of our U.S. first-run auditoriums and approximately 42% of our international auditoriums, with plans to install digital projection technology in 100% of our internationalworldwide auditoriums. Currently, approximately 51%55% of our U.S. screens and 40%65% of our international screens are 3-D compatible. We alsocurrently have eight14 digital IMAX screens. We currently have 109As of December 31, 2015, we had the industry-leading private label premium large format circuit with 210 XD auditoriums in our theatres andtheatres. We have plans to install 4015 to 5020 additional XD auditoriums during 2013. Our2016. We also continue to develop new NextGenmarket-adaptive theatre concept provides further credenceconcepts in various markets. We believe we offer the brightest picture in the industry, with our Doremi servers and Barco digital projectors, and custom surround sound in our auditoriums. We have also established a centralized theatre support center that monitors and responds to projection performance and theatre network connectivity issues across our commitment to provide a continuing state-of-the-art movie-viewing experience to our patrons.worldwide circuit on real-time basis.
Solid Balance Sheet with Significant Cash Flow from Operating Activities.Disciplined and Targeted Growth Strategy.We continue to grow organically as well as through the acquisition of high-quality theatres in select markets. Our growth strategy has centered around achieving a target return on investment while also complementing our existing theatre circuit. We continue to generate significant cash flowflows from operating activities, as a result of several factors, including a geographically diverse and modern theatre circuit and management’s ability to control costs and effectively react to economic and market changes. Additionally, owning land and buildings for 41which demonstrates the success of our theatres isgrowth strategy. We believe a strategic advantage that enhancescombination of our cash flows. We believestrong balance sheet and our expected level of cash flow generationflows will continue to provide us with the financial flexibility to continue to pursue further growth opportunities, supportwhile also allowing us to efficiently service our debt paymentsobligations and continue to makeoffer our stockholders a strong dividend payments toyield under our stockholders. In addition, as of December 31, 2012, we owned approximately 18.1 million shares of National CineMedia and approximately 1.2 million shares of RealD, both of which offer us an additional source of cash flows. As of December 31, 2012, we had cash and cash equivalents of $742.7 million.current dividend policy.
Experienced Management.Led by Chairman and founder Lee Roy Mitchell, Chief Executive Officer and President, Tim Warner, Chief Financial Officer Robert Copple and President-International Valmir Fernandes, our management team has many years of theatre operating experience, ranging from 16 to 54 years, executing a focused strategy that has led to consistent operating results. This management team has successfully navigated us through many industry and economic cycles.
Our Strategy
We believe our disciplined operating philosophy and experienced operational management team will enable us to continue to enhance our leading position in the motion picture exhibition industry. Key components of our strategy include:
Establish and Maintain Leading Market Positions.We will continue to seek growth opportunities by building or acquiring modern theatres that meet our strategic, financial and demographic criteria. We focus on establishing and maintaining a leading position in the markets we currently serve. We also monitor economic and market trends to ensure we offer a broad range of products and prices that satisfy our patrons.
Continue to Focus on Operational Excellence.Excellence and Customer Satisfaction.We will continue to focus on achieving operational excellence by controlling theatre operating costs and adequately training and motivating our staff all while continuing to provide leadingfocusing on making each of our customer’s experiences memorable. We strive for first-rate customer service.service and focus on driving attendance. Our consistent industry-leading margins reflect our track record of operating efficiency.ability to deliver the highest quality presentation to our patrons while also managing changes in product and consumer preferences.
Selectively BuildGrowth in Profitable, Strategic Latin AmericanExisting and New Markets.Our continued international expansion will remain focused primarily on Latin America through construction of modern, state-of-the-artWe continue to seek growth opportunities by building or acquiring high-quality theatres in growing urban markets.that meet our strategic, financial and demographic criteria. We have commitments to build 13added 25 new theatres with 88201 screens to our worldwide circuit during 2013 and three new theatres with 21 screens subsequent to 2013, investing an additional $89 million in our Latin American markets.the year ended December 31, 2015. We also planmonitor economic and market trends to install digital projection technologyensure our existing theatres offer a broad range of products, prices and platforms that satisfy our patrons and to develop new concepts to adapt to changes in all ofpreferences. During 2014, we acquired one theatre in Alabama, a new state for us and we opened our international auditoriums, which allows usfirst theatre in Bolivia. During 2015, we opened our first theatre in Curacao, adding another new country to present 3-D and alternative content in these markets. Approximately 40% of our international auditoriums
are 3-D compatible.diverse circuit. We have also installed 39 of our proprietary XD auditoriums in our international theatres and have plans to install approximately 20 to 25 additional XD auditoriums internationally during 2013.open a theatre in Paraguay, another new country, in 2016.
Commitment to DigitalTechnological and Product Innovation. Our commitment to technological innovation has resulted in us being 100% digital in our U.S. first-run auditoriumsworldwide circuit as of December 31, 2012, approximately 49%2015. In the U.S., 100% of whichour projectors are networked with satellite infrastructure and our Latin American theatres will be 100% capable by the end of 2016. We continue to expand our worldwide XD auditorium footprint. We are also committed to developing and expanding our new market-adaptive theatres. With our technological innovations, we have broadened the range of entertainment options offered at our theatres by expanding content to include concert events, e-sports gaming events and other special presentations. Approximately 57% of our worldwide screens are 3-D compatible. We are also had 553 digital auditoriumscommitted to developing and expanding our market-adaptive concepts. Our concession and food offerings are progressing to selectively include upscale options, hot prepared food, offerings tailored to local demographics, alcoholic beverages, and healthy snack alternatives in addition to our more standard concession products. Theatre amenities we provide to our customers may include our private-label premium large format XD screens, Luxury Lounger reclining seats, VIP lounge areas, reserved seating, and seats with cinematic motion.
Sustained Investment in Existing Circuit.While we continue to grow our theatre circuit with new builds and acquisitions, we also remain committed to investing in our international markets as ofexisting theatres to ensure they provide our customers with a comfortable, high-quality entertainment experience. We spent approximately $140 million and $199 million on capital expenditures for existing theatres during the years ended December 31, 2012, 527 of which are 3-D compatible. See further discussion2014 and 2015, respectively. Our efforts during 2015 included remodeling some of our digital expansion at “Conversionexisting theatres to Digital Projection Technology”. We are planning to convert 100%include reclining seats and expanded concession offerings, the purchase of our worldwide circuitcorporate headquarters building in Plano, TX and routine improvements to digital projection technology, approximately 40-50% of which will be 3-D compatible. We also plan to expandensure our XD auditorium footprint in various markets throughouttheatres offer the U.S. and in select international markets, which offers our patrons a premium movie-viewinghighest quality guest experience.
Theatre Operations
As of December 31, 2012,2015, we operated 465513 theatres and 5,2405,796 screens in 3941 U.S. states and 1314 Latin American countries. Our theatres in the U.S. are primarily located in mid-sized U.S. markets, including suburbs of major metropolitan areas. We believe these markets are generally less competitive and generate high, stable margins. Our theatres in Latin America are primarily located in major metropolitan markets, which we believe are generally underscreened. The following tables summarize the geographic locations of our theatre circuit as of December 31, 2012.2015.
United States Theatres
State | Total Theatres | Total Screens | Total Theatres | Total Screens | ||||||||||||
Texas | 80 | 1,051 | 87 | 1,136 | ||||||||||||
California | 63 | 770 | 67 | 837 | ||||||||||||
Ohio | 19 | 213 | 29 | 365 | ||||||||||||
Utah | 16 | 203 | 16 | 209 | ||||||||||||
Nevada | 10 | 154 | 10 | 154 | ||||||||||||
Colorado | 9 | 136 | ||||||||||||||
Pennsylvania | 9 | 125 | ||||||||||||||
Kentucky | 9 | 119 | ||||||||||||||
Illinois | 9 | 128 | 8 | 118 | ||||||||||||
Colorado | 8 | 127 | ||||||||||||||
Florida | 6 | 110 | ||||||||||||||
Oregon | 7 | 102 | 6 | 90 | ||||||||||||
Kentucky | 7 | 87 | ||||||||||||||
Pennsylvania | 6 | 95 | ||||||||||||||
Arizona | 6 | 90 | 6 | 90 | ||||||||||||
Louisiana | 5 | 74 | ||||||||||||||
Virginia | 5 | 70 | ||||||||||||||
Oklahoma | 6 | 71 | 5 | 65 | ||||||||||||
Florida | 5 | 98 | ||||||||||||||
Louisiana | 5 | 74 | ||||||||||||||
Connecticut | 4 | 58 | ||||||||||||||
Washington | 4 | 55 | ||||||||||||||
New Mexico | 4 | 54 | ||||||||||||||
Indiana | 5 | 48 | 4 | 40 | ||||||||||||
New Mexico | 4 | 54 | ||||||||||||||
Virginia | 4 | 54 | ||||||||||||||
Iowa | 3 | 50 | ||||||||||||||
Michigan | 3 | 50 | ||||||||||||||
Massachusetts | 3 | 46 | ||||||||||||||
Arkansas | 3 | 44 | ||||||||||||||
Mississippi | 3 | 41 | ||||||||||||||
South Carolina | 3 | 34 | ||||||||||||||
North Carolina | 4 | 41 | 3 | 31 | ||||||||||||
Mississippi | 3 | 41 | ||||||||||||||
Iowa | 3 | 37 | ||||||||||||||
Arkansas | 3 | 36 | ||||||||||||||
South Carolina | 3 | 34 | ||||||||||||||
Washington | 2 | 30 | ||||||||||||||
Maryland | 2 | 39 | ||||||||||||||
New Jersey | 2 | 28 | ||||||||||||||
Georgia | 2 | 27 | 2 | 27 | ||||||||||||
New York | 2 | 27 | 2 | 27 | ||||||||||||
South Dakota | 2 | 26 | 2 | 26 | ||||||||||||
Montana | 2 | 25 | ||||||||||||||
West Virginia | 2 | 22 | 2 | 22 | ||||||||||||
Maryland | 1 | 24 | ||||||||||||||
Delaware | 2 | 22 | ||||||||||||||
Kansas | 1 | 20 | 1 | 20 | ||||||||||||
Alaska | 1 | 16 | 1 | 16 | ||||||||||||
Michigan | 1 | 16 | ||||||||||||||
New Jersey | 1 | 16 | ||||||||||||||
Missouri | 1 | 15 | 1 | 15 | ||||||||||||
Massachusetts | 1 | 15 | ||||||||||||||
Tennessee | 1 | 14 | 1 | 14 | ||||||||||||
Wisconsin | 1 | 14 | 1 | 14 | ||||||||||||
Delaware | 1 | 10 | ||||||||||||||
Alabama | 1 | 14 | ||||||||||||||
Minnesota | 1 | 8 | 1 | 8 | ||||||||||||
Montana | 1 | 8 | ||||||||||||||
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Total | 298 | 3,916 | 337 | 4,518 | ||||||||||||
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International Theatres
Country | Total Theatres | Total Screens | Total Theatres | Total Screens | ||||||||||||
Brazil | 56 | 454 | 74 | 568 | ||||||||||||
Mexico | 31 | 290 | ||||||||||||||
Colombia | 29 | 151 | ||||||||||||||
Argentina | 20 | 176 | 20 | 179 | ||||||||||||
Colombia | 18 | 99 | ||||||||||||||
Central America (1) | 14 | 96 | 17 | 124 | ||||||||||||
Chile | 13 | 101 | 16 | 114 | ||||||||||||
Peru | 10 | 76 | 12 | 84 | ||||||||||||
Ecuador | 5 | 32 | 7 | 45 | ||||||||||||
Bolivia | 1 | 13 | ||||||||||||||
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Total | 167 | 1,324 | 176 | 1,278 | ||||||||||||
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(1) | Includes Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala and |
We first entered Latin America when we began operating movie theatresopened a theatre in Chile in 1993 and Mexico in 1994.1993. Since then, through our focused international growth strategy, we have developed into the most geographically diverse theatre circuit in the region. We have balanced our risk through a diversified international portfolio, currently operatingwhich includes theatres in fourteenthirteen of the fifteen largest metropolitan areas in LatinSouth America. In addition, weWe have achievedestablished significant scalepresence in Brazil and Argentina, where we are the largest exhibitor, with 454568 and 179 screens, respectively, as of December 31, 2012. We are also the largest exhibitor in Argentina.2015.
We believe that certain markets within Latin America continue to be underserved as penetration of movie screens per capita in Latin Americanthese markets is substantially lower than in the U.S. and European markets. We intend to continue to build and expand our presence in underserved international markets, with emphasis on Latin America, and fund our expansion primarily with cash flow generated in those markets. We are able to mitigate cash flow exposure to currency fluctuations by usingtransacting local currencies to collect a majority of our revenues and fund a majority of the costs of our international operations.operating expenses primarily in their respective local currencies. Our geographic diversity throughout Latin America has allowed us to maintain consistent local currency revenue growth, notwithstanding currency and economic fluctuations that may affect any particular market. Our international revenues were approximately $777.7 million during 2012 compared to $696.1 million during 2011.
Content and Film Licensing
We offer a variety of content at our theatres. We monitor upcoming films and related events and work with film distributors to license the content that we believe will be most successful in our theatres. We play mainstream films from many different genres, such as animated films, family films, dramas, comedies, horror and action films. We offer content in both 2-D and 3-D formats in all of our theatres, and in select locations, we also offer a D-BOX format. The D-BOX format features moving seats and added sensory features in addition to the ultra-realistic images of 3-D technology.
We also regularly play art and independent films at many of our U.S. theatres and offer local film product in our international markets, providing a variety of film choices to our patrons. Bringing art and independent films to our theatres allows us to benefit from the growth in the art and independent market driven by the increased interest in art, foreign and documentary films.
We have also established a Classic Series at a majority of our U.S. theatres and some of our international theatres, which involves playing digitally re-mastered classic movies that change on a weekly basis. The program covers many genres of classic films that are generally exhibited during non-peak times.
During December 2013, we formed a joint venture, named AC JV, LLC, with Regal Entertainment Group, or Regal, and AMC Entertainment, Inc., or AMC, which then purchased the Fathom event business from National CineMedia, LLC. The Fathom event business generally focuses on the marketing and distribution of live and pre-recorded entertainment programming to movie theatres to augment theatres’ feature film schedules.
AC JV, LLC will continue to bring alternative events to our theatres, including the Metropolitan Opera, sports programs, concert events, e-sports gaming events and other special presentations, that may be live or pre-recorded. We, along with AC JV, LLC, continue to identify new ways to utilize our theatre platform to provide entertainment to consumers.
In the domestic marketplace, the Company’sour corporate film department negotiates with film distributors which are made upto license films for each of the traditional major film companies, specialized and art divisions of some of these major film companies, and many other independent film distributors.our domestic theatres. The film distributors are responsible for determining film release dates the relatedand film marketing campaigns and the expenditures related to marketing materials, television spots and other advertising outlets. The marketing campaign of each movie may include tours of the actors in the movies and coordination of articles and features about each movie. The Company isexpenditures. We are responsible for booking the films in negotiated film licensing zones, which are either free film licensing zones or competitive film licensing zones. In free film licensing zones, movies can be booked without regard to the locationfilm bookings of another exhibitorother exhibitors within that area. In competitive film licensing zones, the distributor allocates its movies generally based on demographics, the conditions, capacity and grossing potential of each theatre, and licensing terms.the terms of exhibition. We are generally able to book films without regard to the sole exhibitor infilm bookings of other exhibitors at approximately 91%93% of the 253 film zones in which our first run U.S. theatres operate. In film zones where there is no directdomestic theatres. We face competition from other theatres, we select those films that we believe will be the most successful from those offered byexhibitors and other forms of entertainment, as discussed underCompetition below, in both our free and competitive film distributors.licensing zones.
Internationally,In each of our international offices, our local film personnel negotiate with local offices of major film distributors as well as local film distributors to license films for our international theatres. In the international marketplace, films are not allocated to a single theatre in a geographicbased on film zone,licensing zones, but played by competitive theatres simultaneously. Our theatre personnel focus on providing excellent customer service, and we provide a modernhigh-quality facility with the most up-to-date sound systems, comfortable stadium style seating and other amenities typical of modern American-style multiplexes,preferred by our patrons, which we believe gives us a competitive advantage in markets where competing theatres play the same films. Of the 1,324 screens
In both our domestic and international locations, we operate in international markets, approximately 80% have no direct competition from other theatres.
Ourpay film rental fees in the U.S. are generally based on a film’s box office receipts andat each of our theatres. Film rental rates are negotiated based on either mutually agreed upona firm terms formula under which we pay a negotiated rate as determined prior to a film’s run; a sliding scale formula orunder which the rate is based on a mutually agreed upon settlement, subject to the film licensing agreement with the film distributor. Under a firm terms formula, we pay the distributor a mutually agreed upon specified percentage of box office receipts. Under a sliding scale formula, we pay a percentage of box office revenues using a pre-determinedstandard rate matrix that is based upon box office performance of the film. The settlement process allows for negotiation of film rental fees upon the conclusion of the film run based upon how the film performs. Internationally, our film rental fees are primarily based on mutually agreed upon firm termsestablished prior to a film’s run; or a rate that are based uponis negotiated after a specified percentage of box office receipts.film’s run.
We regularly play art and independent films at many of our U.S. theatres, providing a variety of film choices to our patrons. Bringing art and independent films to our theatres allows us to benefit from the growth in the art and independent market driven by the more mature patron and increased interest in art, foreign and documentary films. High profile film festivals, such as the Sundance Film Festival, have contributed to interest in this genre. The performance of films such asSilver Linings Playbook, The Best Exotic Marigold HotelandMoonrise Kingdom have demonstrated the box office potential of art and independent films.
Food and Beverage
Concession sales are our second largest revenue source, representing approximately 31%33% of total revenues. Concession sales have a much higher margin than admissions sales. We have devoted considerable management effort to increasing concession sales by expanding our offerings and adapting to our customers’ changing preferences, as discussed below.
Concession Product Mix. Common concession products offered at all of our theatres include various sizes and types of popcorn, soft drinks, coffees, juice blends, candy and quickly-prepared or pre-prepared food, such as hot dogs, pizza, pretzel bites, nachos and ice cream. Other varieties and flavors of candy, snacks and drinks are offered at theatres based on preferences in that particular market. We have recently introduced some healthier snack and beverage options for our patrons, which are available at some locations, and also offer a variety of alcoholic beverages in some locations.
Through our Movie Bistro, Cinemark Reserve and Cinemark Premier concepts, we have expanded concession product offerings to include more food and drink options, such as fresh wraps, hot sandwiches, burgers, and gourmet pizzas, and a selection of beers, wines, and frozen cocktails, all of which can be enjoyed in the comfort of the auditoriums. We also have lobby bars and VIP lounges in certain domestic and international theatres.
Our point of sale system allows us to monitor product sales and make changes to product mix when necessary, which also allows us to quickly take advantage of national as well as regional product launches and promotions.
Pricing.New products and promotions are introduced on a regular basis to increase concession purchases as well as to attract new buyers. We offer specially-priced product combinations at many of our theatres. We
periodically offer discounts to our patrons on certain products by offering weekly coupons as well as reusable popcorn tubs and soft drink cups that can be refilled at a discounted price. In certain international countries, we offer a loyalty benefit program to frequent patrons.
Staff Training.Employees are continually trained in proper sales techniques. Consumer promotions usually include a motivational element that rewards theatre staff for exceptional sales of certain promotional items.
Theatre Design.Our theatres are designed to optimize efficiencies at the concession stands, which include multiple service stations throughout a theatre to facilitate serving patrons in an expedited manner. We strategically place large concession stands within theatres to heighten visibility, reduce the length of concession lines, and improve operating margins. These efforts include implementationtraffic flow around the concession stands. We have self-service cafeteria-style concession areas in many of our domestic theatres, which allow customers to select their own refreshments and proceed to the following strategies:cash register when they are ready. This design allows for efficient service, enhanced choices, impulse purchases and superior visibility of concession items. In some of our international locations, we allow patrons to pre-order concession items, either online or at a kiosk, and pick them up in a dedicated line at the concession counter.
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Pre-Feature Screen Advertising
In our domestic markets, our theatres are part of the in-theatre digital network operated by National CineMedia, LLC, or NCM. NCM’s primary activities that impactNCM provides advertising to our theatres include: advertising through its
branded “First Look” pre-feature entertainment program and also handles lobby promotions and displays live and pre-recorded events; including concerts, sporting events and other non-film entertainment programming.for our theatres. We believe that the reach, scope and digital delivery capability of NCM’s network provides an effective platform for national, regional and local advertisers to reach an engaged audience. We receive a monthly theatre access fee for participation in the NCM network. In addition, we are entitled to receive mandatory quarterly distributions of excess cash from NCM.network and also earn screen advertising revenue on a per patron basis. As of December 31, 2012,2015, we had an approximate 16%19% ownership interest in NCM. See Note 6 to the consolidated financial statements.statements for further discussion of our investment in NCM.
In certainour international markets, during 2011, our wholly-owned subsidiary Flix Media Publicidade E Entretenimento, Ltda., or Flix Media, began handling all of our screen advertising functions in Brazil. Our Flix Media marketing personnel work with local agencies and advertisers to coordinate screen advertising in our Brazil theatres. We have expanded the Flix Media advertising services to another exhibitor in Brazil through a revenue share agreement. In Argentina, we also have in-house personnel that work with local advertisers to arrange screen advertising in our Argentina theatres. We recently acquired an advertising business in Chile, which we will also integrate with our Flix Media division. In our other international markets, we outsource our screen advertising to local companies who have established relationships with local advertisers that provide similar benefits as NCM. The terms of our international screen advertising contracts vary by country. In some of these locations, we earn a percentage of the screen advertising revenues collected by our partners and in other locations we are paid a fixed annual fee for access to our screens, while atscreens. We will continue to expand Flix Media into our other international locations our in-house marketing personnel handle screen advertising. During 2011, we tookover the next few years. In addition to screen advertising function in-house in Brazil, which is being handled by a wholly-owned subsidiaryour theatres, we intend to expand Flix Media Publicidade E Entretenimento, Ltda., or Flix Media. Our Flix Media marketing personnel work directly with local advertisersMedia’s services to generate screen advertising.include, among other things, alternative content, online ticketing, and loyalty initiatives.
Conversion to Digital Projection Technology Innovations
The motion picture exhibition industry began its conversion to digital projectionhas undertaken certain technology during 2009,initiatives over the progress of which ispast few years, as discussed below.
Participation in Digital Cinema Implementation Partners
During 2007, we, AMC Entertainment Inc., or AMC, and Regal Entertainment Group, or Regal, entered into a joint venture known as Digital Cinema Implementation Partners LLC, or DCIP, to facilitate the implementation of digital cinema in our U.S. theatres and to establish agreements with major motion picture studios for the financing of digital cinema. Digital cinema developments are managed by DCIP, subject to certain approvals by us, AMC and Regal with each of us having an equal voting interest in DCIP. DCIP’s wholly-owned subsidiary Kasima executed long-term deployment agreements with all of the major motion picture studios, under which Kasima receives a virtual print fee from such studios for each digital presentation. In accordance with these agreements, the digital projection systems deployed by Kasima comply with the technology and security specifications developed by the Digital Cinema Initiatives studio consortium. Kasima leases digital projection systems to us, AMC and Regal under master lease agreements that have an initial term of 12 years.
On March 10, 2010, we signed a master lease agreement and other related agreements (collectively the “agreements”) with Kasima. Upon signing these agreements, we contributed cash and the majority of our existing U.S. digital projection systems to DCIP. Subsequently during 2010 and 2011, we sold additional U.S. digital projection systems to DCIP. As of December 31, 2011, we had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. As of December 31, 2012, 95% of our 3,916 U.S. auditoriums were digital, 3,515 of which are leased from Kasima and 1,923 of which are capable of exhibiting 3-D content.
International Markets
In our international markets, we continue to convert our auditoriums to digital projection technology. The digital projection systems we deploy are generally funded with operating cash flows generated by each international country. As of December 31, 2012, we had 553 digital auditoriums in our international markets, 527 of which are capable of exhibiting 3-D content. Similar to our domestic markets, we expect to install digital projection systems in all of our international auditoriums.
Digital Cinema Distribution Coalition
We are participating in aThrough the joint venture DCDC with Regal, AMC, Warner Bros. Entertainment, Inc. and certain distributors called Digital Cinema Distribution Coalition, or DCDC, whose goal is to seamlessly distribute allUniversal Pictures, we began delivering digital content to domestic theatres via satellite during October 2013. As of December 31, 2015, 100% of our domestic auditoriums were capable of receiving content via satellite.
Certain Delivery of content via satellite reduces film transportation costs for both distributors and exhibitors, as a portion of the related agreements are in negotiation, however, we are currently testing equipmentcosts to produce and ship hard drives has been eliminated. The satellite delivery system established by DCDC is available to all exhibitors and content providers and allows live and store-and-forward content to be used for satellite distribution. The new distribution network will not only change how content is delivered to theatre sites butour theatres.
Satellite Delivery - International
The industry is beginning to expand satellite delivery technology to certain Latin American markets. Currently, 59 of our international theatres have the ability to receive live events via satellite, with some of these also enrich alternative product availability, such as live sports, concerts, and opera.able to receive film content via satellite. During 2016, we plan to install the necessary equipment in all of our international theatres to allow them to receive content via satellite.
Marketing
In the U.S., we rely onWe generally market our theatres and events using Internet advertising and also newspaper directory film schedules. Radio and television advertising spots are also used to promote certain motion pictures and special events, such as theatre grand openings and VIP events. We exhibit previews of coming attractions and current films we are currently playing as part of our on-screen pre-feature program. We offer patrons access to movie times, the ability to buy and print their tickets at homein advance and purchase gift cards at our websitewww.cinemark.com. and via our smart phone and tablet applications. Customers subscribingcan subscribe to our weekly emailemails to receive targeted information about current and upcoming films at their preferred Cinemark theatre(s), including details about advanced ticket sales, screenings, special events, concerts and live broadcasts; as well as contests, promotions, and exclusive coupons for concession savings. We partner with film distributors to use monthly web contests to drive traffic to our website and to ensure that customers visit often. In addition, we work with all of the film distributors on a regular basis to promote their films withthrough local, regional and national programs that are exclusive to our theatres. These programs may involve customer contests, cross-promotions with the media and third parties and other means to increase patronage for a particular film showing at one of our theatres. We also have smart phone and tablet applications that allow patrons to find theatres, check showtimes and purchase tickets.
Internationally,CineMode, which is a function within the app we exhibit upcoming and current film previews on-screen, partner with film distributors for certain promotions and advertise our new locations through various forms of media and events. We partner with large multi-national corporations in the large metropolitan areas in which we have theatres to promote our brand and image as well as increase attendance levels at our theatres. Our customers are encouraged to register on our website to receive weekly information by email for showtime information, invitations to special screenings, sponsored events and promotional information. In addition, our customers can request to receive showtime information on their cell phones. We also have loyalty programs in some of our international markets that allow customers to pay a nominal fee for a membership card that provides them with certain admissions and concession discounts. In addition, the Company has introduced an iPhone application in Brazil. The application allows consumers to check showtimes and purchase tickets for our Brazil theatres.
Our domestic and international marketing departments also focus on maximizing ancillary revenue, which includes the sale of our gift cards and our SuperSaver discount tickets. We market these programs to such business representatives as realtors, human resource managers, incentive program managers and hospital and pharmaceutical personnel. Gift cards can be purchased for certain of our locations at our theatres or online through our website,www.cinemark.com. SuperSavers are also sold online atwww.cinemark.com or via phone, fax or email by our local corporate offices and are also available at certain retailers in the U.S.
We recently created a new offering to our patrons called CineMode. CineMode is an exclusive feature we offer with our smart phone and tablet applications thatdeveloped, allows patrons the opportunity to earn rewards while being courteous during thea show. Our innovative technology was designed to address texting and other cell phone distractions, which is the number one complaint of movie-goers. While in CineMode, the smart phonephone’s screen is automatically dimmed and patrons are prompted to silence their volume. If CineMode is enabled for the duration of the movie, patrons are rewarded with exclusive digital rewards and offers that can be used at their next visit to Cinemark. CineMode facilitates contactconnects us with our patrons and this initiative provides an opportunity for us to further improveexpand our relationships with the studios and our vendors via couponing and promotions, such as discounted digital downloads. To date, more than two million patronsthrough promotions.
We also have already downloaded CineMode.
Online and Mobile Sales
Our patrons may purchase advance tickets for all of our domestic screens and a majorityloyalty programs in some of our international screens by accessing our corporate website atwww.cinemark.com.Advance tickets may also be purchasedmarkets that allow customers to pay a nominal fee for our domestic screens atwww.fandango.com.Our mobile phone and tablet applications also offer patrons the
ability to purchase tickets. Our Internet initiatives help improve customer satisfaction, allowing patrons who purchase tickets over the Internet to bypass lines at the box office by printing their tickets at home, picking up their tickets at kiosks located at the theatre, or scanning a barcode confirmation from their mobile device at the usher stand.
Point of Sale Systems
We have developed our own proprietary point of sale system to enhance our ability to maximize revenues, control costs and efficiently manage operations. The system is currently installed in all of our U.S. theatres. The point of sale systemmembership card that provides corporate managementthem with real-timecertain admissions and concession revenues datadiscounts.
Our domestic and reportsinternational marketing departments also focus on expanding ancillary revenue, which includes the sale of our gift cards and our SuperSaver discount tickets. We generally market these programs to allowbusinesses as an employee-incentive or rewards program. Our marketing departments also coordinate the use of our auditoriums, generally during off-peak times, for timely changescorporate meetings, private movie screenings, brand and product launches, education and training sessions or other private events, which contribute to movie schedules, including extending film runs, increasing the number of screens on which successful movies are being played, or substituting films when gross receipts do not meet expectations. Real-time seating, as well as reserved seating, and box office information is available to box office personnel, preventing overselling of a particular film and providing faster and more accurate responses to customer inquiries regarding showtimes and available seating. The system tracks concession sales by product, provides in-theatre inventory reports for efficient inventory management and control, offers numerous ticket pricing options, connects with digital concession signage for real-time pricing modifications, integrates Internet ticket sales and processes credit card transactions. Barcode scanners, pole displays, touch screens, credit card readers and other equipment are integrated with the system to enhance its functionality and provide print-at-home and mobile ticketing. In our international locations, we currently use other point of sale systems that have been developed by third parties, which have been certified as compliant with applicable governmental regulations and provide generally the same capabilities as our proprietary point of sale system.ancillary revenue.
Competition
We are one of the leaders in the motion picture exhibition industry. We compete against local, regional, national and international exhibitors with respect to attracting patrons, licensing films and developing new theatre sites. Our primary domesticU.S. competitors include Regal, AMC and Carmike Cinemas, Inc. and our primary international competitors, which vary by country, include Cinépolis, CinemexCine Colombia, CinePlanet, Kinoplex (GSR), and National Amusements.Araujo.
We are generally able to book films without regard to the sole exhibitor infilm bookings of other exhibitors at approximately 91%93% of the 253our theatres. In competitive film licensing zones, in which our first run U.S. theatres operate. In film zones where there is no direct competition from other theatres, we select those films that we believe will be the most successful from those offered to us by film distributors. Where there is competition, the distributor allocates theirits movies generally based on demographics, the conditions, capacity and grossing potential of each theatre, and licensing terms. Of the 1,324 screens we operate outsideterms of the U.S., approximately 80% of those screens have no direct competition from other theatres.exhibition. In areas where we face direct competition,all theatres, our success in attracting patrons depends on location, theatre capacity, quality of projection and sound equipment, film showtime availability, customer service quality, and ticket prices.
We compete for new theatre sites with other movie theatre exhibitors as well as other entertainment venues. Securing a potential site depends upon factors such as committed investment and resources, theatre design and capacity, revenue and patron potential, and financial stability.
We also face competition from a number of other motion picture exhibition delivery systems, such as digital downloads, video on-demand, pay-per-view television, DVDs, network and syndicated television, video on-demand, pay-per-view television and the Internet.television. We also face competition from other forms of entertainment competing for the public’s leisure time and disposable income, such as concerts, theme parks and sporting events.
Seasonality
Our revenues have historically been seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, the most successful motion pictures have been released during the summer, extending from May to mid-August,July, and during the holiday season, extending from early November through
year-end. The unexpected emergence of a hit film during other periods can alter this seasonality trend. The timing and quality of such film releases can have a significant effectimpact on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or for the same period in the following year.
Corporate Operations
Our corporateworldwide headquarters is located in Plano, Texas. Personnel at our corporate headquarters provide oversight and support for our domestic and international theatres. Personnel at our corporate headquarters includetheatres, including our executive team and department heads in charge of film licensing, food and beverage, theatre operations, theatre construction and maintenance, real estate, human resources, marketing, legal, finance, and accounting, tax, audit and information systems support.technology. Our U.S. operations are divided into sixteennineteen regions, primarily organized geographically, each of which is headed by a region leader. We have eight regional offices in Latin America responsible for the local management of theatres in thirteen individualfourteen countries (Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala and GuatemalaCuracao are operated out of one Central American regional office). Each regional office is headed by a general manager and includeswith additional personnel inresponsible for film licensing, marketing, human resources, information systems,technology, operations and accounting. We have a chief financial officerofficers in Brazil Mexico and Argentina, which are our threetwo largest international markets. The regional offices are staffed with experienced personnel from the region to mitigate cultural and operational barriers.
Employees
We have approximately 13,50019,300 employees in the U.S., approximately 10%19% of whom are full time employees and 90%81% of whom are part time employees. We have approximately 9,000 employees in our international markets, approximately 58%37% of whom are full time employees and approximately 42%63% of whom are part time employees. Due to the seasonal nature of our business as discussed above, our headcount can vary throughout the year, depending on the timing and success of movie releases. Some of our international locations are subject to union regulations. We regard our relations with our employees to be satisfactory.
Regulations
The distribution of motion pictures is largely regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. The manner in which we can license films from certain major film distributors is subject to consent decrees resulting from these cases. Consent decrees bind certain major film distributors and require the films of such distributors to be offered and licensed to exhibitors, including us,Cinemark, on a theatre-by-theatre and film-by-film basis. Consequently, exhibitors cannot enter into long-term arrangements with major distributors, but must negotiate for licenses on a theatre-by-theatre and film-by-film basis.
We are subject to various general regulations applicable to our operations including the Americans with Disabilities Act of 1990, or the ADA. We develop new theatres to be accessible toADA, and regulations recently issued by the disabledU.S. Food and we believe we are substantially compliant with current regulations relating to accommodating the disabled. Although we believeDrug Administration that our theatres comply with the ADA, we have been a party to lawsuits which claim that our handicapped seating arrangements do not comply with the ADA or that we are required to provide closed captioningrequire nutrition labels for patrons who are deaf or are severely hearing impaired and descriptive devices for patrons who are blind.
certain menu items. Our theatre operations are also subject to federal, state and local laws governing such matters as wages, working conditions, citizenship, health and sanitation requirements and various business licensing and permitting.
Financial Information About Geographic Areas
We currently have operations in the U.S., Brazil, Mexico, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, and Guatemala,Curacao which are reflected in the consolidated financial statements. See Note 2320 to the consolidated financial statements for segment information and financial information by geographic area.
Our business depends on film production and performance.
Our business depends on both the availability of suitable films for exhibition in our theatres and the success of those films in our markets. Poor performance of films, the disruption in the production of films due to events such as a strike by directors, writers or actors, a reduction in financing options for the film distributors, or a reduction in the marketing efforts of the film distributors to promote their films could have an adverse effect on our business by resulting in fewer patrons and reduced revenues.
Our results of operations fluctuate on a seasonal basis.
Our results of operations vary from period to period based upon the quantity and quality of the motion pictures that we show in our theatres. The major film distributors generally release the films they anticipate will be most successful during the summer and holiday seasons. Consequently, we typically generate higher revenues during these periods. The unexpected emergence of a successful film during other periods or the failure of an expected success at a key time could alter this seasonality trend. Due to the dependency on the success of films released from one period to the next, results of operations for one period may not be indicative of the results for the following period or the same period in the following year.
A deterioration in relationships with film distributors could adversely affect our ability to obtain commercially successful films.
We rely on the film distributors to supply the films shown in our theatres. The film distribution business is highly concentrated, with sevensix major film distributors accounting for approximately 85%84.4% of U.S. box office revenues and 4746 of the top 50 grossing films during 2012.2015. Numerous antitrust cases and consent decrees resulting from thesethe antitrust cases impact the distribution of films. The consent decrees bind certain major filmFilm distributors to license films to exhibitors on a theatre-by-theatre and film-by-film basis. Consequently, we cannot guarantee a supply of films by entering into long-term arrangements with major distributors. We are therefore required to negotiate licenses for each film and for each theatre. A deterioration in our relationship with any of the seven major film distributors could adversely affect our ability to obtain commercially successful films and to negotiate favorable licensing terms for such films, both of which could adversely affect our business and operating results.
Our results of operations vary from period to period based upon the quantity and quality of the motion pictures that we show in our theatres.
Our results of operations vary from period to period based upon the quantity and quality of the motion pictures that we show in our theatres. The major film distributors generally release the films they anticipate will be most successful during the summer and holiday seasons. Consequently, we typically generate higher revenues during these periods. Due to the dependency on the success of films released from one period to the next, results of operations for one period may not be indicative of the results for the following period or the same period in the following year.
We face intense competition for patrons and films which may adversely affect our business.
The motion picture exhibition industry is highly competitive. We compete against local, regional, national and international exhibitors.exhibitors in many of our markets. We compete for both patrons and licensing of films. In markets where we do not face competitive theatres, there is a risk of new theatres being built. The competition for patrons is dependent upon such factors as location, theatre capacity, quality of projection and sound equipment, film showtime availability, customer service quality, products and amenities offered, and ticket prices. The principal competitive factors with respect to film licensing include the theatre’s location and its demographics, the condition, capacity and grossing potential of each theatre, and licensing terms. If we are unable to attract patrons or to license successful films, our business may be adversely affected.
An increase in the use of alternative or “downstream” film distribution channels andor other competing forms of entertainment may reduce movie theatre attendance and limit revenue growth.
We face competition for patrons from a number of alternative film distribution channels, such as digital downloads, video on-demand, pay-per-view television, DVDs, network and syndicated television, video on-demand, pay-per-view television and the Internet.television. We also compete with other forms of entertainment, such as concerts, theme parks, gaming and sporting events, for our patrons’ leisure time and disposable income. A significant increase in popularity of these alternative film distribution channels, or competing forms of entertainment or improvements in technologies available at home could have an adverse effect on our business and results of operations.
Our results of operations may be impacted by shrinking video and digital release windows.
Over the last decade, the average video and digital release window, which represents the time that elapses from the date of a film’s theatrical release to the date a film is available to consumers at home, an important downstream market, has decreased from approximately six months to approximately three to four months. If patrons choose to wait for an in-home release rather than attend a theatre to view the film, it may adversely impact our business and results of operations, financial condition and cash flows. Film studios have started tooccasionally offer consumers a premium video on-demand option for certain films 60 days followingshortly after the theatrical release, which caused the release window to shrink further for certain films. We cannot assure you that theserelease. These release windows, which are determined by the film studios, will notmay shrink further or be eliminated altogether, which could have an adverse impact on our business and results of operations.
General political, social and economic conditions can adversely affect our attendance.
Our results of operations are dependent on general political, social and economic conditions, and the impact of such conditions on our theatre operating costs and on the willingness of consumers to spend money at movie theatres. If consumers’ discretionary income declines as a result of an economic downturn, our operations could be adversely affected. If theatre operating costs, such as utility costs, increase due to political or economic changes, our results of operations could be adversely affected. Political events, such as terrorist attacks, and health-related epidemics, such as flu outbreaks, could cause people to avoid our theatres or other public places where large crowds are in attendance. In addition, a natural disaster, such as a hurricane or an earthquake, could impact our ability to operate certain of our theatres, which could adversely affect our results of operations.
Our foreign operations are subject to adverse regulations, economic instability and currency exchange risk.
We have 167176 theatres with 1,3241,278 screens in thirteenfourteen countries in Latin America. Brazil represented approximately 13.3%10.2% of our consolidated 20122015 revenues. Governmental regulation of the motion picture industry in foreign markets differs from that in the United States. Changes in regulations affecting prices, quota systems requiring the exhibition of locally-produced films and restrictions on ownership of property may adversely affect our international operations. Our international operations are subject to certain political, economic and other uncertainties not encountered by our domestic operations, including risks of severe economic downturns and high inflation. We also face risks of currency fluctuations, hard currency shortages and controls of foreign currency exchange and cash transfers abroad,to the U.S., all of which could have an adverse effect on the results of our international operations.
We have substantial long-term lease and debt obligations, which may restrict our ability to fund current and future operations and that restrict our ability to enter into certain transactions.
We have, and will continue to have, significant long-term debt service obligations and long-term lease obligations. As of December 31, 2012,2015, we had $1,764.0$1,814.6 million in long-term debt obligations, $150.2$227.7 million in capital lease obligations and $1,889.2$1,699.9 million in long-term operating lease obligations. We incurred interest expense of $123.7 million for the year ended December 31, 2012. We incurred $281.6 million of facility lease expense under operating leases for the year ended December 31, 2012 (the terms under these operating leases, excluding optional renewal periods, range from one to 25 years). Our substantial lease and debt obligations pose risk to you by:
making it more difficult for us to satisfy our obligations;
requiring us to dedicate a substantial portion of our cash flows to payments on our lease and debt obligations, thereby reducing the availability of our cash flows from operations to fund working capital, capital expenditures, acquisitions and other corporate requirements and to pay dividends;
impeding our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes;
subjecting us to the risk of increased sensitivity to interest rate increases on our variable rate debt, including our borrowings under our amended senior secured credit facility;
limiting our ability to invest in innovations in technology and implement new platforms or concepts in our theatres; and
making us more vulnerable to a downturn in our business and competitive pressures and limiting our flexibility to plan for, or react to, changes in our industry or the economy.
Our ability to make scheduled payments of principal and interest with respect to our indebtedness will depend on our ability to generate positive cash flows and on our future financial results. Our ability to generate positive cash flows is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control. We cannot assure you that we willmay not be able to continue to generate cash flows at current levels, or guarantee that future borrowings will be available under our amended senior secured credit facility, in an amount sufficient to enable us to pay our indebtedness. If our cash flows and capital resources are insufficient to fund our lease and debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We may not be able to take any of these actions, and these actions may not be successful or permit us to meet our scheduled debt service obligations and these actions may be restricted under the terms of our existing or future debt agreements, including our amended senior secured credit facility.
If we fail to make any required payment under the agreements governing our leases and indebtedness or fail to comply with the financial and operating covenants contained in them, we would be in default, and as a result, our debt holders would have the ability to require that we immediately repay our outstanding indebtedness and the lenders under our amended senior secured credit facility could terminate their commitments to lend us money and foreclose against the assets securing their borrowings. We could be forced into bankruptcy or liquidation, which could result in the loss of your investment.liquidation. The acceleration of our indebtedness under one agreement may permit acceleration of indebtedness under other agreements that contain cross-default and cross-acceleration provisions. If our indebtedness is accelerated, we may not be able to repay our indebtedness or borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us. If our debt holders require immediate payment, we may not have sufficient assets to satisfy our obligations under our indebtedness.
We may not be able to generate additional revenues or continue to realize value from our investment in NCM.
In 2005, we joined Regal and AMC as founding members of NCM, a provider of digital advertising content and digital non-film event content. As of December 31, 2012,2015, we had an ownership interest in NCM of approximately 16%19%. We receive a monthly theatre access fee under our Exhibitor Services Agreement with NCM and we are entitled to receive mandatory quarterly distributions of excess cash from NCM. During the years ended December 31, 20112014 and 2012,2015, the Company received approximately $5.9$9.2 million and $7.1$11.3 million in other revenues from NCM,
respectively, and $24.2$18.5 million and $20.8$18.1 million in cash distributions in excess of our investment in NCM, respectively. Cinema advertising is a small component of the U.S. advertising market and therefore, NCM competes with larger, more established and well known media platforms such as broadcast radio and television, cable and satellite television, outdoor advertising and Internet portals. NCM also competes with other cinema advertising companies and with hotels, conference centers, arenas, restaurants and convention facilities for its non-film related events to be shown or held in our auditoriums. In-theatre advertising may not continue to attract advertisers or NCM’s in-theatre advertising format may not continue to be received favorably by theatre patrons. If NCM is unable to continue to generate consistent advertising revenues, its results of operations may be adversely affected and our investment in and distributions and revenues from NCM may be adversely impacted.
We are subject to uncertainties related to digital cinema, including insufficient financing to obtain digital projectors and insufficient supply of digital projectors for our international locations.
We began a roll-out of digital projection equipment in our international theatres during 2009 which has been funded by operating cash flows. There is no local financing available to finance the deployment of digital
projectors for our international theatres on commercially reasonable terms. Accordingly, the cost of digital projection systems and manufacturer limitations may delay our international deployment.
A failure to adapt to future technological innovations could impact our ability to compete effectively and could adversely affect our results of operations.
While we continue to convert our theatres to digital projection technology,implement the latest technological innovations, such as 3-D, D-BOX and satellite distribution technologies, new technological innovations continue to impact our industry. If we are unable to respond to or invest in changes in technology and the technological preferences of our customers, we may not be able to compete with other exhibitors or other entertainment venues, which could adversely affect our results of operations.
We are subject to uncertainties relating to future expansion plans, including our ability to identify suitable acquisition candidates or site locations, and to obtain financing for such activities on favorable terms or at all.
We have greatly expanded our operations over the last decade through targeted worldwide theatre development and acquisitions. We will continue to pursue a strategy of expansion that will involve the development of new theatres and may involve acquisitions of existing theatres and theatre circuits both in the U.S. and internationally. There is significant competition for new site locations and for existing theatre and theatre circuit acquisition opportunities. As a result of such competition, we may not be able to acquire attractive site locations, existing theatres or theatre circuits on terms we consider acceptable. The pace of our growth may also be impacted by delays in site development caused by other parties. Acquisitions and expansion opportunities may divert a significant amount of management’s time away from the operation of our business. Growth by acquisition also involves risks relating to difficulties in integrating the operations and personnel of acquired companies and the potential loss of key employees of acquired companies. We cannot assure you that ourOur expansion strategy willmay not result in improvements to our business, financial condition, profitability, or cash flows. Further, our expansion programs may require financing above our existing borrowing capacity and operating cash flows. We cannot assure you that we willmay not be able to obtain such financing or ensure that such financing will be available to us on acceptable terms or at all.
If we do not comply with the Americans with Disabilities Act of 1990ADA and the safe harbor framework included in the consent order we entered into with the Department of Justice, or the DOJ, we could be subject to further litigation.
Our theatres must comply with Title III of the ADA and analogous state and local laws. Compliance with the ADA requires among other things that public facilities “reasonably accommodate” individuals with disabilities and that new construction or alterations made to “commercial facilities” conform to accessibility guidelines unless “structurally impracticable” for new construction or technically infeasible for alterations. On November 15, 2004, weCinemark and the Department of Justice, or DOJ, entered into a consent order, which was filed with the U.S. District Court for the Northern District of Ohio, Eastern Division. Under the consent order, the DOJ approved a safe harbor framework for us to construct all of our future stadium-style movie theatres. The DOJ has stipulated that all theatres built in compliance with the consent order will comply with the wheelchair seating requirements of the ADA. If we fail to comply with the ADA, remedies could include imposition of injunctive relief, fines, awards for damages to private litigants and additional capital expenditures to remedy non-compliance. Imposition of significant fines, damage awards or capital expenditures to cure non-compliance could adversely affect our business and operating results.
We depend on key personnel for our currentmay be subject to increased labor and future performance.benefits costs.
Our currentIn the U.S., we are subject to United States federal and future performance dependsstate laws governing such matters as minimum wages, working conditions and overtime. As federal and state minimum wage rates increase, we may need to a significant degree uponincrease not only the continued contributionswages of our senior management teamminimum wage employees, but also the wages paid to employees at wage rates that are above minimum wage. Labor shortages, increased employee turnover and health care mandates could also increase our labor costs. This in turn could lead us to increase prices which could impact our sales. Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our results of operations may be adversely impacted. We are also subject to union regulations in certain of our international markets, which can specify wage rates as well as minimum hours to be paid to certain employees. As union wage rates and other key personnel. The loss or unavailabilityrequirements change, our results of any member of our senior management team or a key employeeoperations could significantly impair our business. We cannot assure you that we would be able to locate or employ qualified replacements for senior management or key employees on acceptable terms.adversely affected.
We are subject to impairment losses due to potential declines in the fair value of our assets.
We review long-lived assets for impairment indicators onhave a quarterly basis or whenever events or changes in circumstances indicate the carryingsignificant amount of the assets may not be fully recoverable.long-lived assets. We assess many factors when determining whether to impair individual theatre assets, including actual theatre level cash flows, future years budgeted theatre level cash flows, theatre property and equipment carrying values, amortizing intangible asset carrying values, the age of a recently built theatre, competitive theatres in the marketplace, the impact of recent ticket price changes, available lease renewal options and other factors considered relevant in our assessment of impairment of individual theatre assets. Long-lived assets are evaluated for impairment on an individual theatre basis, which we believe is the lowest applicable level for which there are identifiable cash flows. When estimated fair value is determined to be lower than the carrying value of the theatre assets, the theatre assets are written down to their estimated fair value. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluations performed during 2010, 2011 and 2012. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Since we evaluate long-lived assets for impairment at the theatre level, therefore if a theatre is directly and individually impacted by increased competition, adverse changes in market demographics, or adverse changes in the development or condition of the areas surrounding the theatre, we may record impairment charges to reflect the decline in estimated fair value of that theatre.
We also have a significant amount of goodwill. We evaluate goodwill for impairment at the reporting unit level at least annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of goodwill may not be fully recoverable. Goodwill is evaluated for impairment using a two-step approach under which we compute the fair value of a reporting unit and compare it with its carrying value. If the carrying value of the reporting unit exceeds its fair value, a second step would be performed to measure the potential goodwill impairment. Fair values are determined based on a multiple of cash flows, which was six and a half times for the evaluation performed during 2010 and seven and a half times for the evaluations performed during 2011 and 2012. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples.tradename intangible assets. Declines in our stock price or market capitalization, declines in our attendance due to increased competition in certain regions and/or countries or economic factors that lead to a decline in attendance in any given region or country could negatively affect our estimated fair values and could result in further impairments of goodwill.goodwill and our intangible assets. As of December 31, 2012, the estimated fair value of2015, we performed a qualitative analysis on our goodwill for all of our reporting units exceeded their carrying values by at least 10%.
We also have a significant amount of tradename intangible assets. Tradename intangible assets are tested for impairment at least annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. We estimate the fair value of our tradenames by applying an estimated market royalty rate that could be charged for the use of our tradename to forecasted future revenues, with an adjustment for the present value of such royalties. If the estimated fair value is less than the carrying value, the tradename intangible asset is written down to its estimated fair value. Significant judgment is involved in estimating market royalty rates and long-term revenue forecasts. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected revenue performance and industry trends. As of December 31, 2012, the estimated fair value of our tradename intangible assets exceededand determined that it is not more likely than not that the fair values of such assets are below their respective carrying values by at least 10%.
We recorded asset impairment charges of $12.5 million, $7.0 million and $3.0 million for the years ended December 31, 2010, 2011 and 2012, respectively. We cannot assure you that additional impairment charges will not be required in the future, and such charges may have an adverse effect on our financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 10 and 11 to the consolidated financial statements.
The impairment or insolvency of certain financial institutions could adversely affect us.
We have exposure to different counterparties with regard to our interest rate swap agreements. These transactions expose us to credit risk in the event of a default by one or more of our counterparties to such agreements. We also have exposure to financial institutions used as depositories of our corporate cash balances. If our counterparties or financial institutions become impaired or insolvent, this could have an adverse impact on our results of operations or impair our ability to access our cash.values.
A credit market crisis may adversely affect our ability to raise capital and may materially impact our operations.
Severe dislocations and liquidity disruptions in the credit markets could materially impact our ability to obtain debt financing on reasonable terms or at all. The inability to access debt financing on reasonable terms could materially impact our ability to make acquisitions, invest in technology innovations or significantly expand our business in the future.
We may be subject to liability under environmental laws and regulations.
We own and operate a large number of theatres and other properties within the United StatesU.S. and internationally, which may be subject to various foreign, federal, state and local laws and regulations relating to the protection of the environment or human health. Such environmental laws and regulations include those that impose liability for the investigation and remediation of spills or releases of hazardous materials. We may incur such liability, including for any currently or formerly owned, leased or operated property, or for any site, to which we may have disposed, or arranged for the disposal of, hazardous materials or wastes. Certain of these laws and regulations may impose liability, including on a joint and several liability, which can result in a liable party being obliged to pay for greater than its share, regardless of fault or the legality of the original disposal. Environmental conditions relating to our properties or operations could have an adverse effect on our business and results of operations and cash flows.
Our ability to pay dividends may be limited or otherwise restricted.
Our ability to pay dividends is limited by our status as a holding company and the terms of our senior notes indentures, our senior subordinated notes indenture, and our amended senior secured credit facility, which restrict our ability to pay dividends and the ability of certain of our subsidiaries to pay dividends, directly or indirectly, to us. Under our debt instruments, we may pay a cash dividend up to a specified amount, provided we have satisfied
certain financial covenants in, and are not in default under, our debt instruments. The declaration of future dividends on our common stock, par value $0.001 per share, or Common Stock, will be at the discretion of our board of directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, limitations in our debt agreements and legal requirements. See Note 13 to the consolidated financial statements for further discussion of our long term debt agreements.
Provisions in our corporate documents and certain agreements, as well as Delaware law, may hinder a change of control.
Provisions in our amended and restated certificate of incorporation and bylaws, as well as provisions of the Delaware General Corporation Law, could discourage unsolicited proposals to acquire us, even though such proposals may be beneficial to you.us. These provisions include:
authorization of our board of directors to issue shares of preferred stock without stockholder approval;
a board of directors classified into three classes of directors with the directors of each class having staggered, three-year terms;
provisions regulating the ability of our stockholders to nominate directors for election or to bring matters for action at annual meetings of our stockholders; and
provisions of Delaware law that restrict many business combinations and provide that directors serving on classified boards of directors, such as ours, may be removed only for cause.
Certain provisions of our 8.625%4.875% senior notes indenture, our 5.125% senior notes indenture, our 7.375% senior subordinated notes indenture and our amended senior secured credit facility may have the effect of delaying or preventing future transactions involving a “change of control.” A “change of control” would require us to make an offer to the holders of each of our 8.625%4.875% senior notes, to repurchase all of the outstanding notes at a purchase price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest to the date of the purchase. A “change of control” would require us to make an offer to the holders of our 5.125% senior notes, and our 7.375% senior subordinated notes to repurchase all of the outstanding notes at a purchase price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest to the date of purchase. A “change of control”, as defined in the senior subordinated notes indenture, would require us to make an offer to repurchase the senior subordinated 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. A “change of control” would also be an event of default under our amended senior secured credit facility.
The market price of our Common Stock may be volatile.
There can be no assurance that an active trading market for our Common Stock will continue. The securities markets have experienced extreme price and volume fluctuations in recent years and the market prices of the securities of companies have been particularly volatile. This market volatility, as well as general economic or political conditions, could reduce the market price of our Common Stock regardless of our operating performance. In addition, our operating results could be below the expectations of investment analysts and investors and, in response, the market price of our Common Stock may decrease significantly and prevent investors from reselling their shares of our Common Stock at or above a market price that is favorable to other stockholders. In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we were the subject of securities class action litigation, it could result in substantial costs, liabilities and a diversion of management’s attention and resources.
Future sales of our Common Stock may adversely affect the prevailing market price.
If a large number of shares of our Common Stock is sold in the open market, or if there is a perception that such sales will occur, the trading price of our Common Stock could decrease. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional Common Stock. As of December 31, 2012,2015, we had an aggregate of 173,074,817178,561,563 shares of our Common Stock authorized but unissued and not reserved for specific purposes. In general, we may issue all of these shares without any action or approval by our stockholders. We may issue shares of our Common Stock in connection with acquisitions.
As of December 31, 2012,2015, we had 114,949,667115,924,059 shares of our Common Stock outstanding. Of these shares, approximately 103,023,739104,622,631 shares were freely tradable. The remaining shares of our Common Stock were “restricted securities” as that term is defined in Rule 144 under the Securities Act. Restricted securities may not be resold in a public distribution except in compliance with the registration requirements of the Securities Act or pursuant to an exemption therefrom, including the exemptions provided by Regulation S and Rule 144 promulgated under the Securities Act.
We cannot predict whether substantial amounts of our Common Stock will be sold in the open market in anticipation of, or following, any divestiture by any of our large stockholders, our directors or executive officers of their shares of Common Stock.
As of December 31, 2012,2015, there were 8,422,4317,361,757 shares of our Common Stock reserved for issuance under our Amended and Restated 2006 Long Term Incentive Plan, of which 22,022 shares of Common Stock were issuable upon exercise of options outstanding as of December 31, 2012. The sale of shares issued upon the exercise of stock options could further dilute your investment in our Common Stock and adversely affect our stock price.Plan.
Legislative or regulatory initiatives related to global warming/climate change concerns may negatively impact our business.
Recently, there has been an increasing focus and continuous debate on global climate change including increased attention from regulatory agencies and legislative bodies. This increased focus may lead to new initiatives directed at regulating an as yet unspecified array of environmental matters. Legislative, regulatory or other efforts in the United StatesU.S. to combat climate change could result in future increases in the cost of raw materials, taxes, transportation and utilities for our vendors and for us which would result in higher operating costs for the Company. Also, compliance of our theatres and accompanying real estate with new and revised environmental, zoning, land-use or building codes, laws, rules or regulations, could have a material and adverse effect on our business. However, we are unable to predict at this time, the potential effects, if any, that any future environmental initiatives may have on our business.
Cyber security threats and our failure to protect our electronically stored data could adversely affect our business.
We store and maintain electronic information and data necessary to conduct our business, including confidential and proprietary information of our customers and employees. Data maintained in electronic form is subject to the risk of intrusion, tampering and theft. While we have adopted industry-accepted security measures and technology to protect the confidential and proprietary information, the development and maintenance of these systems is costly and require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. As such, we may be unable to anticipate and implement adequate preventive measures in time. This may adversely affect our business, including exposure to government enforcement actions and private litigation, and our reputation with our customers and employees may be injured. In addition to Company-specific cyber threats or attacks, our business and results of operations could also be impacted by breaches affecting our peers and partners within the entertainment industry, as well as other retail companies.
Product recalls and associated costs could adversely affect our reputation and financial condition.
We are resellers of food and we may be liable if the consumption of any of the products we sell causes illness or injury. We are also subject to recall by product manufacturers or if the food products become contaminated. Recalls could result in losses due to the cost of the recall, the destruction of the product and lost sales due to the unavailability of the product for a period of time.
Changes in privacy laws could adversely affect our ability to market our products effectively.
Our cinemas rely on a variety of direct marketing techniques, including email marketing. Any expansion on existing and/or new laws and regulations regarding marketing, solicitation or data protection could adversely affect the continuing effectiveness of our email and other marketing techniques and could result in changes to our marketing strategy which could adversely impact our attendance levels and revenues.
We are subject to complex taxation and could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities.
We are subject to many different forms of taxation both in the U.S. and in the foreign jurisdictions where we operate. The tax authorities may not agree with the determinations that we made and such disagreements could result in lengthy legal disputes and, ultimately, in the payment of substantial amounts for tax, interest and penalties, which could have a material impact on our results. Additionally, current economic and political conditions make tax rates in any jurisdiction, including the U.S., subject to significant change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. If the Company’s effective tax rates were to increase, or if the ultimate determination of the Company’s taxes owed in the U.S. or foreign jurisdictions is for an amount in excess of amounts previously accrued, the Company’s operating results, cash flows, and financial condition could be adversely affected.
Item 1B.Unresolved1B. Unresolved Staff Comments
None.
Item 2.Properties2. Properties
United States
As of December 31, 2012,2015, in the U.S., we operated 257295 theatres with 3,3293,904 screens pursuant to leases and own the land and building for 4142 theatres with 587614 screens. Our leases are generally entered into on a long-term basis with terms, including optional renewal periods, generally ranging from 20 to 45 years. As of December 31, 2012,2015, approximately 10%8.1% of our theatre leases in the U.S., covering 2524 theatres with 189177 screens, have remaining terms, including optional renewal periods, of less than six years. Approximately 10%7.5% of our theatre leases in the U.S., covering 2722 theatres with 228229 screens, have remaining terms, including optional renewal periods, of between six and 15 years and approximately 80%84.4% of our theatre leases in the U.S., covering 205249 theatres with 2,9123,498 screens, have remaining terms, including optional renewal periods, of more than 15 years. The leases generally provide for a fixed monthly minimum rent payment, with certain leases also subject to additional percentage rent if a target annual revenue level is achieved. We leasecurrently own an office building in Plano, Texas, forwhich is our corporateworldwide headquarters. We also lease office space in Frisco, Texas and McKinney, Texas for our theatre support group.and maintenance personnel.
International
As of December 31, 2012,2015, internationally, we operated 167176 theatres with 1,3241,278 screens, all of which are leased. Our international leases are generally entered into on a long term basis with terms, including optional renewal periods, generally ranging from 510 to 4030 years. The leases generally provide for contingent rental based upon operating results with an annual minimum. As of December 31, 2012,2015, approximately 6%15% of our international theatre leases, covering 1026 theatres with 87225 screens, have remaining terms, including optional renewal periods, of less than six years. Approximately 41%47% of our international theatre leases, covering 6982 theatres and 560613 screens, have remaining terms, including optional renewal periods, of between six and 15 years and approximately 53%38% of our international theatre leases, covering 8868 theatres and 677440 screens, have remaining terms, including optional renewal periods, of more than 15 years. The leases generally provide for a fixed monthly minimum rent payment, with certain leases also subject to additional percentage rent if a target annual revenue level is achieved. We also lease office space in eightseven regions in Latin America for our local management.
See Note 2319 to the consolidated financial statements for information regarding our minimum lease commitments. We periodically review the profitability of each of our theatres, particularly those whose lease terms are nearing expiration, to determine whether to continue its operations.
Item 3.Legal3. Legal Proceedings
Joseph Amey, et al. v. Cinemark USA, Inc.,Case No. 3:13cv05669, In the United States District Court for the Northern District of California, San Francisco Division. The case presents putative class action claims for damages and attorney’s fees arising from employee wage and hour claims under California law for alleged meal period, rest break, reporting time pay, unpaid wages, pay upon termination, and wage statements violations. The claims are also asserted as a representative action under the California Private Attorney General Act (“PAGA”). We deny the claims, deny that class certification is appropriate and deny that a PAGA representative action is appropriate, and are vigorously defending against the claims. We deny any violation of law and plan to vigorously defend against all claims. The Court recently determined that class certification is not appropriate and determined that a PAGA representative action is not appropriate. The plaintiff may appeal these rulings. We are unable to predict the outcome of the litigation or the range of potential loss.
We received a Civil Investigative Demand, or CID, from the Antitrust Division of the United States Department of Justice. The CID relates to an investigation under Sections 1 and 2 of the Sherman Act. We also received CIDs from the Antitrust Section of the Office of the Attorney General of the State of Ohio and later from other states regarding similar inquiries under state antitrust laws. The CIDs request us to answer interrogatories, and produce documents, or both, related to the investigation of matters including film clearances, potential coordination and/or communication with other major theatre circuits and related joint ventures. We intend to fully cooperate with all federal and state government agencies. Although we do not believe that we have violated any federal or state antitrust or competition laws, we cannot predict the ultimate scope, duration or outcome of these investigations.
From time to time, we are involved in other various legal proceedings arising from the ordinary course of our business operations, such as personal injury claims, employment matters, landlord-tenant disputes, patent
claims and contractual disputes, some of which are covered by insurance or by indemnification from vendors. We believe our potential liability, with respect to these types of proceedings currently pending, is not material, individually or in the aggregate, to our financial position, results of operations and cash flows.
Item 4.Mine4. Mine Safety Disclosures
Not applicable.
Item 5.Market5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common equity consists of common stock, which has traded on the New York Stock Exchange since April 24, 2007 under the symbol “CNK.” The following table sets forth the historical high and low sales prices per share of our common stockCommon Stock as reported by the New York Stock Exchange for the years indicated.
2011 | 2012 | 2014 | 2015 | |||||||||||||||||||||||||||||
High | Low | High | Low | High | Low | High | Low | |||||||||||||||||||||||||
First Quarter (January 1 – March 31) | $ | 20.56 | $ | 16.70 | $ | 22.85 | $ | 17.93 | $ | 33.40 | $ | 27.34 | $ | 45.30 | $ | 32.98 | ||||||||||||||||
Second Quarter (April 1 – June 30) | $ | 22.09 | $ | 18.65 | $ | 24.45 | $ | 20.99 | $ | 35.37 | $ | 27.29 | $ | 45.68 | $ | 39.06 | ||||||||||||||||
Third Quarter (July 1 – September 30) | $ | 21.25 | $ | 17.10 | $ | 24.47 | $ | 22.34 | $ | 36.51 | $ | 32.69 | $ | 41.91 | $ | 30.91 | ||||||||||||||||
Fourth Quarter (October 1 – December 31) | $ | 21.00 | $ | 17.78 | $ | 27.50 | $ | 22.18 | $ | 36.87 | $ | 29.42 | $ | 37.63 | $ | 31.65 |
Holders of Common Stock
As of December 31, 2012,2015, there were 147457 holders of record of the Company’s common stock and there were no other classes of stock issued and outstanding.
Dividend Policy
In August 2007, we initiated a quarterly dividend policy, which was amended in November 2010. Below is a summary of dividends declared for the fiscal periods indicated:
Date Declared | Date of Record | Date Paid | Amount per Common Share (1) | Total Dividends (in millions) | ||||
02/24/11 | 03/04/11 | 03/16/11 | $0.21 | $24.0 | ||||
05/12/11 | 06/06/11 | 06/17/11 | $0.21 | 24.1 | ||||
08/04/11 | 08/17/11 | 09/01/11 | $0.21 | 24.2 | ||||
11/03/11 | 11/18/11 | 12/07/11 | $0.21 | 24.2 | ||||
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Total – Year ended December 31, 2011(2) | $96.5 | |||||||
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02/03/12 | 03/02/12 | 03/16/12 | $0.21 | $24.1 | ||||
05/11/12 | 06/04/12 | 06/19/12 | $0.21 | 24.3 | ||||
08/08/12 | 08/21/12 | 09/05/12 | $0.21 | 24.3 | ||||
11/06/12 | 11/21/12 | 12/07/12 | $0.21 | 24.6 | ||||
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Total – Year ended December 31, 2012(2) | $97.3 | |||||||
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Date Declared | Date of Record | Date Paid | Amount per Common Share(1) | Total Dividends(2) (in millions) | ||||
02/14/14 | 03/04/14 | 03/19/14 | $0.25 | $29.0 | ||||
05/22/14 | 06/06/14 | 06/20/14 | $0.25 | 29.0 | ||||
08/13/14 | 08/28/14 | 09/12/14 | $0.25 | 29.1 | ||||
11/12/14 | 12/02/14 | 12/11/14 | $0.25 | 29.1 | ||||
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Total – Year ended December 31, 2014 | $116.2 | |||||||
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02/17/15 | 03/04/15 | 03/18/15 | $0.25 | $29.0 | ||||
05/18/15 | 06/05/15 | 06/19/15 | $0.25 | 29.1 | ||||
08/20/15 | 08/31/15 | 09/11/15 | $0.25 | 29.1 | ||||
11/13/15 | 12/02/15 | 12/16/15 | $0.25 | 29.3 | ||||
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Total – Year ended December 31, 2015 | $116.5 | |||||||
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Includes amounts related to restricted stock unit awards that will not be paid until such awards vest. |
We, at the discretion of the board of directors and subject to applicable law, anticipate paying regular quarterly 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, anticipated cash needs, overall financial condition, loan agreement restrictions, future prospects for earnings and cash flows, as well as other relevant factors. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources — Financing Activities for a discussion of dividend restrictions under our debt agreements.
Performance Graph
Incorporated by reference to the Company’s proxy statement for its annual stockholders meeting to be held on May 26, 2016 and to be filed with the SEC within 120 days after December 31, 2015.
Securities Authorized for Issuance under Equity Compensation Plans
Information regarding securities authorized for issuance under the Company’s long-term compensation plan is incorporated by reference to the Company’s proxy statement for its annual stockholders meeting (under the heading “Board Committees — Compensation Committee report — Securities Authorized for Issuance under Equity Compensation Plans”) to be held on May 23, 201326, 2016 and to be filed with the SEC within 120 days after December 31, 2012.2015.
Item 6.Selected6. Selected Financial Data
The following table provides our selected consolidated financial and operating data for the periods and at the dates indicated for each of the five most recent years ended December 31, 2012.2015. During August 2011, we acquired ten theatres with 95 screens in Argentina. During May 2013, we acquired 32 theatres with 483 screens in the U.S. The results of operations for these theatres are included in our consolidated results of operations beginning on the dates of the respective acquisitions. During November 2013, we sold our Mexico theatres, which included 31 theatres and 290 screens. You should read the selected consolidated financial and operating data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes appearing elsewhere in this report.
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | (Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||||||
Statement of Income Data: | ||||||||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||||
Admissions | $ | 1,126,977 | $ | 1,293,378 | $ | 1,405,389 | $ | 1,471,627 | $ | 1,580,401 | $ | 1,471,627 | $ | 1,580,401 | $ | 1,706,145 | $ | 1,644,169 | $ | 1,765,519 | ||||||||||||||||||||
Concession | 534,836 | 602,880 | 642,326 | 696,754 | 771,405 | 696,754 | 771,405 | 845,168 | 845,376 | 936,970 | ||||||||||||||||||||||||||||||
Other | 80,474 | 80,242 | 93,429 | 111,232 | 121,725 | 111,232 | 121,725 | 131,581 | 137,445 | 150,120 | ||||||||||||||||||||||||||||||
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Total revenues | $ | 1,742,287 | $ | 1,976,500 | $ | 2,141,144 | $ | 2,279,613 | $ | 2,473,531 | 2,279,613 | 2,473,531 | 2,682,894 | 2,626,990 | 2,852,609 | |||||||||||||||||||||||||
Film rentals and advertising | 612,248 | 708,160 | 769,698 | 798,606 | 845,107 | 798,606 | 845,107 | 919,511 | 883,052 | 976,590 | ||||||||||||||||||||||||||||||
Concession supplies | 86,618 | 91,918 | 97,484 | 112,122 | 123,471 | 112,122 | 123,471 | 135,715 | 131,985 | 144,270 | ||||||||||||||||||||||||||||||
Salaries and wages | 180,950 | 203,437 | 221,246 | 226,475 | 247,468 | 226,475 | 247,468 | 269,353 | 273,880 | 301,099 | ||||||||||||||||||||||||||||||
Facility lease expense | 225,595 | 238,779 | 255,717 | 276,278 | 281,615 | 276,278 | 281,615 | 307,851 | 317,096 | 319,761 | ||||||||||||||||||||||||||||||
Utilities and other | 205,814 | 222,660 | 239,470 | 259,703 | 280,670 | 259,703 | 280,670 | 305,703 | 308,445 | 324,851 | ||||||||||||||||||||||||||||||
General and administrative expenses | 90,788 | 96,497 | 109,045 | 127,621 | 148,624 | 127,621 | 148,624 | 165,351 | 151,444 | 156,736 | ||||||||||||||||||||||||||||||
Total depreciation and amortization | 158,034 | 149,515 | 143,508 | 154,449 | 147,675 | |||||||||||||||||||||||||||||||||||
Depreciation and amortization | 154,449 | 147,675 | 163,970 | 175,656 | 189,206 | |||||||||||||||||||||||||||||||||||
Impairment of long-lived assets | 113,532 | 11,858 | 12,538 | 7,033 | 3,031 | 7,033 | 3,031 | 3,794 | 6,647 | 8,801 | ||||||||||||||||||||||||||||||
(Gain) loss on sale of assets and other | 8,488 | 3,202 | (431 | ) | 8,792 | 12,168 | 8,792 | 12,168 | (3,845 | ) | 15,715 | 8,143 | ||||||||||||||||||||||||||||
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Total cost of operations | 1,682,067 | 1,726,026 | 1,848,275 | 1,971,079 | $ | 2,089,829 | $ | 1,971,079 | $ | 2,089,829 | $ | 2,267,403 | $ | 2,263,920 | $ | 2,429,457 | ||||||||||||||||||||||||
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Operating income | $ | 60,220 | $ | 250,474 | $ | 292,869 | $ | 308,534 | $ | 383,702 | $ | 308,534 | $ | 383,702 | $ | 415,491 | $ | 363,070 | $ | 423,152 | ||||||||||||||||||||
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Interest expense | $ | 116,058 | $ | 102,505 | $ | 112,444 | $ | 123,102 | $ | 123,665 | $ | 123,102 | $ | 123,665 | $ | 124,714 | $ | 113,698 | $ | 112,741 | ||||||||||||||||||||
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Net income (loss) | $ | (44,430 | ) | $ | 100,756 | $ | 149,663 | $ | 132,582 | $ | 171,420 | |||||||||||||||||||||||||||||
Net income | $ | 132,582 | $ | 171,420 | $ | 150,548 | $ | 193,999 | $ | 218,728 | ||||||||||||||||||||||||||||||
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Net income (loss) attributable to Cinemark Holdings, Inc. | $ | (48,325 | ) | $ | 97,108 | $ | 146,120 | $ | 130,557 | $ | 168,949 | |||||||||||||||||||||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 130,557 | $ | 168,949 | $ | 148,470 | $ | 192,610 | $ | 216,869 | ||||||||||||||||||||||||||||||
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Net income (loss) attributable to Cinemark Holdings, Inc. per share: | ||||||||||||||||||||||||||||||||||||||||
Net income attributable to Cinemark Holdings, Inc. per share: | ||||||||||||||||||||||||||||||||||||||||
Basic | $ | (0.45 | ) | $ | 0.89 | $ | 1.30 | $ | 1.15 | $ | 1.47 | $ | 1.15 | $ | 1.47 | $ | 1.28 | $ | 1.66 | $ | 1.87 | |||||||||||||||||||
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Diluted | $ | (0.45 | ) | $ | 0.87 | $ | 1.29 | $ | 1.14 | $ | 1.47 | $ | 1.14 | $ | 1.47 | $ | 1.28 | $ | 1.66 | $ | 1.87 | |||||||||||||||||||
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Dividends declared per common share | $ | 0.72 | $ | 0.72 | $ | 0.75 | $ | 0.84 | $ | 0.84 | ||||||||||||||||||||||||||||||
Cash dividends declared per common share | $ | 0.84 | $ | 0.84 | $ | 0.92 | $ | 1.00 | $ | 1.00 | ||||||||||||||||||||||||||||||
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Year Ended December 31, | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||||||||||||||
Ratio of earnings to fixed charges (1) | — | 1.84 | x | 2.10 | x | 2.00 | x | 2.44 | x | 2.00x | 2.44x | 2.23x | 2.40x | 2.67x | ||||||||||||||||||||||||||
Cash flow provided by (used for): | ||||||||||||||||||||||||||||||||||||||||
Operating activities | $ | 257,294 | $ | 176,763 | $ | 264,751 | $ | 391,201 | $ | 395,205 | $ | 391,201 | $ | 395,205 | $ | 309,666 | $ | 454,634 | $ | 455,871 | ||||||||||||||||||||
Investing activities | (94,942 | ) | (183,130 | ) | (136,067 | ) | (247,067 | ) | (234,311 | ) | (247,067 | ) | (234,311 | ) | (364,701 | ) | (253,339 | ) | (328,122 | ) | ||||||||||||||||||||
Financing activities | (135,091 | ) | 78,299 | (106,650 | ) | (78,414 | ) | 63,424 | (78,414 | ) | 63,424 | (76,184 | ) | (146,833 | ) | (151,147 | ) | |||||||||||||||||||||||
Capital expenditures | (106,109 | ) | (124,797 | ) | (156,102 | ) | (184,819 | ) | (220,727 | ) | (184,819 | ) | (220,727 | ) | (259,670 | ) | (244,705 | ) | (331,726 | ) |
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||||||||||||||
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Balance Sheet Data: | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 349,603 | $ | 437,936 | $ | 464,997 | $ | 521,408 | $ | 742,664 | $ | 521,408 | $ | 742,664 | $ | 599,929 | $ | 638,869 | $ | 588,539 | ||||||||||||||||||||
Theatre properties and equipment, net | 1,208,283 | 1,219,588 | 1,215,446 | 1,238,850 | 1,304,958 | 1,238,850 | 1,304,958 | 1,427,190 | 1,450,812 | 1,505,069 | ||||||||||||||||||||||||||||||
Total assets | 3,065,708 | 3,276,448 | 3,421,478 | 3,522,408 | 3,863,226 | 3,495,677 | 3,822,814 | 4,107,515 | 4,120,561 | 4,126,497 | ||||||||||||||||||||||||||||||
Total long-term debt and capital lease obligations, including current portion | 1,632,174 | 1,684,073 | 1,672,601 | 1,713,393 | 1,914,181 | 1,686,662 | 1,873,769 | 2,012,508 | 1,791,578 | 1,781,335 | ||||||||||||||||||||||||||||||
Equity | 824,227 | 914,628 | 1,033,152 | 1,023,639 | 1,094,984 | 1,023,639 | 1,094,984 | 1,102,417 | 1,123,129 | 1,110,813 |
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||||||||||||||||||
United States | ||||||||||||||||||||||||||||||||||||||||
Theatres operated (at period end) | 293 | 294 | 293 | 297 | 298 | 297 | 298 | 334 | 335 | 337 | ||||||||||||||||||||||||||||||
Screens operated (at period end) | 3,742 | 3,830 | 3,832 | 3,878 | 3,916 | 3,878 | 3,916 | 4,457 | 4,499 | 4,518 | ||||||||||||||||||||||||||||||
Total attendance (in 000s) | 147,897 | 165,112 | 161,174 | 158,486 | 163,639 | 158,486 | 163,639 | 177,156 | 173,864 | 179,601 | ||||||||||||||||||||||||||||||
International | ||||||||||||||||||||||||||||||||||||||||
Theatres operated (at period end) | 127 | 130 | 137 | 159 | 167 | 159 | 167 | 148 | 160 | 176 | ||||||||||||||||||||||||||||||
Screens operated (at period end) | 1,041 | 1,066 | 1,113 | 1,274 | 1,324 | 1,274 | 1,324 | 1,106 | 1,177 | 1,278 | ||||||||||||||||||||||||||||||
Total attendance (in 000s) | 63,413 | 71,622 | 80,026 | 88,889 | 100,084 | 88,889 | 100,084 | 99,402 | 90,009 | 100,499 | ||||||||||||||||||||||||||||||
Worldwide | ||||||||||||||||||||||||||||||||||||||||
Theatres operated (at period end) | 420 | 424 | 430 | 456 | 465 | 456 | 465 | 482 | 495 | 513 | ||||||||||||||||||||||||||||||
Screens operated (at period end) | 4,783 | 4,896 | 4,945 | 5,152 | 5,240 | 5,152 | 5,240 | 5,563 | 5,676 | 5,796 | ||||||||||||||||||||||||||||||
Total attendance (in 000s) | 211,310 | 236,734 | 241,200 | 247,375 | 263,723 | 247,375 | 263,723 | 276,558 | 263,873 | 280,100 |
(1) | For the purposes of calculating the ratio of earnings to fixed charges, earnings consist of income |
(2) |
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Item 7.Management’s7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes included in this report. This discussion contains forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties and risk associated with these statements.
Overview
We are a leader in the motion picture exhibition industry, with theatres in the U.S., Brazil, Mexico, Argentina, Chile, Colombia, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia and Guatemala.Curacao. We operated theatres in Mexico until November 15, 2013. As of December 31, 2012,2015, we managed our business under two reportable operating segments — U.S. markets and international markets. See Note 2320 to the consolidated financial statements.
Revenues and Expenses
We generate revenues primarily from box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as vendor marketing promotions, meeting rentals and electronic video games located in some of our theatres. Our contractsrelationship with NCM havehas assisted us in expanding our offerings to domestic advertisers and broadening ancillary revenue sources such as digital video monitor advertising, third party branding, and the use of our domestic theatres foradvertising. We also offer alternative entertainment, such as live and pre-recorded sports programs, concert events, the operaMetropolitan Opera, in-theatre gaming and other special presentations. events in our theatres through our recently formed joint venture, AC JV, LLC. Our Flix Media initiative has allowed us to expand our screen advertising within our international circuit and to other international exhibitors.
Films leading the box office during the year ended December 31, 20122015 includedStar Wars: The Avengers, The Dark Knight Rises, The Hunger Games, Skyfall, The Twilight Saga: Breaking Dawn Part 2, The Hobbit: An Unexpected Journey, Dr. Suess’ The Lorax, Madagascar 3: Europe’s Most Wanted, Men in Black 3, Taken 2, Snow White and the Huntsman, Safe House, The Vow, Brave, PrometheusForce Awakens, Jurassic World,The Amazing Spider-Man, Ice Age: Continental DriftAvengers: Age of Ultron,Hunger Games: Mockingjay Part II, Furious 7, American Sniper, 50 Shades of Grey,Inside Out,Minions,SpectreandThe Bourne Legacy,Mission: Impossible 5,among other films. Our revenues are affected by changes in attendance and concession revenues per patron. Attendance is primarily affected by the quality and quantity of films released by motion picture studios. Films currently scheduled for release in 2013during 2016 include sequels such asThe Hunger Games: Catching Fire, The Hobbit: The Desolation of Smaug, Iron Man 3, The Hangover 3, Monsters University, Despicable Me 2, Fast & Furious 6Captain America: Civil War,Batman V Superman: Dawn Of Justice,Finding Dory,Star Trek Beyond,andA Good Day to Die Hard X-Men: Apocalypseand original titles; action films such asMan of Steel, Oz: Deadpool; family films such asThe GreatSecret Life Of Pets,Zootopia,Alice Through The Looking Glass, and Powerful, Oblivion, Pacific Rim, Lone RangerSing; and spin-off films such asRogue One: A Star Wars Storyand the Harry Potter spin-off World War Z,Fantastic Beasts And Where To Find Them, among other films.
Film rental costs are variable in nature and fluctuate with our admissions revenues. Film rental costs as a percentage of revenues are generally higher for periods in which more blockbuster films are released. Film rental costs can also vary based on the length of a film’s run. Film rental rates are generally negotiated on a film-by-film and theatre-by-theatre basis. Advertising costs, which are expensed as incurred, are primarily fixed at the theatre level as daily movie directories placed in newspapers represent the largest component of advertising costs. The monthly cost of these advertisements is based on, among other things, the size of the directory and the frequency and size of the newspaper’s circulation.
Concession supplies expense is variable in nature and fluctuates with our concession revenues. We purchase concession supplies to replace units sold. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates.
Although salaries and wages include a fixed cost component (i.e. the minimum staffing costs to operate a theatre facility during non-peak periods), salaries and wages move in relation to revenues as theatre staffing is adjusted to respond to changes in attendance. In some international locations, staffing levels are also subject to local regulations.
Facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment. Certain of our 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 revenue level is achieved. Facility lease expense as a percentage of revenues is also affected by the number of theatres under operating leases, the number of theatres under capital leases and the number of fee-owned theatres.
Utilities and other costs include certain costs that have both fixed and variable components such ascosts and primarily includes utilities, property taxes, janitorial costs, repairs and maintenance and security services.
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with generally accepted accounting principles in the U.S., or U.S. GAAP. As such, we are required to make certain estimates and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies, which we believe are the most critical to aid in fully understanding and evaluating our reported consolidated financial results, include the following:
Revenue and Expense Recognition
Revenues are recognized when admissions and concession sales are received at the box office. Other revenues primarily consist of screen advertising. Screen advertising revenues are recognized over the period that the related advertising is delivered on-screen or in-theatre. We record proceeds from the sale of gift cards and other advanced sale-type certificates in current liabilities and recognize admissions or concession revenue when a holder redeems the card or certificate. We recognize unredeemed gift cards and other advanced sale-type certificates as revenue only after such a period of time indicates, based on historical experience, the likelihood of redemption is remote, and based on applicable laws and regulations. In evaluating the likelihood of redemption, we consider the period outstanding, the level and frequency of activity, and the period of inactivity.
Film rental costs are accrued based on the applicable box office receipts and either mutually agreed upon firm terms or a sliding scale formula, which are generally established prior to the opening of the film, or estimates of the final mutually agreed upon settlement,rate, which occurs at the conclusion of the film run, subject to the film licensing arrangement. Under a firm terms formula, we pay the distributor a mutually agreed upon specified percentage of box office receipts, which reflects either a mutually agreed uponan aggregate rate for the life of the film or rates that decline over the term of the run. Under a sliding scale formula, we pay a percentage of box office revenues using a pre-determined matrix that is based upon box office performance of the film. The settlement process allows for negotiation of film rental fees upon the conclusion of the film run based upon how the film performs. Estimates are based on the expected success of a film. The success of a film can typically be determined a few weeks after a film is released when initial box office performance of the film is known. Accordingly, final settlements typically approximate estimates since box office receipts are known at the time the estimate is made and the expected success of a film can typically be estimated early in the film’s run. If actual settlements are different than those estimates, film rental costs are adjusted at that time. Our advertising costs are expensed as incurred.
Facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment. Certain of our leases are subject to monthly percentage rent only, which is accrued each month based on actual revenues. Certain of our other theatres require payment of percentage rent in addition to fixed monthly rent if an annual target revenue level is achieved. Percentage rent expense is estimated and recorded for these theatres on a monthly basis if the theatre’s historical performance or forecasted performance indicates that the annual target revenue level will be reached. Once annual revenues are known, which is generally at the end of the year, the percentage rent expense is adjusted at that time. We record the fixed minimum rent payments on a straight-line basis over the lease term.
Theatre properties and equipment are depreciated using the straight-line method over their estimated useful lives. In estimating the useful lives of our theatre properties and equipment, we have relied upon our experience with such assets and our historical replacement period. We periodically evaluate these estimates and assumptions
and adjust them as necessary. Adjustments to the expected lives of assets are accounted for on a prospective basis through depreciation expense. Leasehold improvements for which we pay and to which we have title are amortized over the lesser of useful life or the lease term.
Impairment of Long-Lived Assets
We review long-lived assets for impairment indicators on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. We assess many factors including the following to determine whether to impair individual theatre assets:
actual theatre level cash flows;
future years budgeted theatre level cash flows;
theatre property and equipment carrying values;
amortizing intangible asset carrying values;
the age of a recently built theatre;
competitive theatres in the marketplace;
the impact of recent ticket price changes;
available lease renewal options; and
other factors considered relevant in our assessment of impairment of individual theatre assets.
Long-lived assets are evaluated for impairment on an individual theatre basis, which we believe is the lowest applicable level for which there are identifiable cash flows. The impairment evaluation is based on the estimated undiscounted cash flows from continuing use through the remainder of the theatre’s useful life. The remainder of the theatre’s useful life correlates with the available remaining lease period, which includes the probability of renewal periods for leased properties and a periodthe lesser of approximately twenty years or the building’s remaining useful life for fee owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, we then compare the carrying value of the asset group (theatre) with its estimated fair value. When estimated fair value is determined to be lower than the carrying value of the asset group (theatre), the asset group (theatre) is written down to its estimated fair value. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluations performed during 2010, 20112013, 2014 and 2012.2015. The long-lived asset impairment charges related to theatre properties recorded during each of the periods presented are specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics, or adverse changes in the development or the conditions of the areas surrounding the theatre.
Impairment of Goodwill and Intangible Assets
We evaluate goodwill for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of the goodwill may not be fully recoverable. We evaluate goodwill for impairment at the reporting unit level and have allocated goodwill to the reporting unit based on an estimate of its relative fair value. Management considers the reporting unit to be each of our sixteenits nineteen regions in the U.S. and each of our eight internationalseven countries internationally (Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala are considered one reporting unit). The evaluation is
Goodwill impairment was evaluated using a two-step approach during 2013 and 2014, requiring usthe Company to compute the fair value of a reporting unit and compare it with its carrying value. If the carrying
value of the reporting unit exceeds its estimated fair value, a second step is performed to measure the potential goodwill impairment. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluation performed during 2010 and seven and a halfeight times for the evaluations performed during 20112013 and 2012.2014. As of December 31, 2012,2014, the estimated fair value of goodwill for all of our reporting unitsgoodwill exceeded their carrying valuevalues by at least 10%.
For the year ended December 31, 2015, we performed a qualitative goodwill impairment assessment on all reporting units except one, in accordance with ASU 2011-08Testing Goodwill for Impairment(“ASU 2011-08”). The qualitative assessment included consideration of historical and expected future industry performance, our estimated future performance, current industry trading multiples and other economic factors. Based on the qualitative assessment performed, we determined that it was not more likely than not that the fair value of the reporting units were less than their carrying values. We performed the quantitative two-step approach on a new U.S. region that had not previously been assessed for goodwill impairment. The fair value for the new reporting unit was determined based on a multiple of estimated cash flows, which was eight times, and exceeded its carrying value by more than 10%.
Tradename intangible assets are tested for impairment at least annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. We estimateDuring 2013 and 2014, we estimated the fair value of our tradenames by applying an estimated market royalty rate that could be charged for the use of our tradename to forecasted future revenues, with an adjustment for the present value of such royalties. If the estimated fair value is less than the carrying value, the tradename intangible asset is written down to its estimated fair value. Significant judgment is involved in estimating market royalty rates and long-term revenue forecasts. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected revenue performance and industry trends. As of December 31, 2012,2014, the estimated fair value of our tradename intangible assets exceeded their carrying values by at least 10%. For the year ended December 31, 2015, the Company performed a qualitative tradename intangible asset impairment assessment in accordance with ASU 2011-08. The qualitative assessment included consideration of our historical and forecasted revenues and estimated royalty rates for each tradename intangible asset. Based on the qualitative assessment performed, the Company determined that it was not more likely than not that the fair values of tradename intangible assets were less than their carrying values.
Income Taxes
We use an asset and liability approach to financial accounting and reporting for income taxes. Deferred income taxes are provided when tax laws and financial accounting standards differ with respect to the amount of income for a year and the basis of assets and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets unless it is more likely than not that such assets will be realized. Income taxes are provided on unremitted earnings from foreign subsidiaries unless such earnings are expected to be indefinitely reinvested. Income taxes have also been provided for potential tax assessments. The evaluation of an uncertain tax position is a two-step process. The first step is recognition: We determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position would be examined by the appropriate taxing authority that would have full knowledge of all relevant information. The second step is measurement: A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements result in (1) a change in a liability for income taxes payable or (2) a change in an income tax refund receivable, a deferred tax asset or a deferred tax liability or both (1) and (2). We accrue interest and penalties on uncertain tax positions.
Accounting for Investment in National CineMedia, LLC and Related Agreements
We have an investment in NCM. NCM operates a digital in-theatre network in the U.S. for providing cinema advertising and non-film events. Upon joining NCM, the Company and NCM entered into an Exhibitor Services Agreement, pursuant to which NCM provides advertising, promotion and event services to the Company’s theatres. On February 13, 2007, National CineMedia, Inc., or “NCMNCM Inc.”, a newly formed entity that serves as a member and the sole manager of NCM, completed an initial public offering of its common stock. In connection with the NCM Inc. initial public offering, the Company amended its operating agreement and the Exhibitor Services Agreement, or ESA, with NCM and received proceeds related to the modification of the ESA and the Company’s sale of certain of its shares in NCM. The ESA modification reflected a shift from circuit share expense under the prior Exhibitor Services Agreement, which obligated NCM to pay the Company a percentage of revenue, to a monthly theatre access fee, which significantly reduced the contractual amounts paid to the Company by NCM. The Company recorded the proceeds related to the ESA modification as deferred revenue, which is being amortized into other revenues over the life of the agreement using the units of revenue method. As a result of the proceeds received as part of the NCM, Inc. initial public offering, the Company had a negative basis in its original membership units in NCM (referred to herein as its Tranche 1 Investment). The Company does not recognize undistributed equity in the earnings on its 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 believes that the accounting model provided by ASC 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.
Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and Cinemark, AMC and Regal, collectively referred to as its Founding Members, 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 by each Founding Member. To account for the receipt of additional common units under the Common Unit Adjustment Agreement, the Company follows the guidance in ASC 323-10-35-29 (formerly EITF 02-18,Accounting for Subsequent Investments in an Investee after Suspension of Equity Loss Recognition) by analogy, which also refers to AICPA Technical Practice Aid 2220.14, which indicates that if a subsequent investment is made in an equity method investee that has experienced significant losses, the investor must determine if the subsequent investment constitutes funding of prior losses. The Company concluded that the construction or acquisition of new theatres that has led to the common unit adjustments equates to making additional investments in National CineMedia. The Company evaluated the receipt of the additional common units in National CineMedia and the assets exchanged for these additional units and has determined that the right to use its incremental new screens would not be considered funding of prior losses. The Company accounts for these additional common units (referred to herein as its Tranche 2 Investment) as a separate investment than its Tranche 1 Investment. The common units received are recorded at fair value as an increase in the Company’s investment in NCM with an offset to deferred revenue. The deferred revenue is amortized over the remaining term of the ESA. The Tranche 2 Investment is accounted for following the equity method, with undistributed equity earnings related to its Tranche 2 Investment included as a component of equity in income (loss) of affiliates and distributions received related to its Tranche 2 Investment are recorded as a reduction of its investment basis.
Recent Developments
Dividend Declaration
On February 12, 2013,16, 2016, the Compensation Committee of our board of directors declaredapproved the Amended and Restated Employment Agreement of Mark Zoradi, to be effective February 19, 2016 (the “Amended Agreement”). The Amended Agreement amends Section 3.2(c) by providing that the Equity Awards (as defined in the Amended Agreement) shall be at least 200% of Mr. Zoradi’s base salary and providing for an additional amount for personal expenses. The amendments conform the Amended Agreement to the terms of Mr. Zoradi’s employment offer in August 2015.
Our board of directors approved a cash dividend for the fourth quarter of 20122015 of $0.21$0.27 per share of common sharestock payable to stockholders of record on March 4, 2013.7, 2016. The dividend will be paid on March 15, 2013.
Disposition of Mexican Subsidiaries
During February 2013, we entered into a stock purchase agreement with Grupo Cinemex, S.A. De C.V. pursuant to which we will sell our Mexican subsidiaries, which consist of 31 theatres and 290 screens. The sales price, which will be paid in Mexican pesos and is subject to certain closing date adjustments, will be approximately $125.0 million, based on the exchange rate on the date of this report. The transaction, which is subject to review by the Mexican Federal Competition Commission, is expected to close during the second half of 2013.18, 2016.
Results of Operations
The following table sets forth, for the periods indicated, the amounts for certain items reflected in our consolidated statements of income along with each of those items as a percentage of revenues. On August 25, 2011,During May 2013, we purchased tenacquired 32 theatres with 95483 screens in Argentina.the U.S. The results of operations for these theatres are included in our consolidated results of operations beginning on the date of the acquisition. During November 2013, we sold our Mexico theatres, which included 31 theatres and 290 screens.
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Operating data (in millions): | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Admissions | $ | 1,405.4 | $ | 1,471.6 | $ | 1,580.4 | $ | 1,706.1 | $ | 1,644.2 | $ | 1,765.5 | ||||||||||||
Concession | 642.3 | 696.8 | 771.4 | 845.2 | 845.4 | 937.0 | ||||||||||||||||||
Other | 93.4 | 111.2 | 121.7 | 131.6 | 137.4 | 150.1 | ||||||||||||||||||
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Total revenues | 2,141.1 | 2,279.6 | 2,473.5 | 2,682.9 | 2,627.0 | 2,852.6 | ||||||||||||||||||
Cost of operations | ||||||||||||||||||||||||
Film rentals and advertising | 769.7 | 798.6 | 845.1 | 919.5 | 883.1 | 976.6 | ||||||||||||||||||
Concession supplies | 97.5 | 112.1 | 123.5 | 135.7 | 132.0 | 144.3 | ||||||||||||||||||
Salaries and wages | 221.2 | 226.5 | 247.4 | 269.3 | 273.9 | 301.1 | ||||||||||||||||||
Facility lease expense | 255.7 | 276.3 | 281.6 | 307.9 | 317.1 | 319.7 | ||||||||||||||||||
Utilities and other | 239.5 | 259.7 | 280.7 | 305.7 | 308.4 | 324.9 | ||||||||||||||||||
General and administrative expenses | 109.1 | 127.6 | 148.6 | 165.4 | 151.4 | 156.7 | ||||||||||||||||||
Depreciation and amortization | 143.5 | 154.4 | 147.7 | 164.0 | 175.7 | 189.2 | ||||||||||||||||||
Impairment of long-lived assets | 12.5 | 7.0 | 3.0 | 3.8 | 6.6 | 8.8 | ||||||||||||||||||
(Gain) loss on sale of assets and other | (0.4 | ) | 8.8 | 12.2 | (3.9 | ) | 15.7 | 8.1 | ||||||||||||||||
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Total cost of operations | 1,848.3 | 1,971.0 | 2,089.8 | 2,267.4 | 2,263.9 | 2,429.4 | ||||||||||||||||||
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Operating income | $ | 292.8 | $ | 308.6 | $ | 383.7 | $ | 415.5 | $ | 363.1 | $ | 423.2 | ||||||||||||
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Operating data as a percentage of total revenues: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Admissions | 65.6 | % | 64.6 | % | 63.9 | % | 63.6 | % | 62.6 | % | 61.9 | % | ||||||||||||
Concession | 30.0 | % | 30.6 | % | 31.2 | % | 31.5 | % | 32.2 | % | 32.8 | % | ||||||||||||
Other | 4.4 | % | 4.8 | % | 4.9 | % | 4.9 | % | 5.2 | % | 5.3 | % | ||||||||||||
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Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
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Cost of operations(1) | ||||||||||||||||||||||||
Film rentals and advertising | 54.8 | % | 54.3 | % | 53.5 | % | 53.9 | % | 53.7 | % | 55.3 | % | ||||||||||||
Concession supplies | 15.2 | % | 16.1 | % | 16.0 | % | 16.1 | % | 15.6 | % | 15.4 | % | ||||||||||||
Salaries and wages | 10.3 | % | 9.9 | % | 10.0 | % | 10.0 | % | 10.4 | % | 10.6 | % | ||||||||||||
Facility lease expense | 11.9 | % | 12.1 | % | 11.4 | % | 11.5 | % | 12.1 | % | 11.2 | % | ||||||||||||
Utilities and other | 11.2 | % | 11.4 | % | 11.3 | % | 11.4 | % | 11.7 | % | 11.4 | % | ||||||||||||
General and administrative expenses | 5.1 | % | 5.6 | % | 6.0 | % | 6.2 | % | 5.8 | % | 5.5 | % | ||||||||||||
Depreciation and amortization | 6.7 | % | 6.8 | % | 6.0 | % | 6.1 | % | 6.7 | % | 6.6 | % | ||||||||||||
Impairment of long-lived assets | 0.6 | % | 0.3 | % | 0.1 | % | 0.1 | % | 0.3 | % | 0.3 | % | ||||||||||||
(Gain) loss on sale of assets and other | (0.0 | %) | 0.4 | % | 0.5 | % | (0.1 | %) | 0.6 | % | 0.3 | % | ||||||||||||
Total cost of operations | 86.3 | % | 86.5 | % | 84.5 | % | 84.5 | % | 86.2 | % | 85.2 | % | ||||||||||||
Operating income | 13.7 | % | 13.5 | % | 15.5 | % | 15.5 | % | 13.8 | % | 14.8 | % | ||||||||||||
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Average screen count (month end average) | 4,909 | 5,021 | 5,198 | 5,548 | 5,613 | 5,725 | ||||||||||||||||||
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Revenues per average screen (dollars) | $ | 436,181 | $ | 454,051 | $ | 475,897 | $ | 483,579 | $ | 468,019 | $ | 498,272 | ||||||||||||
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(1) | All costs are expressed as a percentage of total revenues, except film rentals and advertising, which are expressed as a percentage of admissions revenues and concession supplies, which are expressed as a percentage of concession revenues. |
Comparison of Years Ended December 31, 20122015 and December 31, 20112014
Revenues.Total revenues increased $193.9$225.6 million to $2,473.5$2,852.6 million for 20122015 from $2,279.6$2,627.0 million for 2011,2014, representing an 8.5%8.6% increase. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.
U.S. Operating Segment | International Operating Segment | Consolidated | U.S. Operating Segment | International Operating Segment | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | % Change | 2012 | 2011 | % Change | 2012 | 2011 | % Change | 2015 | 2014 | % Change | 2015 | 2014 | % Change | 2015 | 2014 | % Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Admissions revenues (1) | $ | 1,099.6 | $ | 1,033.6 | 6.4 | % | $ | 480.8 | $ | 438.0 | 9.8 | % | $ | 1,580.4 | $ | 1,471.6 | 7.4 | % | $ | 1,338.0 | $ | 1,220.8 | 9.6 | % | $ | 427.5 | $ | 423.4 | 1.0 | % | $ | 1,765.5 | $ | 1,644.2 | 7.4 | % | ||||||||||||||||||||||||||||||||||||
Concession revenues (1) | $ | 546.2 | $ | 503.4 | 8.5 | % | $ | 225.2 | $ | 193.4 | 16.4 | % | $ | 771.4 | $ | 696.8 | 10.7 | % | $ | 709.7 | $ | 635.6 | 11.7 | % | $ | 227.3 | $ | 209.8 | 8.3 | % | $ | 937.0 | $ | 845.4 | 10.8 | % | ||||||||||||||||||||||||||||||||||||
Other revenues(1)(2) | $ | 50.1 | $ | 46.5 | 7.7 | % | $ | 71.6 | $ | 64.7 | 10.7 | % | $ | 121.7 | $ | 111.2 | 9.4 | % | $ | 76.2 | $ | 66.0 | 15.5 | % | $ | 73.9 | $ | 71.4 | 3.5 | % | $ | 150.1 | $ | 137.4 | 9.2 | % | ||||||||||||||||||||||||||||||||||||
Total revenues(1)(2) | $ | 1,695.9 | $ | 1,583.5 | 7.1 | % | $ | 777.6 | $ | 696.1 | 11.7 | % | $ | 2,473.5 | $ | 2,279.6 | 8.5 | % | $ | 2,123.9 | $ | 1,922.4 | 10.5 | % | $ | 728.7 | $ | 704.6 | 3.4 | % | $ | 2,852.6 | $ | 2,627.0 | 8.6 | % | ||||||||||||||||||||||||||||||||||||
Attendance(1) | 163.6 | 158.5 | 3.2 | % | 100.1 | 88.9 | 12.6 | % | 263.7 | 247.4 | 6.6 | % | 179.6 | 173.9 | 3.3 | % | 100.5 | 90.0 | 11.7 | % | 280.1 | 263.9 | 6.1 | % |
(1) | Amounts in millions. |
(2) | U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note |
• | U.S.The $117.2 million increase in admissions revenues |
• | International.The $4.1 million increase in admissions revenues |
Cost of Operations. The table below summarizes certain of our theatre operating costs by reportable operating segment (in millions).
U.S. Operating Segment | International Operating Segment | Consolidated | U.S. Operating Segment | International Operating Segment | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||
Film rentals and advertising | $ | 610.5 | $ | 574.2 | $ | 234.6 | $ | 224.4 | $ | 845.1 | $ | 798.6 | $ | 768.2 | $ | 681.1 | $ | 208.4 | $ | 202.0 | $ | 976.6 | $ | 883.1 | ||||||||||||||||||||||||
Concession supplies | 71.1 | 64.0 | 52.4 | 48.1 | 123.5 | 112.1 | 95.4 | 86.4 | 48.9 | 45.6 | 144.3 | 132.0 | ||||||||||||||||||||||||||||||||||||
Salaries and wages | 174.2 | 167.5 | 73.2 | 59.0 | 247.4 | 226.5 | 226.9 | 202.8 | 74.2 | 71.1 | 301.1 | 273.9 | ||||||||||||||||||||||||||||||||||||
Facility lease expense | 191.1 | 185.8 | 90.5 | 90.5 | 281.6 | 276.3 | 239.4 | 235.2 | 80.3 | 81.9 | 319.7 | 317.1 | ||||||||||||||||||||||||||||||||||||
Utilities and other | 182.9 | 174.5 | 97.8 | 85.2 | 280.7 | 259.7 | 228.0 | 217.2 | 96.9 | 91.2 | 324.9 | 308.4 |
• | U.S.Film rentals and advertising costs were |
Salaries and wages increased to $174.2$226.9 million for 20122015 from $167.5$202.8 million for 20112014 primarily due to increased staffing levels to support the increased attendance, new theatres.theatres and increases in minimum wages. Facility lease expense increased to $191.1$239.4 million for 20122015 from $185.8$235.2 million for 20112014 primarily due to new theatres.theatres and increased percentage rent expense due to increased revenues. Utilities and other costs increased to $182.9$228.0 million for 20122015 from $174.5$217.2 million for 20112014 primarily due to new theatres increased equipment lease and personalincreases in property tax expenses related to digitaltaxes, janitorial costs and 3-D equipment, increased security expense and increased repairs and maintenance expense.expenses.
• | International.Film rentals and advertising costs were |
Salaries and wages increased to $73.2$74.2 million for 20122015 from $59.0$71.1 million for 2011 primarily2014 due to new theatres, includingincreased staffing levels to support the ten theatresincreased attendance, limited flexibility in Argentina acquired during August 2011scheduling staff caused by shifting government regulations and increased local currency wage rates. Facility lease expense was $90.5decreased to $80.3 million for 2012 and 2011.2015 from $81.9 for 2014. Utilities and other costs increased to $97.8$96.9 million for 20122015 from $85.2$91.2 million for 2011 primarily2014 due to increases in repairs and maintenance expenses, utility expenses and new theatres, including the ten theatres in Argentina acquired during August 2011, increased janitorial costs and increased screen advertising commissions and related expenses. Eachtheatres. All of the expenses previously discussedabove-mentioned theatre operating costs were also impacted by the changechanges in exchangeforeign currency exchanges rates in certain countries in which we operate.
General and Administrative Expenses.General and administrative expenses increased to $148.6$156.7 million for 20122015 from $127.6$151.4 million for 2011.2014. The increase was primarily due to increasedincreases in salaries and incentive compensation expense of approximately $7.7 million, increasedand share based awards compensation expense, partially offset by the impact of $5.4 million, increased professional fees of $1.8 million and additional overhead expenses associated with the ten theatreschanges in Argentina acquiredforeign currency exchange rates in August 2011.certain countries in which we operate.
Depreciation and Amortization.Depreciation and amortization expense including amortization of favorable/ unfavorable leases, was $147.7$189.2 million for 20122015 compared to $154.4$175.7 million for 2011.2014. The decreaseincrease was primarily due to the impact of accelerated depreciation taken on our domestic 35 millimeter projection systems that were replaced with digital projection systems during 2011. We recorded approximately $10.6 million of depreciation expense related to our domestic 35 millimeter projection systems during 2011. Our domestic 35 millimeter projection systems were fully depreciated asnew theatres and remodels and other improvements of December 31, 2011.existing theatres.
Impairment of Long-Lived Assets.We recorded asset impairment charges on assets held and used of $3.0$8.8 million for 20122015 compared to $7.0$6.6 million for 2011.2014. Impairment charges for 2012 were related to2015 consisted of theatre properties in the U.S., Colombia and Ecuador, impacting fourteen of our twenty-fourtwenty-seven reporting units. Impairment charges for 2011 were related to2014 consisted primarily of U.S. theatre properties, impacting fourteentwelve of our twenty-fourtwenty-six reporting units. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics, or adverse changes in the development or the conditions of the areas surrounding the theatre. See Notes 101, 8 and 119 to our consolidated financial statements.
Loss on Sale of Assets and Other.We recorded a loss on sale of assets and other of $12.2$8.1 million during 20122015 compared to $8.8$15.7 million during 2011.2014. The loss recorded during 20122015 included a $6.7 million lease termination reserve forcosts, contract termination costs and the retirement of assets due to theatre remodels and closures, partially offset by gains related to lease amendments that resulted in a closed theatrereduction of certain capital lease liabilities, the sale of an
investment in a Taiwan joint venture, and the sale of a land parcel in the U.S. The loss recorded during 2014 was primarily due to the retirement of certain theatre equipment that was replaced during
the year. The lossperiod, lease termination charges recorded during 2011 includedfor theatre closures and a losscharge for termination of $2.3 million related to a settlement for a previously terminated interest rate swap agreement, a loss of $1.0 million related to the sale of digital projection systems to DCIP and the write-off of theatre properties and equipment primarily as a result of theatre remodels.vendor contract.
Interest Expense.Interest costs incurred, including amortization of debt issue costs, were $123.7$112.7 million for 20122015 compared to $123.1$113.7 million for 2011.2014. See Note 1311 to our consolidated financial statements for further discussion of our long-term debt.
Foreign Currency Exchange Loss.We recorded foreign currency exchange losses of $16.8 million during 2015 and $6.2 million during 2014 related to the continued decline of exchange rates in certain of the international countries in which we operate. See Notes 1 and 14 to our consolidated financial statements for discussion of foreign currency translation.
Loss on Early Retirement ofAmendment to Debt Agreement.. We recorded a loss on early retirement of debt of $5.6$0.9 million during 2012in 2015 related to the amendment and restatement of our senior secured credit facility. We recorded a loss on early retirement of debt of $4.9 million during 2011 related to the prepayment of approximately $157.2 million of the unextended portion of our term loan debt. The loss for the 2011 period included the write-off of $2.2 million of unamortized debt issue costs related to the portion of the term loan debt that was prepaid and the reclassification of $2.7 million from accumulated other comprehensive loss to earnings as a result of our determination that quarterly interest payments hedged by certain of our interest rate swap agreements are no longer probable to occur. See Note 1311 to our consolidated financial statements for further discussion of our long-term debt.
Distributions from NCM.We recorded distributions received from NCM of $20.8$18.1 million during 20122015 and $24.2$18.5 million during 2011,2014, which were in excess of the carrying value of our Tranche 1 Investment. NCM did not distribute any excess cash during the second quarter of 2015 due to expenses incurred as the result of the termination of a proposed merger. See Note 6 to our consolidated financial statements.
Loss on Marketable Securities — RealD.We recorded a loss on our investment in RealD of $12.6 million during 2011 due to an other-than-temporary impairment of our investment. The loss recorded represented the cumulative net unrealized holding losses we had previously recorded in accumulated other comprehensive loss. These cumulative net unrealized holding losses were recognized as a loss during 2011 due to the length of time and extent to which RealD’s stock price had been below our basis in the stock. See Note 8 to our consolidated financial statements.
Equity in Income of Affiliates.We recorded equity in income of affiliates of $13.1$28.1 million during 20122015 and $5.7$22.7 million during 2011. The equity in income of affiliates recorded during 2012 primarily included approximately $4.4 million of income related to our equity investment in NCM (see Note2014. See Notes 6 to our consolidated financial statements) and approximately $8.9 million of income related to our equity investment in DCIP (see Note 7 to our consolidated financial statements). The equity in income of affiliates recorded during 2011 primarily included approximately $5.4 million of income related tostatements for information about our equity investment in NCM and approximately $0.5 million of income related to our equity investment in DCIP.investments.
Income Taxes.Income tax expense of $125.4$128.9 million was recorded for 20122015 compared to $73.1$96.1 million recorded for 2011.2014. The effective tax rate for 20122015 was 42.2%37.1%. The effective tax rate for 20112014 was 35.5%33.1%. The effective tax rate for 2014 reflects the impact of items related to our Mexican subsidiaries. See Note 2118 to our consolidated financial statements.
Comparison of Years Ended December 31, 20112014 and December 31, 20102013
Revenues.Total revenues increased $138.5decreased $55.9 million to $2,279.6$2,627.0 million for 20112014 from $2,141.1$2,682.9 million for 2010,2013, representing a 6.5% increase.2.1% decrease. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.
U.S. Operating Segment | International Operating Segment | Consolidated | U.S. Operating Segment | International Operating Segment | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | 2011 | 2010 | % Change | 2014 | 2013 | % Change | 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Admissions revenues(1) | $ | 1,033.6 | $ | 1,044.7 | (1.1 | )% | $ | 438.0 | $ | 360.7 | 21.4 | % | $ | 1,471.6 | $ | 1,405.4 | 4.7 | % | $ | 1,220.8 | $ | 1,231.4 | (0.9 | %) | $ | 423.4 | $ | 474.7 | (10.8 | %) | $ | 1,644.2 | $ | 1,706.1 | (3.6 | %) | ||||||||||||||||||||||||||||||||||||
Concession revenues(1) | $ | 503.4 | $ | 487.9 | 3.2 | % | $ | 193.4 | $ | 154.4 | 25.3 | % | $ | 696.8 | $ | 642.3 | 8.5 | % | $ | 635.6 | $ | 609.3 | 4.3 | % | $ | 209.8 | $ | 235.9 | (11.1 | %) | $ | 845.4 | $ | 845.2 | — | % | ||||||||||||||||||||||||||||||||||||
Other revenues(1)(2) | $ | 46.5 | $ | 44.3 | 5.0 | % | $ | 64.7 | $ | 49.1 | 31.8 | % | $ | 111.2 | $ | 93.4 | 19.1 | % | $ | 66.0 | $ | 59.1 | 11.7 | % | $ | 71.4 | $ | 72.5 | (1.5 | %) | $ | 137.4 | $ | 131.6 | 4.4 | % | ||||||||||||||||||||||||||||||||||||
Total revenues(1)(2) | $ | 1,583.5 | $ | 1,576.9 | 0.4 | % | $ | 696.1 | $ | 564.2 | 23.4 | % | $ | 2,279.6 | $ | 2,141.1 | 6.5 | % | $ | 1,922.4 | $ | 1,899.8 | 1.2 | % | $ | 704.6 | $ | 783.1 | (10.0 | %) | $ | 2,627.0 | $ | 2,682.9 | (2.1 | %) | ||||||||||||||||||||||||||||||||||||
Attendance(1) | 158.5 | 161.2 | (1.7 | )% | 88.9 | 80.0 | 11.1 | % | 247.4 | 241.2 | 2.6 | % | 173.9 | 177.2 | (1.9 | %) | 90.0 | 99.4 | (9.5 | %) | 263.9 | 276.6 | (4.6 | %) |
Amounts in millions. |
U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note |
• | U.S.The decrease in admissions revenues |
|
• | International.The decrease in admissions revenues was primarily attributable to a 9.5% decrease in attendance and a 1.7% decrease in average ticket price from $4.78 for 2013 to $4.70 for 2014. The decrease in concession revenues was primarily attributable to the |
Cost of Operations. The table below summarizes certain of our theatre operating costs by reportable operating segment (in millions).
U.S. Operating Segment | International Operating Segment | Consolidated | U.S. Operating Segment | International Operating Segment | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||||||
Film rentals and advertising | $ | 574.2 | $ | 586.6 | $ | 224.4 | $ | 183.1 | $ | 798.6 | $ | 769.7 | $ | 681.1 | $ | 687.3 | $ | 202.0 | $ | 232.2 | $ | 883.1 | $ | 919.5 | ||||||||||||||||||||||||
Concession supplies | 64.0 | 59.1 | 48.1 | 38.4 | 112.1 | 97.5 | 86.4 | 83.7 | 45.6 | 52.0 | 132.0 | 135.7 | ||||||||||||||||||||||||||||||||||||
Salaries and wages | 167.5 | 174.1 | 59.0 | 47.1 | 226.5 | 221.2 | 202.8 | 192.5 | 71.1 | 76.8 | 273.9 | 269.3 | ||||||||||||||||||||||||||||||||||||
Facility lease expense | 185.8 | 181.9 | 90.5 | 73.8 | 276.3 | 255.7 | 235.2 | 215.5 | 81.9 | 92.4 | 317.1 | 307.9 | ||||||||||||||||||||||||||||||||||||
Utilities and other | 174.5 | 161.5 | 85.2 | 78.0 | 259.7 | 239.5 | 217.2 | 204.5 | 91.2 | 101.2 | 308.4 | 305.7 |
• | U.S.Film rentals and advertising costs were |
|
Salaries and wages decreasedincreased to $167.5$202.8 million for 20112014 from $174.1$192.5 million for 2010 primarily due to the 1.7% decline in attendance and operating efficiencies achieved with reduced staffing levels.2013. Facility lease expense increased to $185.8$235.2 million for 20112014 from $181.9$215.5 million for 2010 primarily due to new theatres.2013. Utilities and other costs increased to $174.5$217.2 million for 20112014 from $161.5$204.5 million for 20102013. All of the above-mentioned theatre operating costs for 2014 increased primarily due to new theatre openings and the inclusion of the 32 Rave theatres and increased expenses relatedacquired on May 29, 2013 (see Note 5 to digital and 3-D equipment.the consolidated financial statements).
• | International.Film rentals and advertising costs were |
Salaries and wages increaseddecreased to $59.0$71.1 million for 20112014 from $47.1$76.8 million for 2010 primarily due2013. Facility lease expense decreased to new theatres, increased wage rates, increased staffing levels$81.9 million for 2014 from $92.4 for 2013. Utilities and other costs decreased to support$91.2 million for 2014 from $101.2 million for 2013. All of the 11.1% increaseabove-mentioned theatre operating costs were impacted by changes in attendance and the impact of exchange rates in certain countries in which we operate. Facility lease expense increased to $90.5 million for 2011 from $73.8 million for 2010 primarily due to new theatres, increased percentage rent due to the 23.4% increase in revenuesoperate and the impactsale of exchange rates in certain countries in which we operate. Utilities and other costs increased to $85.2 million for 2011 from $78.0 million for 2010 primarily due to newour Mexico theatres increased expenses related to 3-D equipment and the impact of exchange rates in certain countries in which we operate.during November 2013.
General and Administrative Expenses.General and administrative expenses increaseddecreased to $127.6$151.4 million for 20112014 from $109.1$165.4 million for 2010.2013. The increasereduction was primarily due to increased salaries and incentive compensation expense of $5.0 million, increased share based awards compensation expense of $1.3 million, increased professional fees of $2.1 million, increased service charges of $1.0 million related to increased credit card activity and the impact of changes in exchange rates in certain countries in which we operate.operate, the sale of our Mexico theatres in November 2013 and a reduction in incentive compensation expense. General and administrative expenses for 2013 also included approximately $1.5 million in severance expense and approximately $1.8 million in share based award compensation expense related to the sale of our Mexico theatres during November 2013.
Depreciation and Amortization.Depreciation and amortization expense including amortization of favorable/ unfavorable leases, was $154.4$175.7 million for 20112014 compared to $143.5$164.0 million for 2010.2013. The increase was primarily due to new theatres, including the impact32 Rave theatres acquired on May 29, 2013, and remodels and other improvements of accelerated depreciation taken onexisting theatres, partially offset by the sale of our domestic 35 millimeter projection systems that were replaced with digital projection systems and the impact of exchange rates in certain countries in which we operate. We recorded approximately $10.6 million of depreciation expense related to our domestic 35 millimeter projection systemsMexico theatres during 2011. Our domestic 35 millimeter projection systems were fully depreciated as of December 31, 2011.November 2013.
Impairment of Long-Lived Assets.We recorded asset impairment charges on assets held and used of $7.0$6.6 million for 20112014 compared to $12.5$3.8 million for 2010.2013. Impairment charges for 2011 were related to2014 consisted primarily of U.S. theatre properties, impacting fourteentwelve of our twenty-fourtwenty-six reporting units. Impairment charges for 2010 consisted of $10.8 million of2013 were primarily related to U.S. and international theatre properties, and $1.5 million of intangible assets, impacting eighteentwelve of our twenty-fourtwenty-six reporting units, and $0.2 million related to an equity investment that was written down to its estimated fair value.units. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics, or adverse changes in the development or the conditions of the areas surrounding the theatre. See Notes 101, 8 and 119 to our consolidated financial statements.
(Gain) Loss on Sale of Assets and Other.We recorded a loss on sale of assets and other of $8.8$15.7 million during 20112014 compared to a gain on sale of assets and other of $0.4$3.9 million during 2010.2013. The loss recorded during 2011 included a loss of $2.3 million related to a settlement for a previously terminated interest rate swap
agreement, a loss of $1.0 million relatedthe 2014 period was primarily due to the saleretirement of digital projection systems to DCIPcertain theatre equipment that was replaced during the period, lease termination charges recorded for theatre closures and the write-offa charge for termination of theatre properties and equipment primarily as a result of theatre remodels.vendor contract. The gain recorded during 20102013 included a gain of $7.0 million related to the sale of a theatre in Canada and a gain of $8.5$3.5 million related to the sale of our interest inMexico theatres and a profit sharing agreementgain of $2.3 million related to another previously sold propertythe sale of one theatre in Canada,Argentina, both of which were partially offset by a lossthe retirement of $5.8 million forequipment replaced during the write-off of an intangible asset associated with a vendor contract in Mexico that was terminated, a loss of $2.3 million for the write-off of intangible assets associated with our original IMAX license agreement that was terminated, a loss of $2.0 million that was recorded upon the contribution and sale of digital projection systems to DCIP and a loss of $0.9 million related to storm damage to a U.S. theatre. See Note 7 to our consolidated financial statements for discussion of DCIP.period.
Interest Expense.Interest costs incurred, including amortization of debt issue costs, were $123.1$113.7 million for 20112014 compared to $112.4$124.7 million for 2010.2013. The increasedecrease was primarily due to increases in interest rates on our variable rate debt related to the amendment and extension of our former senior secured credit facility in March 2010 and the refinancing in June 2011issuance of the unextended portion of our term loan debt outstanding with 7.375% senior subordinated notes due 2021.4.875% Senior Notes on May 24, 2013 that were used to pay off, on June 24, 2013, the previously issued 8.625% Senior Notes. See Note 1311 to our consolidated financial statements for further discussion of our long-term debt.
Loss on Early Retirement of Debt. We recorded a loss on early retirement of debt of $4.9approximately $72.3 million during 2011 related to the prepayment of approximately $157.2 million2013 as a result of the unextended portionredemption of our term loan debt.Cinemark USA, Inc.’s 8.625% Senior Notes on June 24, 2013. The loss on early retirement of debt included approximately $56.6 million for a make-whole premium paid, the write-off of $2.2approximately $8.0 million in unamortized bond discount, the write-off of $7.6 million in unamortized debt issue costs related to the portion of the term loan debt that was prepaid and the reclassificationpayment of $2.7$0.1 million from accumulatedof other comprehensive loss to earnings as a result of our determination that quarterly interest payments hedged by certain of our interest rate swap agreements are no longer probable to occur.fees. See Note 1311 to our consolidated financial statements.statements for further discussion of our long-term debt.
Distributions from NCM.We recorded distributions received from NCM of $24.2$18.5 million during 20112014 and $23.4$20.7 million during 2010,2013, which were in excess of the carrying value of our Tranche 1 Investment. See Note 6 to our consolidated financial statements.
Loss on Marketable Securities — RealD.We recorded a loss on our investment in RealD of $12.6 million due to an other-than-temporary impairment of our investment. The loss recorded represented the cumulative net unrealized holding losses we had previously recorded in accumulated other comprehensive loss. These cumulative net unrealized holding losses were recognized as a loss during 2011 due to the length of time and extent to which RealD’s stock price had been below our basis in the stock. See Note 8 to our consolidated financial statements.
Equity in Income (Loss) of Affiliates.We recorded equity in income of affiliates of $5.7$22.7 million during 2011 compared to a loss of $3.42014 and $22.7 million during 2010. The equity in income of affiliates recorded during 2011 primarily included approximately $5.4 million of income related to our equity investment in NCM (see Note2013. See Notes 6 to our consolidated financial statements) and approximately $0.5 million of income related to our equity investment in DCIP (see Note 7 to our consolidated financial statements). The equity in loss of affiliates recorded during 2010 primarily included a loss of approximately $7.9 million related tostatements for information about our equity investment in DCIP (see Note 7 to our consolidated financial statements), offset by income of approximately $4.5 million related to our equity investment in NCM (see Note 6 to our consolidated financial statements).investments.
Income Taxes.Income tax expense of $73.1$96.1 million was recorded for 20112014 compared to $57.8$113.3 million recorded for 2010.2013. The effective tax rate for 20112014 was 35.5%33.1%. The effective tax rate for 20102013 was 27.9%42.9%. See Note 2118 to our consolidated financial statements.
Liquidity and Capital Resources
Operating Activities
We primarily collect our revenues in cash, mainly through box office receipts and the sale of concessions. In addition, a majoritynearly all of our theatres provide the patron a choice of using a credit card, debit card or debitadvanced-sale type certificates such as a gift card, in place of cash. Because our revenues are received in cash prior to the payment of related expenses, we have an operating “float” and historically have not required traditional working capital financing. Cash provided by operating activities amounted to $264.8$309.7 million, $391.2$454.6 million, and $395.2$455.9 million for the years ended December 31, 2010, 20112013, 2014 and 2012,2015, respectively. Cash provided by operating activities for the year ended December 31, 2010 iswas lower in 2013 primarily due to a higher film rental liability at December 31, 2009 attributablethe make-whole premium of $56.6 million paid to redeem the significant domestic box office performance during the latter part of December 2009, whenAvatar8.625% Senior Notes, which was released.included in net income.
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 amended senior secured credit facility. Cash used for investing activities amounted to $136.1$364.7 million, $247.1$253.3 million, and $234.3$328.1 million for the years ended December 31, 2010, 20112013, 2014 and 2012,2015, respectively. Cash used for investing activities for the year ended December 31, 20112013 included the acquisition of ten theatres in Argentinathe U.S. for approximately $67.0$259.2 million (see Note 5 toand proceeds of approximately $126.2 million from the consolidated financial statements). Cashsale of our theatres in Mexico. The increase in cash used for investing activities for the year ended December 31, 2012 included the acquisition of one theatre in the U.S. for $14.1 million and anduring 2015 is primarily due to increased level of capital expenditures.
CapitalCash capital expenditures for the years ended December 31, 2010, 20112013, 2014 and 20122015 were as follows (in millions):
Period | New Theatres | Existing Theatres | Total | |||||||||
Year Ended December 31, 2010 | $ | 54.5 | $ | 101.6 | $ | 156.1 | ||||||
Year Ended December 31, 2011 | $ | 73.5 | $ | 111.3 | $ | 184.8 | ||||||
Year Ended December 31, 2012 | $ | 104.9 | $ | 115.8 | $ | 220.7 |
Period | New Theatres | Existing Theatres (a) | Total | |||||||||
Year Ended December 31, 2013 | $ | 134.7 | $ | 125.0 | $ | 259.7 | ||||||
Year Ended December 31, 2014 | $ | 104.7 | $ | 140.0 | $ | 244.7 | ||||||
Year Ended December 31, 2015 | $ | 132.4 | $ | 199.3 | $ | 331.7 |
During November 2012, we entered into an asset purchase agreement with Rave Real Property Holdco, LLC and certain of its subsidiaries, Rave Cinemas, LLC and RC Processing, LLC (collectively “Rave”), pursuant to which we will acquire 32 theatres with 483 screens located in 12 states. The estimated purchase price is approximately $240.0 million. The purchase price, the amount of which is subject to certain closing date adjustments, will consist of cash consideration and the assumption of certain liabilities. The transaction is expected to close during the first quarter of 2013, subject to the satisfaction of customary closing conditions for transactions of this type, including Department of Justice or Federal Trade Commission antitrust approval. We plan to use existing cash to fund the Rave acquisition.
(a) | The amount for the year ended December 31, 2015 includes approximately $26.3 million for the purchase of our corporate headquarters building in Plano, TX. |
We continue to invest in ourOur U.S. theatre circuit.circuit consisted of 4,518 screens as of December 31, 2015. We built fournine new theatres and 59 screens, acquired one theatre with 1699 screens and closed fourseven theatres with 3780 screens during the year ended December 31, 2012, bringing our total domestic screen count to 3,916.2015. At December 31, 2012,2015, we had signed commitments to open nineseven new theatres and 11170 screens in domestic markets during 20132016 and open five new theatres with 6759 screens subsequent to 2013.2016. We estimate the remaining capital expenditures for the development of these 178129 domestic screens will be approximately $123$73 million.
Our international theatre circuit consisted of 1,278 screens as of December 31, 2015. We built 13 new theatres and 83 screens, acquired three theatres with 19 screens and closed one screen during the year ended December 31, 2015. At December 31, 2015, we had signed commitments to open six new theatres and 45 screens in international markets during 2016 and open two theatres and 17 screens subsequent to 2016. We estimate the remaining capital expenditures for the development of these 62 international screens will be approximately $39 million.
Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.
We also continue to invest in our international theatre circuit. We built eight new theatres and 54 screens and closed 4 screens during the year ended December 31, 2012, bringing our total international screen count to 1,324. At December 31, 2012, we had signed commitments to open 13 new theatres with 88 screens in international markets during 2013 and open three new theatres with 21 screens subsequent to 2013. We estimate
the remaining capital expenditures for the development of these 109 international screens will be approximately $89 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.
We plan to fund capital expenditures for our continued development with cash flow from operations, borrowings under our amended senior secured credit facility, and proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.
Financing Activities
Cash provided by (used for)used for financing activities was $(106.7)$76.2 million, $(78.4)$146.8 million, and $63.4$151.1 million during the years ended December 31, 2010, 20112013, 2014 and 2012,2015, respectively. See Note 4 to the consolidated financial statements for a summary of dividends declared and paid during the years ended December 31, 2010, 20112013, 2014 and 2012.2015. Cash provided byused for financing activities for the year ended December 31, 2012 includes2013 included proceeds of $700.0 million from the amended senior secured credit facility and proceeds of $400.0 million from the issuance of our 5.125% senior notes due 2022,Cinemark USA, Inc.’s 4.875% Senior Notes, partially offset by the useredemption of a portion of these proceeds to pay off the remaining $899.0 million term loan outstanding under the former senior secured credit facility.Cinemark USA, Inc.’s 8.625% Senior Notes. See below for further information regarding these transactions.
We, at the discretion of the board of directors and subject to applicable law, anticipate paying regular quarterly 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, 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.
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 December 31, 20112014 and 20122015 (in millions):
December 31, 2011 | December 31, 2012 | |||||||
Cinemark USA, Inc. term loan | $ | 905.9 | $ | 700.0 | ||||
Cinemark USA, Inc. 8.625% senior notes due 2019(1) | 460.5 | 461.5 | ||||||
Cinemark USA, Inc. 5.125% senior notes due 2022 | — | 400.0 | ||||||
Cinemark USA, Inc. 7.375% senior subordinated notes due 2021 | 200.0 | 200.0 | ||||||
Hoyts General Cinema (Argentina) bank loan due 2013(2) | 5.8 | 2.5 | ||||||
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Total long-term debt | $ | 1,572.2 | $ | 1,764.0 | ||||
Less current portion | 12.1 | 9.5 | ||||||
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Long-term debt, less current portion | $ | 1,560.1 | $ | 1,754.5 | ||||
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2014 | 2015 | |||||||
Cinemark USA, Inc. term loan | $ | 686.0 | $ | 679.0 | ||||
Cinemark USA, Inc. 7.375% senior subordinated notes due 2021 | 200.0 | 200.0 | ||||||
Cinemark USA, Inc. 5.125% senior notes due 2022 | 400.0 | 400.0 | ||||||
Cinemark USA, Inc. 4.875% senior notes due 2023 | 530.0 | 530.0 | ||||||
Other | 7.0 | 5.6 | ||||||
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Total long-term debt | $ | 1,823.0 | $ | 1,814.6 | ||||
Less current portion | 8.4 | 8.4 | ||||||
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Subtotal long-term debt, less current portion | $ | 1,814.6 | $ | 1,806.2 | ||||
Less: Debt issuance costs | 31.4 | 33.3 | ||||||
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Long-term debt, less current portion, net of debt issuance costs | $ | 1,783.2 | $ | 1,772.9 | ||||
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As of December 31, 2012,2015, we had $100.0 million in available borrowing capacity on our revolving credit line.
As of December 31, 2012,2015, our long-term debt obligations, scheduled interest payments on long-term debt, future minimum lease obligations under non-cancelable operating and capital leases, scheduled interest payments under capital leases and other obligations for each period indicated are summarized as follows:
Payments Due by Period (in millions) | Payments Due by Period (in millions) | |||||||||||||||||||||||||||||||||||||||
Contractual Obligations | Total | Less Than One Year | 1 - 3 Years | 3 - 5 Years | After 5 Years | Total | Less Than One Year | 1 - 3 Years | 3 - 5 Years | After 5 Years | ||||||||||||||||||||||||||||||
Long-term debt(1) | $ | 1,772.5 | 9.5 | 14.0 | 14.0 | 1,735.0 | $ | 1,814.6 | $ | 8.4 | $ | 16.8 | $ | 15.4 | $ | 1,774.0 | ||||||||||||||||||||||||
Scheduled interest payments on long-term debt (2) | $ | 784.6 | 104.0 | 206.7 | 205.6 | 268.3 | $ | 557.8 | 84.3 | 167.7 | 166.5 | 139.3 | ||||||||||||||||||||||||||||
Operating lease obligations | $ | 1,889.2 | 225.8 | 449.7 | 406.5 | 807.2 | $ | 1,699.9 | 248.5 | 446.7 | 343.2 | 661.5 | ||||||||||||||||||||||||||||
Capital lease obligations | $ | 150.2 | 11.1 | 25.7 | 29.4 | 84.0 | $ | 227.7 | 18.8 | 40.0 | 45.8 | 123.1 | ||||||||||||||||||||||||||||
Scheduled interest payments on capital leases | $ | 85.1 | 14.2 | 24.8 | 19.2 | 26.9 | $ | 96.1 | 16.4 | 27.7 | 20.0 | 32.0 | ||||||||||||||||||||||||||||
Employment agreements | $ | 13.5 | 4.5 | 9.0 | — | — | ||||||||||||||||||||||||||||||||||
Purchase commitments (3) | $ | 227.2 | 155.5 | 70.5 | 0.5 | 0.7 | ||||||||||||||||||||||||||||||||||
Purchase and other commitments (3) | $ | 157.5 | 117.5 | 37.6 | 2.2 | 0.2 | ||||||||||||||||||||||||||||||||||
Current liability for uncertain tax positions (4) | $ | 14.9 | 14.9 | — | — | — | $ | 9.2 | 9.2 | — | — | — | ||||||||||||||||||||||||||||
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Total obligations | $ | 4,937.2 | $ | 539.5 | $ | 800.4 | $ | 675.2 | $ | 2,922.1 | $ | 4,562.8 | $ | 503.1 | $ | 736.5 | $ | 593.1 | $ | 2,730.1 | ||||||||||||||||||||
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(1) |
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(2) | Amounts include scheduled interest payments on fixed rate and variable rate debt agreements. Estimates for the variable rate interest payments were based on interest rates in effect on December 31, |
(3) | Includes estimated capital expenditures associated with the construction of new theatres to which we were committed as of December 31, |
(4) | The contractual obligations table excludes the long-term portion of our liability for uncertain tax positions of |
Amended Off-Balance Sheet Arrangements
Other than the operating leases and purchase and other commitments disclosed in the tables above, we do not have any off-balance sheet arrangements.
Senior Secured Credit Facility
On December 18, 2012, Cinemark USA, Inc. amended and restated itshas a senior secured credit facility to includethat includes a seven year $700.0 million term loan and a five year $100.0 million revolving credit line, referred to herein asor the Amended Senior Secured Credit Facility. The proceeds fromOn May 8, 2015, Cinemark USA, Inc. amended the Amended Senior Secured Credit Facility combined with a portionto extend the maturity of the proceeds from the 5.125% Senior Notes discussed below, were used to refinance Cinemark USA, Inc.’s Former Senior Secured Credit Facility, also discussed below. We incurred debt issue costs of approximately $12.0 million during the year ended December 31, 2012 related to the amendment and restatement. The term loan under the Amended Senior Secured Credit Facility matures infrom December 2019. The revolving credit line, which was undrawn at closing and remained undrawn as of December 31, 2012, matures in December 2017.2019 to May 2022. Quarterly principal payments in the amount of $1.75 million are due on the term loan beginningthrough March 2013 through September 201931, 2022, with the remaining principal of $652.8$635.3 million due on May 8, 2022. The maturity date for the revolving credit line, which is December 18, 2019.2017, did not change.
Interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin of 2.0% per annum, or (B) a “eurodollar rate” plus a margin of 3.0% per annum. Interest on the revolving credit line accrues, at Cinemark USA, Inc.’s option, at: (A) a base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5 and (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 1.00% to 1.75% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 2.00% to 2.75% 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 Amended Senior Secured Credit Facility 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 Amended Senior Secured Credit Facility 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 Cinemark Holdings, Inc.’s 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, and 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 determined in accordance with the Amended Senior Secured Credit Facility.
The dividend restriction contained in the Amended Senior Secured Credit Facility 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 Amended Senior
Secured Credit Facility; 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 Amended Senior Secured Credit Facility, and (c) certain other defined amounts. As of December 31, 2012,2015, Cinemark USA, Inc. could have distributed up to approximately $1,409.0$1,905.1 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the Amended Senior Secured Credit Facility, subject to its available cash and other borrowing restrictions outlined in the agreement.
At December 31, 2012,2015, there was $700.0$679.0 million outstanding under the term loan and no borrowings outstanding under the revolving credit line. Cinemark USA, Inc. had $100.0 million in available borrowing capacity on the revolving credit line. The average interest rate on outstanding term loan borrowings under the Amended Senior Secured Credit Facility at December 31, 20122015 was approximately 4.0%3.6% per annum.
Cinemark USA, Inc. 4.875% Senior Notes
On May 24, 2013, Cinemark USA, Inc. issued $530.0 million aggregate principal amount of 4.875% senior notes due 2023, at par value, or the 4.875% Senior Notes. Proceeds, after payment of fees, were used to finance a redemption of the 8.625% Senior Notes due 2019, discussed below. Interest on the 4.875% Senior Notes is payable on June 1 and December 1 of each year, beginning December 1, 2013. The 4.875% Senior Notes mature on June 1, 2023.
The 4.875% 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 4.875% 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 unsecured debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior subordinated debt. The 4.875% 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 assets securing such debt, including all borrowings under Cinemark USA, Inc.’s senior secured credit facility. The 4.875% 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 4.875% Senior Notes.
The indenture to the 4.875% 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. As of December 31, 2015, Cinemark USA, Inc. could have distributed up to approximately $2,079.7 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 4.875% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control, as defined in the indenture governing the 4.875% Senior Notes, Cinemark USA, Inc. would be required to make an offer to repurchase the 4.875% Senior 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 indenture governing the 4.875% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies 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 December 31, 2015 was approximately 7.7 to 1.
Prior to June 1, 2018, Cinemark USA, Inc. may redeem all or any part of the 4.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 4.875% Senior Notes to the date of redemption. After June 1, 2018, Cinemark USA, Inc. may redeem the 4.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to June 1, 2016, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal amount of the 4.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
Cinemark USA, Inc. 5.125% Senior Notes
On December 18, 2012, Cinemark USA, Inc. issued $400.0 million aggregate principal amount of 5.125% senior notes due 2022, at par value, referred to herein asor the 5.125% Senior Notes. A portion of the proceeds were used to refinance a portion of the Former Senior Secured Credit Facility as discussed aboveformer senior secured credit facility and a portion of the proceeds are expected to be used to fund the purchase price for the Rave Acquisition (see Note 5) and for general corporate purposes.5 to the consolidated financial statements). Interest on the 5.125% Senior Notes is payable on June 15 and December 15 of each year, beginning June 15, 2013. The senior notes5.125% Senior Notes mature on December 15, 2022. We incurred debt issue costs of approximately $6.4 million in connection with the issuance during the year ended December 31, 2012.
The 5.125% 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 5.125% 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 unsecured debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantor’s existing and future subordinated debt. The 5.125% 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 assets securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior
secured credit facility. The 5.125% 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 senior notes.5.125% Senior Notes.
The indenture to the 5.125% 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. As of December 31, 2012,2015, Cinemark USA, Inc. could have distributed up to approximately $1,118.5$2,084.0 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 5.125% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control, of Cinemark Holdings, Inc. or Cinemark USA, Inc.,as defined in the indenture governing the 5.125% Senior Notes, Cinemark USA, Inc. would be required to make an offer to repurchase the 5.125% Senior 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 indenture governing the 5.125% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies 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 December 31, 20122015 was 5.6approximately 7.7 to 1.
Prior to December 15, 2017, Cinemark USA, Inc. may redeem all or any part of the 5.125% Senior Notes at its option at 100% of the principal amount plus a make-whole premium. After December 15, 2017, Cinemark USA, Inc. may redeem the 5.125% Senior Notes in whole or in part at redemption prices described in the 5.125% Senior Notes. In addition, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal amount of the 5.125% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the senior notes.
Under a registration rights agreement entered into in conjunction with the issuance of the 5.125% Senior Notes, the Company and its guarantor subsidiaries are obligated to use its commercially reasonable best efforts to file a registration statement with the Securities and Exchange Commission, or the Commission, on or prior to 120 days from the issuance date, pursuant to which the Company will offer to exchange the 5.125% Senior Notes for substantially identical notes registered under the Securities Act of 1933, as amended, that will not contain terms restricting the transfer thereof or providing for registration rights. The Company will use its commercially reasonable best efforts to have the registration statement declared effective by the Commission on or prior to 210 days from the issuance date, or the Effective Date. The Company will use its commercially reasonable best efforts to issue on the earliest practicable date after the Effective Date, but not later than 30 days thereafter, exchange registered 5.125% Senior Notes in exchange for all 5.125% Senior Notes tendered prior thereto in the exchange offer. If the Company is obligated to file a shelf registration statement, the Company will use its commercially reasonable best efforts to file the shelf registration statement with the Commission on or prior to 30 days after such filing obligation arises (and in any event within 240 days after the closing of the 5.125% Senior Notes offering) and to cause the shelf registration statement to be declared effective by the Commission on or prior to 210 days after such obligation arises. The Company will use its commercially reasonable best efforts to keep the shelf registration statement effective for a period of one year after the closing of the 5.125% Senior Notes offering, subject to certain exceptions.
If (a) the Company fails to file the registration statement on or before the date specified, (b) if such registration statement is not declared effective by the Commission on or prior to the date specified for such effectiveness, (c) if the Company fails to consummate the exchange offer within 30 business days of the Effective Date with respect to the exchange offer registration statement or (d) if the date the shelf registration statement is declared effective by the Commission or the exchange offer registration statement thereafter ceases to be effective or usable during the periods specified in the registration rights agreement without being succeeded within two business days by a post-effective amendment to such registration statement that cures such failure and that is itself immediately declared effective (each such event a “Registration Default”), the Company will pay
additional interest to each holder of the 5.125% Senior Notes. Such additional interest, with respect to the first 90-day period immediately following the occurrence of any such Registration Default, shall equal an increase in the annual interest rate on the notes by 0.5% per annum.
The amount of the additional interest will increase by an additional 0.5% per annum with respect to each subsequent 90-day period relating to such Registration Default until all Registration Defaults have been cured, up to a maximum amount of additional interest for all Registration Defaults of 1.0% per annum. The 5.125% Senior Notes will not accrue additional interest from and after the second anniversary of the closing of the 5.125% Senior Notes offering even if the Company is not in compliance with its obligations under the registration rights agreement. The receipt of additional interest shall be the sole remedy available to holders of 5.125% Senior Notes as a result of one or more Registration Defaults. Following the cure of all Registration Defaults, the accrual of additional interest will cease.
Cinemark USA, Inc. 7.375% Senior Subordinated Notes
On June 3, 2011, Cinemark USA, Inc. issued $200.0 million aggregate principal amount of 7.375% senior subordinated notes due 2021, at par value, referred to herein asor the Senior Subordinated Notes. The proceeds, after payment of fees, were primarily used to fund the prepayment of the remaining $157.2 million of Cinemark USA, Inc.’s unextended portion of term loan debt under its former senior secured credit facility. Interest on the Senior Subordinated Notes is payable on June 15 and December 15 of each year. The Senior Subordinated Notes mature on June 15, 2021. We incurred debt issue costs of approximately $4.5 million during the year ended December 31, 2011 in connection with the issuance.
The Senior Subordinated Notes are fully and unconditionally guaranteed on a joint and several senior subordinated 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 other debt. The Senior Subordinated Notes and the guarantees are senior subordinated unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and a guarantor’s future senior subordinated indebtedness; are subordinate in right of payment to all of Cinemark USA, Inc.’s and a guarantor’s existing and future senior indebtedness, whether secured or unsecured, including Cinemark USA, Inc.’s obligations under its Amended Senior Secured Credit Facility, its 8.625%5.125% Senior Notes and its 5.125%4.875% Senior Notes; and structurally subordinate to all existing and future indebtedness and other liabilities of Cinemark USA, Inc.’s non-guarantor subsidiaries.
The indenture to the Senior Subordinated 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. As of December 31, 2012,2015, Cinemark USA, Inc. could have distributed up to approximately $1,107.4$2,072.8 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 7.375% Senior Subordinated Notes, subject to its available cash and other borrowing restrictions outlined in the indenture.indenture governing the Senior Subordinated Notes. Upon a change of control, as defined in the indenture, Cinemark USA, Inc. would be required to make an offer to repurchase the senior subordinated notesSenior Subordinated 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 indenture governing the Senior Subordinated Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies 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 December 31, 20122015 was 5.5approximately 7.7 to 1.
Prior to June 15, 2016, Cinemark USA, Inc. may redeem all or any part of the Senior Subordinated Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the senior subordinated notes to the date of redemption. After June 15, 2016, Cinemark USA, Inc. may redeem the
Senior Subordinated Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to June 15, 2014, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal amount of the Senior Subordinated Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
Cinemark USA, Inc. and its guarantor subsidiaries filed a registration statement with the Securities and Exchange Commission (the “Commission”) on July 27, 2011 pursuant to which Cinemark USA, Inc. offered to exchange the Senior Subordinated Notes for substantially similar registered Senior Subordinated Notes. The registration statement became effective August 4, 2011, and approximately $199.5 million of the notes were exchanged on September 7, 2011. The registered Senior Subordinated Notes, issued in the exchange, do not have transfer restrictions. Approximately $0.5 million of the notes were not exchanged as of December 31, 2012.
8.625% Senior Notes
On June 29, 2009, Cinemark USA, Inc. issued $470.0 million aggregate principal amount of 8.625% senior notes due 2019, referred to herein asor the 8.625% Senior Notes, with an original issue discount of $11.5 million, resulting in proceeds of approximately $458.5 million. The proceeds were primarily used to fund the repurchase of the then remaining outstanding $419.4 million aggregate principal amount at maturity of Cinemark, Inc.’s 9.75% senior discount notes. Interest on the 8.625% Senior Notes is payable onOn June 15 and December 15 of each year. The 8.625% Senior Notes mature on June 15, 2019. The original issue discount is being amortized on the effective interest method over the term of the 8.625% Senior Notes. As of December 31, 2012, the carrying value of the 8.625% Senior Notes was $461.5 million.
24, 2013, Cinemark USA, Inc. filed a registration statement with the Securities and Exchange Commission on September 24, 2009 pursuant to which Cinemark USA, Inc. offered to exchange the 8.625% Senior Notes for substantially similar registered 8.625% Senior Notes. The registration statement became effective and the notes were exchanged on December 17, 2009. The registered 8.625% Senior Notes, issued in the exchange, do not have transfer restrictions.
The 8.625% 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 8.625% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s andredeemed its guarantor’s existing and future senior unsecured debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantor’s existing and future subordinated debt. The 8.625% 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 assets securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 8.625% 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 8.625% Senior Notes.
The indenture to the 8.625% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) consummate specified asset sales, (2) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (3) incur additional indebtedness and issue preferred stock, (4) enter into transactions with affiliates, (5) enter new lines of business, (6) merge or consolidate with, or sell all or substantially all of its assets to, another person and (7) create liens. As of December 31, 2012, Cinemark USA, Inc. could have distributed up to approximately $1,060.2 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 8.625% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control of Cinemark Holdings, Inc. or Cinemark USA, Inc., Cinemark USA, Inc. would be required to make an offer to repurchase the 8.625% Senior Notes at a price equal to 101%112.035% of the aggregate principal amount, outstanding plus accrued and unpaid
interest, if any, through the dateinclusive of repurchase. Certain asset dispositions are considered triggering events that may require Cinemark USA, Inc. to use the proceeds from those asset dispositions to make an offer to purchase the notes at 100% of their principal amount,a make-whole premium, plus accrued and unpaid interest, if any, to the date of repurchase if such proceeds are not otherwise used within 365 days as described in the indenture. The indenture governing the 8.625% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies 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 December 31, 2012 was 5.5 to 1.
Prior to June 15, 2014, Cinemark USA, Inc. may redeem all or any part of the 8.625% Senior Notes at its option at 100% of the principal amount plus a make-whole premium. After June 15, 2014, Cinemark USA, Inc. may redeem the 8.625% Senior Notes in whole or in part at redemption prices described in the senior notes. In addition, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal amount of the 8.625% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the 8.625% Senior Notes.
Former Senior Secured Credit Facility
On October 5, 2006, in connection with the Century Acquisition, Cinemark USA, Inc. entered into its former senior secured credit facility that provided for a seven year $1,120.0 million term loan and a six year $150.0 million revolving credit line. On March 2, 2010, the Company completed an amendment and extension to this former senior secured credit facility to primarily extend the maturities of the facility and make certain other modifications. Approximately $924.4 million of the Company’s then remaining outstanding $1,083.6 million term loan debt was extended from an original maturity date of October 2013 to a maturity date of April 2016. The then remaining term loan debt of $159.2 million that was not extended continued to have a maturity date of October 2013. On June 3, 2011, Cinemark USA, Inc. prepaid the remaining $157.2 million of its unextended term loan debt utilizing a portion of the proceeds from the issuance of the Cinemark USA, Inc. 7.375% senior subordinated notes4.875% Senior Notes discussed above. There were no prepayment penalties incurred upon the prepayment of the term loan debt. Subsequent to the prepayment, the quarterly payments due on the term loan were approximately $2.3 million per quarter through March 2016 with the remaining principal amount of approximately $866.6 million due April 30, 2016. The prepayment did not impact the interest rate applicable to the remaining portion of the term loan debt, which accrued interest at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a 2.25% margin per annum, or (B) a “eurodollar rate” plus a 3.25% margin per annum.
The prepayment did not impact the interest rate applicable to or the maturity of Cinemark USA, Inc.’s revolving credit line. The maturity date of $73.5 million of Cinemark USA, Inc.’s $150.0 million revolving credit line had been extended from October 2012 to March 2015. The maturity date of the remaining $76.5 million of Cinemark USA, Inc.’s revolving credit line did not change and remained October 2012. The interest rate on the original revolving credit line accrued interest, at Cinemark USA, Inc.’s option, at: (A) a base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5 and (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 0.50% to 1.00% per annum, or (B) a “eurodollar rate” plus a margin that ranged from 1.50% to 2.00% per annum. The interest rate on the extended revolving credit line accrued interest, at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 1.75% to 2.0% per annum, or (B) a “eurodollar rate” plus a margin that ranged from 2.75% to 3.0% per annum. The margin of the revolving credit line was determined by the consolidated net senior secured leverage ratio as defined in the Former Senior Secured Credit Facility.
As a result of the prepayment made in June 2011, we wrote-off approximately $2.2 million in unamortized debt issue costs related to the unextended portion of term loan debt that was prepaid. In addition, we determined that a portion of the quarterly interest payments hedged by two of our then current interest rate swap agreements under cash flow hedges and the quarterly interest payments related to our previously terminated interest rate swap agreement were probable not to occur and therefore reclassified approximately $2.7 million of our accumulated other comprehensive loss related to these cash flow hedges to earnings, as a component of loss on early retirement of debt. These write-offs, combined with related fees, are reflected in loss on early retirement of debt for the year ended December 31, 2011.
On December 18, 2012, the remaining outstanding term loan of $899.0 million was paid in full with proceeds from the Amended Senior Secured Credit Facility combined with a portion of the proceeds from the 5.125% Senior Notes issuance, both of which are discussed above.
Covenant Compliance
As of December 31, 2012,2015, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.
Ratings
We are rated by nationally recognized rating agencies. The rating scales and methodologies used to derive individual ratings may vary from agency to agency. Credit ratings are issued by credit rating agencies based on evaluations of our ability to pay back our outstanding debt and the likelihood that we would default on that debt prior to its maturity. The credit ratings issued by the credit rating agencies represent the credit rating agency’s evaluation of both qualitative and quantitative information for our company. The credit ratings that are issued are based on the credit rating agency’s judgment and experience in determining what information should be considered in giving a rating to a particular company. Ratings are always subject to change and there can be no assurance that our current ratings will continue for any given period of time. A downgrade of our debt ratings, depending on the extent, could increase the cost to borrow funds. Below are our latestcurrent credit ratings, which were published by the respective agency during December 2012.ratings.
Category | Moody’s | Standard and Poor’s | ||
Cinemark USA, Inc. | Ba1 | |||
Cinemark USA, Inc. | B2 | |||
Cinemark USA, Inc. 5.125% Senior Notes | B2 | |||
Cinemark USA, Inc. 7.375% Senior Subordinated Notes | B3 |
With respect to the ratings issued by Moody’s as noted above, Moody’s defines these ratings as follows:
‘Ba1’ — Obligations rated Ba are judged to be speculative and are subject to substantial credit risk. The Prime-1 rating indicates the issuer has a superior ability to repay short-term debt.
‘B2’ — Obligations rated B are considered speculative and are subject to high credit risk. The Prime-2 portion of the rating indicates issuer has a strong ability to repay short-term debt.
‘B3’ — Obligations rated B are considered speculative and are subject to high credit risk. The Prime-3 portion of the rating indicates issuer has an acceptable ability to repay short-term debt.
With respect to the ratings issued by Standard and Poor’s as noted above, Standard and Poor’s defines these ratings as follows:
‘B’BBB — MoreAn obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB — An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, andor economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B — An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitments.
‘BB+’ — Considered highest speculative grade by market participants.
‘BB-’ — Less vulnerable incommitment on the near-term but faces major ongoing uncertainties to adverseobligation. Adverse business, financial, andor economic conditions.conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.
New Accounting Pronouncements
In July 2012,January 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-01,Income Statement — Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, (“ASU 2015-01”). ASU 2015-01 eliminates the concept of an extraordinary item from GAAP. With this update, there is no longer a need to segregate extraordinary items from the results of ordinary operations, separately present an extraordinary item on its income statement, net of tax, after income from continuing operations or disclose income taxes and earnings per share data applicable to an extraordinary item. However, presentation and disclosure requirements for items that are unusual in nature and occur infrequently still apply. ASU 2015-01 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. We have elected to early adopt ASU 2015-01, which had no impact on our consolidated financial statements.
In February 2015, the FASB issued Accounting Standards Update 2012-02,2015-02, Testing Indefinite-Lived Intangible Assets for Impairment, an amendmentConsolidation (Topic 810): Amendments to FASB ASC Topic 350, Intangibles — Goodwill and Otherthe Consolidation Analysis, (“ASU 2012-02”2015-02”). The update provides an entity with the option first to assess qualitative factors in determining whether it is more likely than notASU 2015-02 affects reporting entities that the indefinite-lived intangible asset is impaired. After assessing the qualitative factors, if an entity determines that it is not more likely than not that the indefinite-lived intangible asset is impaired, the entity is notare required to take further action. If an entity concludes otherwise, then it isevaluate whether they should consolidate certain legal entities. Specifically, ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with certain VIEs. ASU 2015-02 also provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to determine the fair valuecomply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the indefinite-lived intangible asset and perform the quantitative impairment test.Investment Company Act of 1940 for registered money market funds. ASU 2012-022015-02 is effective for annual and interim impairment tests performed for fiscal years beginning after SeptemberDecember 15, 2012.2015. Early adoption wasis permitted. We are currently evaluating the impact of ASU 2015-02 on our consolidated financial statements.
In April 2015, the FASB issued Accounting Standards Update 2015-03Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The update changes the presentation of debt issuance costs for term debt in the balance sheet by requiring the debt issuance costs be presented as a direct deduction from the related debt liability, rather than recorded as an asset. This guidance is effective for periods beginning after December 15, 2015, and interim periods within those annual periods applied retrospectively. Early adoption is permitted. We adopted this guidance in the fourth quarter of fiscal year 2015. Debt issuance costs associated with long-term debt, net of accumulated amortization, were $31.4 million and $33.2 million as of December 31, 2014 and 2015, respectively. The balance sheet as of December 31, 2014 has been recast to reflect the reclassification of debt issuances costs, net of accumulated amortization, from deferred charges and other assets — net to a reduction of long-term debt, less current portion.
In April 2015, the FASB issued Accounting Standards Update 2015-05,Intangibles — Goodwill and Other — Internal Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in Cloud Computing Arrangement, (“ASU 2015-05”). ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer’s accounting for service contracts. In addition, the guidance in this Update supersedes paragraph 350-40-25-16. Consequently, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. ASU 2015-05 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. We have elected to early adopt ASU 2015-05, which had no impact on our consolidated financial statements.
In July 2015, the FASB issued Accounting Standards Update 2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory, (“ASU 2015-11”). ASU 2015-11 affects reporting entities that measure inventory using first-in, first-out (FIFO) or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. We do not expect ASU 2015-11 to have an impact on our consolidated financial statements.
In August 2015, the FASB issued Accounting Standards Update 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, (“ASU 2015-14”). ASU 2015-14 defers the effective date of Accounting Standards Update 2014-09: Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09). The guidance in ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are currently evaluating the impact of ASU 2012-022014-09, as amended by ASU 2015-14, on our consolidated financial statements.
In August 2015, the FASB issued Accounting Standards Update 2015-15,Interest — Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, (“ASU 2015-15”). ASU 2015-15 adds clarification to the guidance presented in ASU 2015-03, as that guidance did not address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. We adopted this ASU along with the original guidance in ASU 2015-03 discussed above. The guidance in this ASU did not have an impact on our consolidated financial statements.
In September 2015, the FASB issued Accounting Standards Update 2015-16,Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, (“ASU 2015-16”). ASU 2015-16 was issued to simplify the accounting for adjustments made to provisional amounts recognized in a business combination and eliminates the requirement to retrospectively account for such adjustments. ASU 2015-16 requires an entity to present separately on the face of the income statement, or disclose in the notes, amounts recorded in current period earnings that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. We do not expect ASU 2015-16 to have a significant impact on our consolidated financial statements.
In November 2015, the FASB issued Accounting Standards Update 2015-17,Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, (“ASU 2015-17”). ASU 2015-17 was issued to simplify the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. However, the requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments in ASU 2015-17 may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We adopted this guidance in the fourth quarter of fiscal year 2015 and elected the prospective approach. Therefore, deferred taxes as of December 31, 2015 are recorded as long-term deferred tax assets and long-term deferred tax liabilities on the balance sheet. Balances as of December 31, 2014 have not been recast.
In January 2016, the FASB issued Accounting Standards Update 2016-01,Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, (“ASU 2016-01”). ASU 2016-01 address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The guidance in ASU 2016-01 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted for financial statements of fiscal years that have not been previously issued. We are currently evaluating the impact of ASU 2016-01 on our consolidated financial statements.
Seasonality
Our revenues have historically been seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, the most successful motion pictures have been released during the summer, extending from May to mid-August,July, and during the holiday season, extending from early November through year-end. The unexpected emergence of a hit film during other periods can alter this seasonality trend. The timing and quality of such film releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or for the same period in the following year.
Item 7A.Quantitative7A. Quantitative and Qualitative Disclosures About Market Risk
We have exposure to financial market risks, including changes in interest rates and foreign currency exchange rates.
Interest Rate Risk
We are currently party to variable rate debt facilities. An increase or decrease in interest rates would affect our interest expense relating to our variable rate debt facilities. At December 31, 2012,2015, there was an aggregate of approximately $250.0$579.0 million of variable rate debt outstanding under these facilities, which excludes $450.0$100.0 million of Cinemark USA, Inc.’s term loan debt that is hedged with the Company’s interest rate swap agreements asagreement discussed below. Based on the interest rates in effect on the variable rate debt outstanding at December 31, 2012,2015, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $2.5$5.8 million.
All of our currentOur interest rate swap agreements qualifyagreement qualifies for cash flow hedge accounting. The fair valuesvalue of the interest rate swaps areswap is recorded on our consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’swap’s gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings.
Below is a summary of our interest rate swap agreementsagreement as of December 31, 2012:2015:
Nominal Amount (in millions) | Effective Date | Pay | Receive Rate | Expiration Date | ||||
$175.0 | December 2010 | 1.3975% | 1-month LIBOR | September 2015 | ||||
$175.0 | December 2010 | 1.4000% | 1-month LIBOR | September 2015 | ||||
$100.0 | November 2011 | 1.7150% | 1-month LIBOR | April 2016 | ||||
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$450.0 |
Nominal Amount (in millions) Effective Date Pay Rate Receive Rate Expiration Date $ 100.0 November 2011 1.7150% 1-month LIBOR April 2016
The table below provides information about our fixed rate and variable rate long-term debt agreements as of December 31, 2012:2015:
Expected Maturity for the Twelve-Month Periods Ending December 31, (in millions) | Average Interest Rate | Expected Maturity for the Twelve-Month Periods Ending December 31, (in millions) | Average Interest Rate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | Total | Fair Value | 2016 | 2017 | 2018 | 2019 | 2020 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed rate | $ | 2.5 | $ | — | $ | — | $ | — | $ | — | $ | 1,520.0 | $ | 1,522.5 | $ | 1,601.2 | 6.3 | % | $ | 1.4 | $ | 1.4 | $ | 1.4 | $ | 1.4 | $ | — | $ | 1,230.0 | $ | 1,235.6 | $ | 1,229.5 | 5.3 | % | ||||||||||||||||||||||||||||||||||||
Variable rate | 7.0 | 7.0 | 7.0 | 7.0 | 7.0 | 215.0 | 250.0 | 250.0 | 3.2 | % | 7.0 | 7.0 | 7.0 | 7.0 | 7.0 | 544.0 | 579.0 | 576.8 | 3.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total debt | $ | 9.5 | $ | 7.0 | $ | 7.0 | $ | 7.0 | $ | 7.0 | $ | 1,735.0 | $ | 1,772.5 | $ | 1,851.2 | $ | 8.4 | $ | 8.4 | $ | 8.4 | $ | 8.4 | $ | 7.0 | $ | 1,774.0 | $ | 1,814.6 | $ | 1,806.3 | ||||||||||||||||||||||||||||||||||||||||
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Foreign Currency Exchange Rate Risk
We are also exposed to market risk arising from changes in foreign currency exchange rates as a result of our international operations. Generally, we export from the U.S. certain of the equipment and construction interior finish items and other operating supplies used by our international subsidiaries. A majority of the revenues and operating expenses of our international subsidiaries are transacted in the country’s local currency. Generally accepted accounting principles in the U.S., or U.S. GAAP requirerequires that our subsidiaries use the currency of the primary economic environment in which they operate as their functional currency. If our subsidiaries operate in a highly inflationary economy, U.S. GAAP requires that the U.S. dollar be used as the functional currency for the subsidiary. Currency fluctuations in the countries in which we operate result in us reporting exchange gains (losses) or foreign currency translation adjustments. Based upon our equity ownership in our international subsidiaries as of December 31, 2012,2015, holding everything else constant, a 10% immediate, simultaneous, unfavorable change in all of the foreign currency exchange rates to which we are exposed, would decrease the aggregate net book value of our investments in our international subsidiaries by approximately $51$30 million and would decrease the aggregate net income of our international subsidiaries for the years ended December 31, 2010, 20112013, 2014 and 20122015 by approximately $7 million, $8 million $9 million and $9$7 million, respectively.
Item 8.Financial8. Financial Statements and Supplementary Data
The financial statements and supplementary data are listed on the Index on page F-1 of this Form 10-K. Such financial statements and supplementary data are included herein beginning on page F-3.
Item 9.Changes9. Changes in and Disagreements Withwith Accountants on Accounting and Financial Disclosure
None.
Item 9A.Controls9A. Controls and Procedures
Evaluation of the Effectiveness of Disclosure Controls and Procedures
As of December 31, 2012,2015, under the supervision and with the participation of our principal executive officer and principal financial officer, we carried out an evaluation required by the Exchange Act 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 December 31, 2012,2015, 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 December 31, 2015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control framework and processes are designed to provide reasonable assurance to management and the board of directors regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements in accordance with the accounting principles generally accepted in the U.S. Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 20122015 based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, inInternal Control — Integrated—Integrated Framework (2013). As a result of this assessment, management concluded that, as of December 31, 2012,2015, our internal control over financial reporting was effective.
Certifications of our Chief Executive Officer and our Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Annual Report. This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
The Company’s independent registered public accounting firm, Deloitte & Touche LLP, with direct access to the Company’s board of directors through its Audit Committee, have audited the consolidated financial statements prepared by the Company. Their report on the consolidated financial statements is included in Part II, Item 8.8, Financial Statements and Supplementary Data. Deloitte & Touche LLP has issued an attestation report on
the Company’s internal control over financial reporting. Deloitte & Touche LLP’s report on the Company’s internal control over financial reporting is included herein.
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 December 31, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors or fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
Item 9B.Other9B. Other Information
None.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Cinemark Holdings, Inc.
Plano, Texas
We have audited the internal control over financial reporting of Cinemark Holdings, Inc. and subsidiaries (the “Company”) as of December 31, 2012,2015, based on criteria established inInternal Control — Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012,2015, based on the criteria established inInternal Control — Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 20122015 of the Company and our report dated February 28, 201324, 2016 expressed an unqualified opinion on those financial statements and financial statement schedule.
/s/Deloitte & Touche LLP
Dallas, Texas
February 28, 201324, 2016
Item 10.Directors,10. Directors, Executive Officers and Corporate Governance
Incorporated by reference to the Company’s proxy statement for its annual stockholders meeting (under the headings “Election of Directors”, “Section 16(a) Beneficial Ownership Reporting Compliance”, “Corporate Governance” and “Executive Officers”) to be held on May 23, 201326, 2016 and to be filed with the SEC within 120 days after December 31, 2012.2015.
Item 11.Executive11. Executive Compensation
Incorporated by reference to the Company’s proxy statement for its annual stockholders meeting (under the heading “Executive Compensation”) to be held on May 23, 201326, 2016 and to be filed with the SEC within 120 days after December 31, 2012.2015.
Item 12.Security12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Incorporated by reference to the Company’s proxy statement for its annual stockholders meeting (under the headings “Security Ownership of Certain Beneficial Owners and Management”) to be held on May 23, 201326, 2016 and to be filed with the SEC within 120 days after December 31, 2012.2015.
Item 13.Certain13. Certain Relationships and Related Transactions, and Director Independence
Incorporated by reference to the Company’s proxy statement for its annual stockholders meeting (under the heading “Certain Relationships and Related Party Transactions” and “Corporate Governance”) to be held on May 23, 201326, 2016 and to be filed with the SEC within 120 days after December 31, 2012.2015.
Item 14.Principal Accountant14. Principal Accounting Fees and Services
Incorporated by reference to the Company’s proxy statement for its annual stockholders meeting (under the heading “Board Committees — Audit Committee — Fees Paid to Independent Registered Public Accounting Firm”) to be held on May 23, 201326, 2016 and to be filed with the SEC within 120 days after December 31, 2012.2015.
Item 15.Exhibits,15. Exhibits, Financial Statement Schedules
(a)Documents Filed as Part of this Report
1. | The financial statement schedules and related data listed in the accompanying Index beginning on page F-1 are filed as a part of this report. |
2. | The exhibits listed in the accompanying Index beginning on page E-1 are filed as a part of this report. |
(b)Exhibits
See the accompanying Index beginning on page E-1.
(c)Financial Statement Schedules
Schedule I — Condensed Financial Information of Registrant beginning on page F-50.S-1.
All schedules not identified above have been omitted because they are not required, are not applicable or the information is included in the consolidated financial statements or notes contained in this report.
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February | CINEMARK HOLDINGS, INC. | |||
BY: | /s/ | |||
Chief Executive Officer | ||||
BY: | /s/ | |||
Chief Financial Officer and Principal Accounting Officer |
POWER OF ATTORNEY
Each person whose signature appears below hereby severally constitutes and appoints Tim WarnerMark Zoradi and Robert CoppleSean Gamble his true and lawful attorney-in-fact and agent, each with the power of substitution and resubstitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with accompanying exhibits and other related documents, with the Securities and Exchange Commission, and ratify and confirm all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue of said appointment.
Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name | Title | Date | ||
/s/ Lee Roy Mitchell Lee Roy Mitchell | Chairman of the Board of Directors and Director | February | ||
/s/ Mark Zoradi Mark Zoradi | Chief Executive Officer and Director (principal executive officer) | February 24, 2016 | ||
/s/ Sean Gamble Sean Gamble | Chief Financial Officer (principal financial and accounting officer) | February 24, 2016 | ||
/s/ Tim Warner Tim Warner |
| February | ||
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/s/ Benjamin D. Chereskin Benjamin D. Chereskin | Director | February | ||
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/s/ Enrique F. Senior Enrique F. Senior | Director | February | ||
/s/ Raymond W. Syufy Raymond W. Syufy | Director | February 24, 2016 |
Name | Title | Date | ||
/s/
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Carlos M. Sepulveda | Director | February | ||
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/s/ Donald G. Soderquist Donald G. Soderquist | Director | February | ||
/s/ Steven Rosenberg Steven Rosenberg | Director | February | ||
/s/ Nina Vaca Nina Vaca | Director | February 24, 2016 | ||
/s/ Darcy Antonellis Darcy Antonellis | Director | February 24, 2016 |
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report or proxy material has been sent to our stockholders. An annual report and proxy material may be sent to our stockholders subsequent to the filing of this Form 10-K. We shall furnish to the SEC copies of any annual report or proxy material that is sent to our stockholders.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS: | ||||
F-2 | ||||
Consolidated Balance Sheets, December 31, | F-3 | |||
Consolidated Statements of Income for the Years Ended December 31, | F-4 | |||
F-5 | ||||
Consolidated Statements of Equity for the Years Ended December 31, | F-6 | |||
F-7 | ||||
F-8 | ||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Cinemark Holdings, Inc.
Plano, Texas
We have audited the accompanying consolidated balance sheets of Cinemark Holdings, Inc. and subsidiaries (the “Company”) as of December 31, 20112014 and 2012,2015, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2012.2015. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cinemark Holdings, Inc. and subsidiaries as of December 31, 20112014 and 2012,2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012,2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2012,2015, based on the criteria established inInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 201324, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/ss//Deloitte & Touche LLP
Dallas, Texas
February 28, 201324, 2016
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
(In thousands, except share data)
December 31, 2011 | December 31, 2012 | December 31, 2014 | December 31, 2015 | |||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 521,408 | $ | 742,664 | $ | 638,869 | $ | 588,539 | ||||||||
Inventories | 11,284 | 12,571 | 13,419 | 15,954 | ||||||||||||
Accounts receivable | 54,757 | 57,122 | 47,917 | 74,287 | ||||||||||||
Income tax receivable | 17,786 | 7,129 | ||||||||||||||
Deferred tax asset | 10,583 | 14,397 | ||||||||||||||
Current income tax receivable | 19,350 | 22,877 | ||||||||||||||
Current deferred tax asset | 10,518 | — | ||||||||||||||
Prepaid expenses and other | 11,300 | 11,278 | 10,937 | 13,494 | ||||||||||||
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Total current assets | 627,118 | 845,161 | 741,010 | 715,151 | ||||||||||||
Theatre properties and equipment | ||||||||||||||||
Land | 97,244 | 102,490 | 95,699 | 95,479 | ||||||||||||
Buildings | 397,857 | 398,151 | 416,680 | 453,034 | ||||||||||||
Property under capital lease | 226,522 | 244,022 | 313,277 | 336,666 | ||||||||||||
Theatre furniture and equipment | 677,422 | 748,756 | 878,453 | 929,180 | ||||||||||||
Leasehold interests and improvements | 704,882 | 790,710 | 844,983 | 873,032 | ||||||||||||
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Total | 2,103,927 | 2,284,129 | 2,549,092 | 2,687,391 | ||||||||||||
Less accumulated depreciation and amortization | 865,077 | 979,171 | 1,098,280 | 1,182,322 | ||||||||||||
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Theatre properties and equipment, net | 1,238,850 | 1,304,958 | 1,450,812 | 1,505,069 | ||||||||||||
Other assets | ||||||||||||||||
Goodwill | 1,150,637 | 1,150,811 | 1,277,383 | 1,247,548 | ||||||||||||
Intangible assets — net | 336,907 | 330,741 | 348,024 | 339,644 | ||||||||||||
Investment in NCM | 72,040 | 78,123 | 178,939 | 183,755 | ||||||||||||
Investment in DCIP | 12,798 | 23,012 | ||||||||||||||
Investment in marketable securities — RealD | 9,709 | 13,707 | ||||||||||||||
Investments in and advances to affiliates | 1,543 | 1,482 | 77,658 | 94,973 | ||||||||||||
Long-term deferred tax asset | 8,826 | 13,187 | 164 | 2,114 | ||||||||||||
Deferred charges and other assets — net | 63,980 | 102,044 | ||||||||||||||
Deferred charges and other assets — net (see Note 2) | 46,571 | 38,243 | ||||||||||||||
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Total other assets | 1,656,440 | 1,713,107 | 1,928,739 | 1,906,277 | ||||||||||||
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Total assets | $ | 3,522,408 | $ | 3,863,226 | $ | 4,120,561 | $ | 4,126,497 | ||||||||
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Liabilities and equity | ||||||||||||||||
Current liabilities | ||||||||||||||||
Current portion of long-term debt | $ | 12,145 | $ | 9,546 | $ | 8,423 | $ | 8,405 | ||||||||
Current portion of capital lease obligations | 9,639 | 11,064 | 16,494 | 18,780 | ||||||||||||
Income tax payable | 6,506 | 8,891 | ||||||||||||||
Current income tax payable | 6,396 | 7,332 | ||||||||||||||
Current deferred tax liability | 75 | — | ||||||||||||||
Current liability for uncertain tax positions | — | 14,900 | 7,283 | 9,155 | ||||||||||||
Accounts payable | 65,861 | 70,833 | 119,172 | 108,844 | ||||||||||||
Accrued film rentals | 64,373 | 65,059 | 86,250 | 97,172 | ||||||||||||
Accrued interest | 6,147 | 4,694 | ||||||||||||||
Accrued payroll | 34,270 | 39,443 | 37,457 | 45,811 | ||||||||||||
Accrued property taxes | 24,086 | 24,599 | 29,925 | 31,719 | ||||||||||||
Accrued other current liabilities | 82,000 | 89,175 | 102,932 | 112,575 | ||||||||||||
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Total current liabilities | 305,027 | 338,204 | 414,407 | 439,793 | ||||||||||||
Long-term liabilities | ||||||||||||||||
Long-term debt, less current portion | 1,560,076 | 1,754,464 | ||||||||||||||
Long-term debt, less current portion (see Note 2) | 1,783,155 | 1,772,930 | ||||||||||||||
Capital lease obligations, less current portion | 131,533 | 139,107 | 201,978 | 208,952 | ||||||||||||
Deferred tax liability | 162,449 | 177,960 | ||||||||||||||
Liability for uncertain tax positions | 22,411 | 19,575 | ||||||||||||||
Long-term deferred tax liability | 140,973 | 139,905 | ||||||||||||||
Long-term liability for uncertain tax positions | 8,410 | 7,853 | ||||||||||||||
Deferred lease expenses | 34,466 | 38,297 | 46,003 | 43,333 | ||||||||||||
Deferred revenue — NCM | 236,310 | 241,305 | 335,219 | 342,134 | ||||||||||||
Other long-term liabilities | 46,497 | 59,330 | 67,287 | 60,784 | ||||||||||||
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Total long-term liabilities | 2,193,742 | 2,430,038 | 2,583,025 | 2,575,891 | ||||||||||||
Commitments and contingencies (see Note 22) | ||||||||||||||||
Commitments and contingencies (see Note 19) | ||||||||||||||||
Equity | ||||||||||||||||
Cinemark Holdings, Inc.’s stockholders’ equity | ||||||||||||||||
Cinemark Holdings, Inc.‘s stockholders’ equity | ||||||||||||||||
Common stock, $0.001 par value: 300,000,000 shares authorized; | ||||||||||||||||
117,593,329 shares issued and 114,201,737 shares outstanding at December 31, 2011 and 118,502,752 shares issued and 114,949,667 shares outstanding at December 31, 2012 | 118 | 118 | ||||||||||||||
119,757,582 shares issued and 115,700,447 shares outstanding at December 31, 2014 and 120,107,563 shares issued and 115,924,059 shares outstanding at December 31, 2015 | 120 | 120 | ||||||||||||||
Additional paid-in-capital | 1,047,237 | 1,064,016 | 1,095,040 | 1,113,219 | ||||||||||||
Treasury stock, 3,391,592 and 3,553,085 common shares at cost at December 31, 2011 and December 31, 2012, respectively | (45,219 | ) | (48,482 | ) | ||||||||||||
Treasury stock, 4,057,135 and 4,183,504 common shares at cost at December 31, 2014 and December 31, 2015, respectively | (61,807 | ) | (66,577 | ) | ||||||||||||
Retained earnings | 34,423 | 106,111 | 224,219 | 324,632 | ||||||||||||
Accumulated other comprehensive loss | (23,682 | ) | (37,698 | ) | (144,772 | ) | (271,686 | ) | ||||||||
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Total Cinemark Holdings, Inc.’s stockholders’ equity | 1,012,877 | 1,084,065 | ||||||||||||||
Total Cinemark Holdings, Inc.‘s stockholders’ equity | 1,112,800 | 1,099,708 | ||||||||||||||
Noncontrolling interests | 10,762 | 10,919 | 10,329 | 11,105 | ||||||||||||
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Total equity | 1,023,639 | 1,094,984 | 1,123,129 | 1,110,813 | ||||||||||||
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Total liabilities and equity | $ | 3,522,408 | $ | 3,863,226 | $ | 4,120,561 | $ | 4,126,497 | ||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2010, 20112013, 2014 AND 20122015
(In thousands, except per share data)
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Admissions | $ | 1,405,389 | $ | 1,471,627 | $ | 1,580,401 | $ | 1,706,145 | $ | 1,644,169 | $ | 1,765,519 | ||||||||||||
Concession | 642,326 | 696,754 | 771,405 | 845,168 | 845,376 | 936,970 | ||||||||||||||||||
Other | 93,429 | 111,232 | 121,725 | 131,581 | 137,445 | 150,120 | ||||||||||||||||||
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Total revenues | 2,141,144 | 2,279,613 | 2,473,531 | 2,682,894 | 2,626,990 | 2,852,609 | ||||||||||||||||||
Cost of operations | ||||||||||||||||||||||||
Film rentals and advertising | 769,698 | 798,606 | 845,107 | 919,511 | 883,052 | 976,590 | ||||||||||||||||||
Concession supplies | 97,484 | 112,122 | 123,471 | 135,715 | 131,985 | 144,270 | ||||||||||||||||||
Salaries and wages | 221,246 | 226,475 | 247,468 | 269,353 | 273,880 | 301,099 | ||||||||||||||||||
Facility lease expense | 255,717 | 276,278 | 281,615 | 307,851 | 317,096 | 319,761 | ||||||||||||||||||
Utilities and other | 239,470 | 259,703 | 280,670 | 305,703 | 308,445 | 324,851 | ||||||||||||||||||
General and administrative expenses | 109,045 | 127,621 | 148,624 | 165,351 | 151,444 | 156,736 | ||||||||||||||||||
Depreciation and amortization | 143,508 | 154,449 | 147,675 | 163,970 | 175,656 | 189,206 | ||||||||||||||||||
Impairment of long-lived assets | 12,538 | 7,033 | 3,031 | 3,794 | 6,647 | 8,801 | ||||||||||||||||||
(Gain) loss on sale of assets and other | (431 | ) | 8,792 | 12,168 | (3,845 | ) | 15,715 | 8,143 | ||||||||||||||||
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Total cost of operations | 1,848,275 | 1,971,079 | 2,089,829 | 2,267,403 | 2,263,920 | 2,429,457 | ||||||||||||||||||
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Operating income | 292,869 | 308,534 | 383,702 | 415,491 | 363,070 | 423,152 | ||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||
Interest expense | (112,444 | ) | (123,102 | ) | (123,665 | ) | (124,714 | ) | (113,698 | ) | (112,741 | ) | ||||||||||||
Interest income | 6,105 | 8,108 | 6,373 | 3,622 | 5,599 | 8,708 | ||||||||||||||||||
Foreign currency exchange gain (loss) | 1,054 | (219 | ) | 2,086 | ||||||||||||||||||||
Foreign currency exchange loss | (1,616 | ) | (6,192 | ) | (16,793 | ) | ||||||||||||||||||
Loss on amendment to debt agreement | — | — | (925 | ) | ||||||||||||||||||||
Loss on early retirement of debt | (3 | ) | (4,945 | ) | (5,599 | ) | (72,302 | ) | — | — | ||||||||||||||
Distributions from NCM | 23,358 | 24,161 | 20,812 | 20,701 | 18,541 | 18,140 | ||||||||||||||||||
Dividend income | — | 54 | — | |||||||||||||||||||||
Loss on marketable securities — RealD | — | (12,610 | ) | — | ||||||||||||||||||||
Equity in income (loss) of affiliates | (3,438 | ) | 5,651 | 13,109 | ||||||||||||||||||||
Equity in income of affiliates | 22,682 | 22,743 | 28,126 | |||||||||||||||||||||
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Total other expense | (85,368 | ) | (102,902 | ) | (86,884 | ) | (151,627 | ) | (73,007 | ) | (75,485 | ) | ||||||||||||
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Income before income taxes | 207,501 | 205,632 | 296,818 | 263,864 | 290,063 | 347,667 | ||||||||||||||||||
Income taxes | 57,838 | 73,050 | 125,398 | 113,316 | 96,064 | 128,939 | ||||||||||||||||||
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Net income | 149,663 | 132,582 | 171,420 | 150,548 | 193,999 | 218,728 | ||||||||||||||||||
Less: Net income attributable to noncontrolling interests | 3,543 | 2,025 | 2,471 | 2,078 | 1,389 | 1,859 | ||||||||||||||||||
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Net income attributable to Cinemark Holdings, Inc. | $ | 146,120 | $ | 130,557 | $ | 168,949 | $ | 148,470 | $ | 192,610 | $ | 216,869 | ||||||||||||
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Weighted average shares outstanding | ||||||||||||||||||||||||
Basic | 111,565 | 112,736 | 113,216 | 113,896 | 114,653 | 115,080 | ||||||||||||||||||
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Diluted | 112,151 | 113,224 | 113,824 | 114,396 | 114,966 | 115,399 | ||||||||||||||||||
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Earnings per share attributable to Cinemark Holdings, Inc.’s common stockholders: | ||||||||||||||||||||||||
Earnings per share attributable to Cinemark Holdings, Inc.‘s common stockholders: | ||||||||||||||||||||||||
Basic | $ | 1.30 | $ | 1.15 | $ | 1.47 | $ | 1.28 | $ | 1.66 | $ | 1.87 | ||||||||||||
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Diluted | $ | 1.29 | $ | 1.14 | $ | 1.47 | $ | 1.28 | $ | 1.66 | $ | 1.87 | ||||||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2010, 20112013, 2014 AND 20122015
(In thousands)
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Net income | $ | 149,663 | $ | 132,582 | $ | 171,420 | $ | 150,548 | $ | 193,999 | $ | 218,728 | ||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||
Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $4,339, $3,786 and $557 | 7,170 | (2,830 | ) | 1,020 | ||||||||||||||||||||
Unrealized gain (loss) due to fair value adjustments on available-for-sale securities, net of taxes of $3,425, $8,128 and $1,499 | 5,659 | (13,566 | ) | 2,499 | ||||||||||||||||||||
Amortization of accumulated other comprehensive loss on terminated swap agreement | 4,633 | 4,236 | 2,470 | |||||||||||||||||||||
Foreign currency translation adjustment | 19,432 | (46,280 | ) | (20,232 | ) | |||||||||||||||||||
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes of $1,865, $1,759 and $1,562, net of settlements | 3,151 | 2,846 | 2,636 | |||||||||||||||||||||
Unrealized gain (loss) due to fair value adjustments on available-for-sale securities, net of taxes of $1,223, $1,479 and $572 | (2,041 | ) | 2,507 | (957 | ) | |||||||||||||||||||
Other comprehensive income (loss) in equity method investments | 2,386 | 676 | (3,119 | ) | ||||||||||||||||||||
Foreign currency translation adjustments, net of taxes of $0, $0, and $888 | (47,699 | ) | (68,997 | ) | (125,512 | ) | ||||||||||||||||||
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Total other comprehensive income (loss), net of tax | 36,894 | (58,440 | ) | (14,243 | ) | |||||||||||||||||||
Total other comprehensive loss, net of tax | (44,203 | ) | (62,968 | ) | (126,952 | ) | ||||||||||||||||||
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Total comprehensive income, net of tax | 186,557 | 74,142 | 157,177 | 106,345 | 131,031 | 91,776 | ||||||||||||||||||
Comprehensive income attributable to noncontrolling interests | (3,711 | ) | (1,803 | ) | (2,244 | ) | (1,996 | ) | (1,374 | ) | (1,821 | ) | ||||||||||||
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Comprehensive income attributable to Cinemark Holdings, Inc. | $ | 182,846 | $ | 72,339 | $ | 154,933 | $ | 104,349 | $ | 129,657 | $ | 89,955 | | |||||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
YEARS ENDED DECEMBER 31, 2010, 20112013, 2014 AND 20122015
(In thousands)
Common Stock | Treasury Stock | Additional Paid-in- Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Cinemark Holdings, Inc.’s Stockholders’ Equity | Noncontrolling Interests | Total Equity | Common Stock | Treasury Stock | Additional Paid-in- Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Cinemark Holdings, Inc.’s Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares Issued | Amount | Shares Acquired | Amount | Shares Issued | Amount | Shares Acquired | Amount | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2010 | 114,222 | $ | 114 | (3,305 | ) | $ | (43,895 | ) | $ | 1,011,667 | $ | (60,595 | ) | $ | (7,459 | ) | $ | 899,832 | $ | 14,796 | $ | 914,628 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2013 | 118,503 | $ | 118 | (3,553 | ) | $ | (48,482 | ) | $ | 1,064,016 | $ | 106,111 | $ | (37,698 | ) | $ | 1,084,065 | $ | 10,919 | $ | 1,094,984 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 684 | 1 | — | — | — | — | — | 1 | — | 1 | 284 | 1 | — | — | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options, net of stock withholdings | 1,092 | 1 | (35 | ) | (531 | ) | 8,327 | — | — | 7,797 | — | 7,797 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures and stock withholdings related to restricted stock that vested during the year ended December 31, 2010 | — | — | (20 | ) | (299 | ) | — | — | — | (299 | ) | — | (299 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock upon vesting of restricted stock units | 284 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 6 | — | — | — | 57 | — | — | 57 | — | 57 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures and stock withholdings related to share based awards that vested during the year ended December 31, 2013 | — | — | (142 | ) | (3,464 | ) | — | — | — | (3,464 | ) | — | (3,464 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share based awards compensation expense | — | — | — | — | 8,352 | — | — | 8,352 | — | 8,352 | — | — | — | — | 16,886 | — | — | 16,886 | — | 16,886 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit related to stock option exercises and share based award vestings | — | — | — | — | 2,680 | — | — | 2,680 | — | 2,680 | — | — | — | — | 2,963 | — | — | 2,963 | — | 2,963 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to stockholders, $0.75 per share | — | — | — | — | — | (84,502 | ) | — | (84,502 | ) | — | (84,502 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends accrued on unvested restricted stock unit awards | — | — | — | — | — | (635 | ) | — | (635 | ) | — | (635 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | — | — | — | (539 | ) | (539 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of noncontrolling interest share of Panama subsidiary | — | — | — | — | (390 | ) | — | — | (390 | ) | (498 | ) | (888 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Colombia share exchange (see Note 9) | 1,113 | 1 | — | — | 6,950 | — | (1,086 | ) | 5,865 | (5,865 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 146,120 | — | 146,120 | 3,543 | 149,663 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 36,726 | 36,726 | 168 | 36,894 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at December 31, 2010 | 117,111 | $ | 117 | (3,360 | ) | $ | (44,725 | ) | $ | 1,037,586 | $ | 388 | $ | 28,181 | $ | 1,021,547 | $ | 11,605 | $ | 1,033,152 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 424 | 1 | — | — | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 58 | — | — | — | 444 | — | — | 444 | — | 444 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures and stock withholdings related to restricted stock that vested during the year ended December 31, 2011 | — | — | (32 | ) | (494 | ) | — | — | — | (494 | ) | — | (494 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share based awards compensation expense | — | — | — | — | 9,692 | — | — | 9,692 | — | 9,692 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit related to stock option exercises and share based award vestings | — | — | — | — | 917 | — | — | 917 | — | 917 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to stockholders, $0.84 per share | — | — | — | — | — | (95,838 | ) | — | (95,838 | ) | — | (95,838 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends accrued on unvested restricted stock unit awards | — | — | — | — | — | (684 | ) | — | (684 | ) | — | (684 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | — | — | — | (2,120 | ) | (2,120 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of noncontrolling interests’ share of Chile subsidiary | — | — | — | — | (1,402 | ) | — | 485 | (917 | ) | (526 | ) | (1,443 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Write-off of accumulated other comprehensive loss related to cash flow hedges, net of taxes of $723 | — | — | — | — | — | — | (2,037 | ) | (2,037 | ) | — | (2,037 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification of cumulative unrealized holding losses on marketable securities to earnings due to other-than-temporary impairment, net of taxes of $4,703 | — | — | — | — | — | — | 7,907 | 7,907 | — | 7,907 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 130,557 | — | 130,557 | 2,025 | 132,582 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (58,218 | ) | (58,218 | ) | (222 | ) | (58,440 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at December 31, 2011 | 117,593 | $ | 118 | (3,392 | ) | $ | (45,219 | ) | $ | 1,047,237 | $ | 34,423 | $ | (23,682 | ) | $ | 1,012,877 | $ | 10,762 | $ | 1,023,639 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock, net of restricted stock forfeitures | 654 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock upon vesting of restricted stock units | 196 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 60 | — | — | — | 459 | — | — | 459 | — | 459 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures and stock withholdings related to restricted stock and restricted stock units that vested during the year ended December 31, 2012 | — | — | (161 | ) | (3,263 | ) | — | — | — | (3,263 | ) | — | (3,263 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share based awards compensation expense | — | — | — | — | 15,070 | — | — | 15,070 | — | 15,070 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit related to stock option exercises and share based award vestings | — | — | — | — | 1,250 | — | — | 1,250 | — | 1,250 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to stockholders, $0.84 per share | — | — | — | — | — | (96,367 | ) | — | (96,367 | ) | — | (96,367 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of noncontrolling interests’ share of Brazilian subsidiary | — | — | — | — | (4,618 | ) | — | — | (4,618 | ) | (1,003 | ) | (5,621 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to stockholders, $0.92 per share | — | — | — | — | — | (106,045 | ) | — | (106,045 | ) | — | (106,045 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends accrued on unvested restricted stock unit awards | — | — | — | — | — | (894 | ) | — | (894 | ) | — | (894 | ) | — | — | — | — | — | (772 | ) | — | (772 | ) | — | (772 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | — | — | — | (2,087 | ) | (2,087 | ) | — | — | — | — | — | — | — | — | (2,917 | ) | (2,917 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 168,949 | — | 168,949 | 2,471 | 171,420 | — | — | — | — | — | 148,470 | — | 148,470 | 2,078 | 150,548 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (14,016 | ) | (14,016 | ) | (227 | ) | (14,243 | ) | — | — | — | — | — | — | (44,121 | ) | (44,121 | ) | (82 | ) | (44,203 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at December 31, 2012 | 118,503 | $ | 118 | (3,553 | ) | $ | (48,482 | ) | $ | 1,064,016 | $ | 106,111 | $ | (37,698 | ) | $ | 1,084,065 | $ | 10,919 | $ | 1,094,984 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 | 119,077 | $ | 119 | (3,695 | ) | $ | (51,946 | ) | $ | 1,079,304 | $ | 147,764 | $ | (81,819 | ) | $ | 1,093,422 | $ | 8,995 | $ | 1,102,417 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 270 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock upon vesting of restricted stock units | 396 | 1 | — | — | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 15 | — | — | — | 112 | — | — | 112 | — | 112 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures and stock withholdings related to share based awards that vested during the year ended December 31, 2014 | — | — | (362 | ) | (9,861 | ) | — | — | — | (9,861 | ) | — | (9,861 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share based awards compensation expense | — | — | — | — | 12,818 | — | — | 12,818 | — | 12,818 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit related to stock option exercises and share based award vestings | — | — | — | — | 2,806 | — | — | 2,806 | — | 2,806 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interests’ share of acquired subsidiary | — | — | — | — | — | — | — | — | 346 | 346 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to stockholders, $1.00 per share | — | — | — | — | — | (115,625 | ) | — | (115,625 | ) | — | (115,625 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends accrued on unvested restricted stock unit awards | — | — | — | — | — | (530 | ) | — | (530 | ) | — | (530 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | — | — | — | (386 | ) | (386 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 192,610 | — | 192,610 | 1,389 | 193,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (62,953 | ) | (62,953 | ) | (15 | ) | (62,968 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at December 31, 2014 | 119,758 | $ | 120 | (4,057 | ) | $ | (61,807 | ) | $ | 1,095,040 | $ | 224,219 | $ | (144,772 | ) | $ | 1,112,800 | $ | 10,329 | $ | 1,123,129 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 226 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock upon vesting of restricted stock units | 124 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures and stock withholdings related to share based awards that vested during the year ended December 31, 2015 | — | — | (127 | ) | (4,770 | ) | — | — | — | (4,770 | ) | — | (4,770 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share based awards compensation expense | — | — | — | — | 15,758 | — | — | 15,758 | — | 15,758 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit related to share based award vestings | — | — | — | — | 2,421 | — | — | 2,421 | — | 2,421 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to stockholders, $1.00 per share | — | — | — | — | — | (115,863 | ) | — | (115,863 | ) | — | (115,863 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends accrued on unvested restricted stock unit awards | — | — | — | — | — | (593 | ) | — | (593 | ) | — | (593 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | — | — | — | (1,045 | ) | (1,045 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 216,869 | — | 216,869 | 1,859 | 218,728 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (126,914 | ) | (126,914 | ) | (38 | ) | (126,952 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at December 31, 2015 | 120,108 | $ | 120 | (4,184 | ) | $ | (66,577 | ) | $ | 1,113,219 | $ | 324,632 | $ | (271,686 | ) | $ | 1,099,708 | $ | 11,105 | $ | 1,110,813 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2010, 20112013, 2014 AND 20122015
(In thousands)
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Operating activities | ||||||||||||||||||||||||
Net income | $ | 149,663 | $ | 132,582 | $ | 171,420 | $ | 150,548 | $ | 193,999 | $ | 218,728 | ||||||||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation | 138,637 | 150,149 | 143,394 | 160,071 | 173,138 | 186,898 | ||||||||||||||||||
Amortization of intangible and other assets and unfavorable leases | 4,871 | 4,300 | 4,281 | |||||||||||||||||||||
Amortization of intangible and other assets and favorable/unfavorable leases | 3,899 | 2,518 | 2,308 | |||||||||||||||||||||
Amortization of long-term prepaid rents | 1,786 | 2,657 | 2,673 | 2,625 | 1,542 | 2,361 | ||||||||||||||||||
Amortization of debt issue costs | 4,716 | 4,744 | 4,792 | 5,476 | 5,245 | 5,151 | ||||||||||||||||||
Amortization of deferred revenues, deferred lease incentives and other | (6,968 | ) | (9,629 | ) | (9,343 | ) | (11,712 | ) | (13,665 | ) | (17,163 | ) | ||||||||||||
Amortization of bond discount | 780 | 853 | 933 | 482 | — | — | ||||||||||||||||||
Amortization of accumulated other comprehensive loss related to terminated interest rate swap agreement | 4,633 | 4,236 | 2,470 | |||||||||||||||||||||
Fair value change in interest rate swap agreements not designated as hedges | — | (1,130 | ) | (808 | ) | |||||||||||||||||||
Impairment of long-lived assets | 12,538 | 7,033 | 3,031 | 3,794 | 6,647 | 8,801 | ||||||||||||||||||
Share based awards compensation expense | 8,352 | 9,692 | 15,070 | 16,886 | 12,818 | 15,758 | ||||||||||||||||||
(Gain) loss on sale of assets and other | (2,464 | ) | 7,754 | 12,168 | (3,845 | ) | 15,715 | 8,143 | ||||||||||||||||
Loss on contribution and sale of digital projection systems to DCIP | 2,033 | 1,038 | — | |||||||||||||||||||||
Loss on marketable securities — RealD | — | 12,610 | — | |||||||||||||||||||||
Write-off of unamortized debt issue costs and accumulated other comprehensive loss related to early retirement of debt | — | 4,945 | — | |||||||||||||||||||||
Write-off of unamortized debt issue costs, debt discount and accumulated other comprehensive loss related to early retirement of debt | 15,688 | — | — | |||||||||||||||||||||
Deferred lease expenses | 3,940 | 4,155 | 4,104 | 5,701 | 2,536 | (1,806 | ) | |||||||||||||||||
Equity in income of affiliates | (22,682 | ) | (22,743 | ) | (28,126 | ) | ||||||||||||||||||
Deferred income tax expenses | (8,603 | ) | 21,676 | 5,280 | (37,790 | ) | 526 | 11,095 | ||||||||||||||||
Equity in (income) loss of affiliates | 3,438 | (5,651 | ) | (13,109 | ) | |||||||||||||||||||
Tax benefit related to stock option exercises and restricted stock vestings | 2,680 | 917 | — | |||||||||||||||||||||
Interest paid on redemption of senior notes | (8,054 | ) | — | — | ||||||||||||||||||||
Distributions from equity investees | 5,486 | 7,125 | 7,470 | 13,658 | 19,172 | 19,027 | ||||||||||||||||||
Changes in other assets and liabilities | (60,767 | ) | 31,145 | 41,379 | ||||||||||||||||||||
Changes in other assets and liabilities: | ||||||||||||||||||||||||
Inventories | (1,539 | ) | 400 | (2,535 | ) | |||||||||||||||||||
Accounts receivable | (15,938 | ) | 33,804 | (26,370 | ) | |||||||||||||||||||
Income tax receivable | 4,060 | (18,681 | ) | (3,527 | ) | |||||||||||||||||||
Prepaid expenses and other | (3,557 | ) | 4,011 | (2,557 | ) | |||||||||||||||||||
Deferred charges and other assets — net | (17,624 | ) | 19,713 | 8,126 | ||||||||||||||||||||
Accounts payable and accrued expenses | 48,963 | 32,570 | 43,827 | |||||||||||||||||||||
Income tax payable | 15,035 | (15,685 | ) | 936 | ||||||||||||||||||||
Liabilities for uncertain tax positions | (14,345 | ) | (4,437 | ) | 1,315 | |||||||||||||||||||
Other long-term liabilities | (134 | ) | 5,491 | 5,481 | ||||||||||||||||||||
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Net cash provided by operating activities | 264,751 | 391,201 | 395,205 | 309,666 | 454,634 | 455,871 | ||||||||||||||||||
Investing activities | ||||||||||||||||||||||||
Additions to theatre properties and equipment | (156,102 | ) | (184,819 | ) | (220,727 | ) | (259,670 | ) | (244,705 | ) | (331,726 | ) | ||||||||||||
Proceeds from sale of theatre properties and equipment and other | 21,791 | 6,230 | 1,976 | 34,271 | 2,545 | 9,966 | ||||||||||||||||||
Acquisition of theatres in the U.S. | — | — | (14,080 | ) | ||||||||||||||||||||
Acquisition of theatres in Argentina | — | (66,958 | ) | — | ||||||||||||||||||||
Investment in DCIP and other | (1,756 | ) | (1,520 | ) | (1,480 | ) | ||||||||||||||||||
Acquisition of theatres in the U.S., net of cash acquired | (259,247 | ) | (7,951 | ) | — | |||||||||||||||||||
Acquisition of theatre in Brazil | — | — | (2,651 | ) | ||||||||||||||||||||
Proceeds from disposition of Mexico theatres | 126,167 | — | — | |||||||||||||||||||||
Investment in joint ventures and other | (6,222 | ) | (3,228 | ) | (3,711 | ) | ||||||||||||||||||
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Net cash used for investing activities | (136,067 | ) | (247,067 | ) | (234,311 | ) | (364,701 | ) | (253,339 | ) | (328,122 | ) | ||||||||||||
Financing activities | ||||||||||||||||||||||||
Proceeds from stock option exercises | 7,914 | 444 | 459 | 57 | 112 | — | ||||||||||||||||||
Payroll taxes paid as a result of noncash stock option exercises and restricted stock withholdings | (416 | ) | (494 | ) | (3,263 | ) | ||||||||||||||||||
Payroll taxes paid as a result of restricted stock withholdings | (3,464 | ) | (9,861 | ) | (4,770 | ) | ||||||||||||||||||
Dividends paid to stockholders | (84,502 | ) | (95,838 | ) | (96,367 | ) | (106,045 | ) | (115,625 | ) | (115,863 | ) | ||||||||||||
Retirement of senior subordinated notes | (181 | ) | — | — | ||||||||||||||||||||
Proceeds from issuance of notes | — | 200,000 | 400,000 | 530,000 | — | — | ||||||||||||||||||
Other short term borrowings | 1,473 | — | — | |||||||||||||||||||||
Redemption of senior notes | (461,946 | ) | — | — | ||||||||||||||||||||
Repayments of other long-term debt | (9,339 | ) | (9,846 | ) | (8,420 | ) | ||||||||||||||||||
Payment of debt issue costs | (8,858 | ) | (4,539 | ) | (18,453 | ) | (9,328 | ) | — | (6,957 | ) | |||||||||||||
Proceeds from amended senior secured credit facility | — | — | 700,000 | |||||||||||||||||||||
Repayment of former senior secured credit facility | — | — | (898,955 | ) | ||||||||||||||||||||
Repayments of other long-term debt | (11,853 | ) | (166,898 | ) | (9,711 | ) | ||||||||||||||||||
Payments on capital leases | (7,327 | ) | (7,526 | ) | (9,451 | ) | (12,015 | ) | (14,035 | ) | (16,513 | ) | ||||||||||||
Purchases of non-controlling interests | (888 | ) | (1,443 | ) | — | (5,621 | ) | — | — | |||||||||||||||
Other | (539 | ) | (2,120 | ) | (835 | ) | 44 | 2,422 | 1,376 | |||||||||||||||
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Net cash provided by (used for) financing activities | (106,650 | ) | (78,414 | ) | 63,424 | |||||||||||||||||||
Net cash used for financing activities | (76,184 | ) | (146,833 | ) | (151,147 | ) | ||||||||||||||||||
Effect of exchange rates on cash and cash equivalents | 5,027 | (9,309 | ) | (3,062 | ) | (11,516 | ) | (15,522 | ) | (26,932 | ) | |||||||||||||
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Increase in cash and cash equivalents | 27,061 | 56,411 | 221,256 | |||||||||||||||||||||
Increase (decrease) in cash and cash equivalents | (142,735 | ) | 38,940 | (50,330 | ) | |||||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||||||
Beginning of year | 437,936 | 464,997 | 521,408 | 742,664 | 599,929 | 638,869 | ||||||||||||||||||
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End of year | $ | 464,997 | $ | 521,408 | $ | 742,664 | $ | 599,929 | $ | 638,869 | $ | 588,539 | ||||||||||||
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Supplemental information (see Note 20)17)
The accompanying notes are an integral part of the consolidated financial statements.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Business— Cinemark Holdings, Inc. and subsidiaries (the “Company”) is a leaderoperates in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Mexico, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia and Guatemala.Curaçao. The Company also managed additionaloperated theatres in the U.S., Brazil, and Colombia during the year ended December 31, 2012.Mexico until November 15, 2013 (see Note 5).
Principles of Consolidation— The consolidated financial statements include the accounts of Cinemark Holdings, Inc., its subsidiaries and its affiliates. Majority-owned subsidiaries that the Company has control of are consolidated while those affiliates of which the Company owns between 20% and 50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 20% are generally accounted for under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate, in which case the Company would account for its investment under the equity method. The results of these subsidiaries and affiliates are included in the consolidated financial statements effective with their formation or from their dates of acquisition. Intercompany balances and transactions are eliminated in consolidation.
Cash and Cash Equivalents— Cash and cash equivalents consist of operating funds held in financial institutions, petty cash held by the theatres and highly liquid investments with original maturities of three months or less when purchased. Cash investments were primarily in money market funds or other similar funds.
Accounts Receivable —— Accounts receivable, which are recorded at net realizable value, consists primarily of receivables related to screen advertising, receivables related to discounted tickets sold to retail locations, receivables from landlords related to theatre construction, rebates earned from the Company’s beverage and other concession vendors and value-added and other non-income tax receivables.
Inventories— Concession and theatre supplies inventories are stated at the lower of cost (first-in, first-out method) or market.
Theatre Properties and Equipment— Theatre properties and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows:
Category | Useful Life | |
Buildings on owned land | 40 years | |
Buildings on leased land | Lesser of lease term or useful life | |
Land and buildings under capital lease(1) | Lesser of lease term or useful life | |
Theatre furniture and equipment | ||
Leasehold improvements | Lesser of lease term or useful life |
(1) | Amortization of capital lease assets is included in depreciation and amortization expense on the consolidated statements of income. Accumulated amortization of capital lease assets as of December 31, 2014 and 2015 was $133,022 and $150,968, respectively. |
The Company reviews long-lived assets for impairment indicators on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable.
The Company considers actual theatre level cash flows, future years budgeted theatre level cash flows, theatre property and equipment carrying values, amortizing intangible asset carrying values, the age of a recently built theatre,
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
competitive theatres in the marketplace, the impact of recent ticket price changes, available lease renewal options and other factors considered relevant in its assessment of impairment of individual theatre assets. Long-lived assets are evaluated for impairment on an individual theatre basis, which the Company believes is the lowest applicable level for which there are identifiable cash flows. The impairment evaluation is based on the
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
estimated undiscounted cash flows from continuing use through the remainder of the theatre’s useful life. The remainder of the theatre’s useful life correlates with the available remaining lease period, which includes the probability of renewal periods, for leased properties and for fee owned properties, the lesser of twenty years or the building’s remaining useful life.life for fee-owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, the Company then compares the carrying value of the asset group (theatre) with its estimated fair value. When estimated fair value is determined to be lower than the carrying value of the asset group (theatre), the asset group (theatre) is written down to its estimated fair value. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluations performed during 2010, 20112013, 2014 and 2012.2015. The long-lived asset impairment charges recorded during each of the periods presented are specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics, or adverse changes in the development or the conditions of the areas surrounding the theatre. See Note 11.9.
Goodwill and Other Intangible Assets— Goodwill is the excess of cost over fair value of theatre businesses acquired. Goodwill is evaluatedThe Company evaluates goodwill for impairment on an annual basisannually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of the goodwill may not be fully recoverable. The Company evaluates goodwill for impairment at the reporting unit level and has allocated goodwill to the reporting unit based on an estimate of its relative fair value. Management considers the reporting unit to be each of its sixteennineteen regions in the U.S. and each of its eight internationalseven countries internationally (Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala are considered one reporting unit). Goodwill impairment iswas evaluated using a two-step approach during 2013 and 2014, requiring the Company to compute the fair value of a reporting unit and compare it with its carrying value. If the carrying value of the reporting unit exceeds its estimated fair value, a second step is performed to measure the potential goodwill impairment. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluation performed during 2010 and seven and a halfeight times for the evaluations performed during 20112013 and 2012.2014. As of December 31, 2014, the estimated fair value of the Company’s goodwill exceeded their carrying values by at least 10%.
Indefinite-lived tradenameFor the year ended December 31, 2015, the Company performed a qualitative goodwill impairment assessment on all reporting units except one, in accordance with ASU 2011-08Testing Goodwill for Impairment (“ASU 2011-08”). The qualitative assessment included consideration of historical and expected future industry performance, estimated future performance of the Company, current industry trading multiples and other economic factors. Based on the qualitative assessment performed, the Company determined that it was not more likely than not that the fair value of the reporting units were less than their carrying values. The Company performed the quantitative two-step approach on a new U.S. region that had not previously been assessed for goodwill impairment. The fair value for the new reporting unit was determined based on a multiple of estimated cash flows, which was eight times, and exceeded its carrying value by more than 10%.
Tradename intangible assets are tested for impairment at least annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. TheDuring
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
2013 and 2014, the Company estimatesestimated the fair value of its tradenames by applying an estimated market royalty rate that could be charged for the use of the Company’sour tradename to forecasted future revenues, with an adjustment for the present value of such royalties. If the estimated fair value is less than the carrying value, the tradename intangible asset is written down to its estimated fair value. Significant judgment is involved in estimating market royalty rates and long-term revenue forecasts. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected revenue performance and industry trends.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share As of December 31, 2014, the estimated fair value of the Company’s tradename intangible assets exceeded their carrying values by at least 10%. For the year ended December 31, 2015, the Company performed a qualitative tradename intangible asset impairment assessment in accordance with ASU 2011-08. The qualitative assessment included consideration of the Company’s historical and per share data
forecasted revenues and estimated royalty rates for each tradename intangible asset. Based on the qualitative assessment performed, the Company determined that it was not more likely than not that the fair values of tradename intangible assets were less than their carrying values.
The table below summarizes the Company’s intangible assets and the amortization method used for each type of intangible asset:
Intangible Asset | Amortization Method | |
Goodwill | Indefinite-lived | |
Tradename | Indefinite-lived | |
Vendor contracts | Straight-line method over the terms of the underlying contracts. The remaining terms of the underlying contracts range from | |
Favorable/unfavorable leases | Based on the pattern in which the economic benefits are realized over the terms of the lease agreements. The remaining terms of the lease agreements range from | |
Other intangible assets | Straight-line method over the terms of the underlying agreement or the expected useful life of the intangible asset. The remaining useful lives of these intangible assets range from |
Deferred Charges and Other Assets— Deferred charges and other assets consist of debt issue costs, long-term prepaid rents, construction related deposits, leaseand other deposits, equipment to be placed in service, and other assets of a long-term nature. Debt issue costs are amortized using the straight-line method (which approximates the effective interest method) over the primary financing terms of the related debt agreement. Long-term prepaid rents represent prepayments of rent on operating leases. These payments are recognized as facility lease expense over the period for which the rent was paid in advance as outlined in the lease agreements. The amortization periods generally range from 1one to 10ten years.
Lease Accounting— The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the lessee, theThe Company records the lease as a capital lease at its inception.inception if 1) the present value of future minimum lease payments exceeds 90% of the leased property’s estimated fair value; 2) the lease term exceeds 75% of the property’s estimated useful life; 3) the lease contains a bargain purchase option; or 4) ownership transfers to the Company at the end of the lease. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term. The Company determines the straight-line rent expense impact of an operating lease upon inception of the lease. The landlord is typically responsible for constructing a theatre using guidelines and specifications agreed to by the Company and assumes substantially all of the risk of construction. If the Company concludes that it has substantially all of the construction period risks, it records a construction asset and related liability for the amount of total project costs incurred during the construction period. At the end of the construction period, the Company determines if the transaction qualifies for sale-leaseback accounting treatment in regards to lease
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
classification. If the Company receives a lease incentive payment from a landlord, the Company records the proceeds as a deferred lease incentive liability and amortizes the liability as a reduction in rent expense over the initial term of the respective lease.
Deferred Revenues— Advances collected on long-term screen advertising, concession and other contracts are recorded as deferred revenues. In accordance with the terms of the agreements, the advances collected on such contracts are recognized during the period in which the advances are earned, which may differ from the period in which the advances are collected. Revenues related to theseThese advances are recognized on either a straight-line basis over the term of the contracts or as such revenues are earned in accordance with the terms of the contracts.
InsuranceSelf-Insurance Reserves —The Company is self-insured for general liability claims subject to an annual cap. For the yearyears ended December 31, 2012,2013, 2014 and 2015, claims were capped at $250, $100 and $100 per occurrence, respectively, with an annual capcaps of approximately $2,650.$2,600, $2,670 and $2,900, respectively. The Company is also self-insured for medical claims up to $125 per occurrence. The
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Company is fully insured for workers compensation claims. As of December 31, 20112014 and 2012,2015, the Company’s insurance reserves were $7,600$7,675 and $7,693,$9,039, respectively, and are reflected in accrued other current liabilities in the consolidated balance sheets.
Revenue and Expense Recognition— Revenues are recognized when admissions and concession sales are received at the box office. Other revenues primarily consist of screen advertising. Screen advertising revenues are recognized over the period that the related advertising is delivered on-screen or in-theatre. The Company records proceeds from the sale of gift cards and other advanced sale-type certificates in current liabilities and recognizes admissions or concession revenue when a holder redeems the card or certificate. The Company recognizes unredeemed gift cards and other advanced sale-type certificates as revenue only after such a period of time indicates, based on historical experience, the likelihood of redemption is remote, and based on applicable laws and regulations. In evaluating the likelihood of redemption, the Company considers the period outstanding, the level and frequency of activity, and the period of inactivity. As of December 31, 20112014 and 2012,2015, the Company’s liabilities for advanced sale-type certificates were approximately $41,611$63,209 and $46,063,$68,158, respectively, and are reflected in accrued other current liabilities on the consolidated balance sheets. The Company recognized unredeemed gift cards and other advanced sale-type certificates as revenues in the amount of $7,073, $7,846$10,684, $12,233 and $9,093$11,786 during the years ended December 31, 2010, 20112013, 2014 and 2012,2015, respectively.
Film rental costs are accrued based on the applicable box office receipts and either mutually agreed upon firm terms or a sliding scale formula, which are generally established prior to the opening of the film, or estimates of the final mutually agreed upon settlement,rate, which occurs at the conclusion of the film run, subject to the film licensing arrangement. Under a firm terms formula, the Company pays the distributor a mutually agreed upon specified percentage of box office receipts, which reflects either a mutually agreed uponan aggregate rate for the life of the film or rates that decline over the term of the run. Under a sliding scale formula, film rental is paid as a percentage of box office revenues using a pre-determined matrix based upon box office performance of the film. The settlement process allows for negotiation of film rental fees upon the conclusion of the film run based upon how the film performs. Estimates are based on the expected success of a film. The success of a film can typically be determined a few weeks after a film is released when initial box office performance of the film is known. Accordingly, final settlements typically approximate estimates since box office receipts are known at the time the estimate is made and the expected success of a film can typically be estimated early in the film’s run. If actual settlements are different than those estimates, film rental costs are adjusted at that time.
Accounting for Share Based Awards— The Company measures the cost of employee services received in exchange for an award of equity instrumentsaward based on the fair value of the award on the date of the grant. The grant date fair value is estimated using either an option-pricing model, consistent with the terms of the award, or a market observed price, if such a price exists.price. Such costs are recognized over the period during which an
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
employee is required to provide service in exchange for the award (which is usually the vesting period). TheAt the time of the grant, the Company also estimates the number of instruments that will ultimately be forfeited. See Note 1916 for discussion of the Company’s share based awards and related compensation expense.
Income Taxes — The Company uses an asset and liability approach to financial accounting and reporting for income taxes. Deferred income taxes are provided when tax laws and financial accounting standards differ with respect to the amount of income for a year and the basis of assets and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets unless it is more likely than not that such assets will be realized. Income taxes are provided on unremitted earnings from foreign subsidiaries unless such earnings are expected to be indefinitely reinvested. Income taxes have also been provided for potential tax assessments. The evaluation of an uncertain tax position is a two-step process. The first step is recognition: The Company determines whether it is more likely than not that a tax position will be sustained upon examination, including
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company should presume that the position would be examined by the appropriate taxing authority that would have full knowledge of all relevant information. The second step is measurement: A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements result in (1) a change in a liability for income taxes payable or (2) a change in an income tax refund receivable, a deferred tax asset or a deferred tax liability or both (1) and (2). The Company accrues interest and penalties on its uncertain tax positions as a component of income tax expense.
Segments— For the years ended December 31, 2010, 20112013, 2014 and 2012,2015, the Company managed its business under two reportable operating segments, U.S. markets and international markets. See Note 23.20.
Use of Estimates— The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The Company’s consolidated financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.
Foreign Currency Translations— The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average monthly exchange rates. The resulting translation adjustments are recorded in the consolidated balance sheets in accumulated other comprehensive loss. See Note 14 for a summary of the translation adjustments recorded in accumulated other comprehensive loss for the years ended December 31, 2013, 2014 and 2015. The Company recognizes foreign currency transaction gains and losses when changes in exchange rates impact transactions, other than intercompany transactions of a long-term investment nature, that have been denominated in a currency other than the functional currency.
Fair Value Measurements —According to authoritative guidance, inputs used in fair value measurements fall into three different categories; Level 1, Level 2 and Level 3. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company has interest rate swap agreements and investments in marketable securities that are
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
adjusted to fair value on a recurring basis (quarterly). With respect to its interest rate swap agreements, the Company uses the income approach to determine the fair value of its interest rate swap agreements and under this approach, the Company uses projected future interest rates as provided by the counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under these agreements. Therefore, the Company’s fair value measurements for its interest rate swaps use significant unobservable inputs, which fall in Level 3. With respect to its investments in marketable securities, the Company uses quoted market prices, which fall under Level 1 of the hierarchy. There were no changes in valuation techniques during the period and no transfers in or out of Level 1, Level 2 or Level 3 during the yearyears ended December 31, 2012.2013, 2014 or 2015. See Note 1412 for further discussion of the Company’s interest rate swap agreements and Note 1513 for further discussion of the Company’s fair value measurements. The Company also uses fair value measurements on a nonrecurring basis, primarily in the impairment evaluations for goodwill, intangible assets and other long-lived assets. SeeGoodwill and Other Intangible Assets andTheatre Properties and Equipment included above for discussion of such fair value measurements.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Acquisitions— The Company accounts for acquisitions under the acquisition method of accounting. The acquisition method requires that the acquired assets and liabilities, including contingencies, be recorded at fair value determined on the acquisition date and changes thereafter reflected in income. For significant acquisitions, the Company obtains independent third party valuation studies for certain of the assets acquired and liabilities assumed to assist the Company in determining fair value. The estimation of the fair values of the assets acquired and liabilities assumed involves a number of estimates and assumptions that could differ materially from the actual amounts realized. The Company provides assumptions, including both quantitative and qualitative information, about the specified asset or liability to the third party valuation firms. The Company primarily utilizes the third parties to accumulate comparative data from multiple sources and assemble a report that summarizes the information obtained. The Company then uses the information to record estimated fair value. The third party valuation firms are supervised by Company personnel who are knowledgeable about valuations and fair value. The Company evaluates the appropriateness of the assumptions and valuation methodologies utilized by the third party valuation firm.
2. | NEW ACCOUNTING PRONOUNCEMENTS |
In July 2012,January 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-01,Income Statement — Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, (“ASU 2015-01”). ASU 2015-01 eliminates the concept of an extraordinary item from GAAP. With this update, there is no longer a need to segregate extraordinary items from the results of ordinary operations, separately present an extraordinary item on its income statement, net of tax, after income from continuing operations or disclose income taxes and earnings per share data applicable to an extraordinary item. However, presentation and disclosure requirements for items that are unusual in nature and occur infrequently still apply. ASU 2015-01 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company has elected to early adopt ASU 2015-01, which had no impact on its consolidated financial statements.
In February 2015, the FASB issued Accounting Standards Update 2012-02,2015-02, Testing Indefinite-Lived Intangible Assets for Impairment, an amendmentConsolidation (Topic 810): Amendments to FASB ASC Topic 350, Intangibles — Goodwill and Otherthe Consolidation Analysis, (“ASU 2012-02”2015-02”). The update provides an entity with the option first to assess qualitative factors in determining whether it is more likely than notASU 2015-02 affects reporting entities that the indefinite-lived intangible asset is impaired. After assessing the qualitative factors, if an entity determines that it is not more likely than not that the indefinite-lived intangible asset is impaired, the entity is notare required to take further action. If an entity concludes otherwise, then it isevaluate whether they should consolidate certain legal entities. Specifically, ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with certain VIEs. ASU 2015-02 also provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
are required to determine the fair valuecomply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the indefinite-lived intangible asset and perform the quantitative impairment test.Investment Company Act of 1940 for registered money market funds. ASU 2012-022015-02 is effective for annual and interim impairment tests performed for fiscal years beginning after SeptemberDecember 15, 2012.2015. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2015-02 on its consolidated financial statements.
In April 2015, the FASB issued Accounting Standards Update 2015-03Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The update changes the presentation of debt issuance costs for term debt in the balance sheet by requiring the debt issuance costs be presented as a direct deduction from the related debt liability, rather than recorded as an asset. This guidance is effective for periods beginning after December 15, 2015, and interim periods within those annual periods applied retrospectively. Early adoption is permitted. The Company adopted this guidance in the fourth quarter of fiscal year 2015. Debt issuance costs associated with long-term debt, net of accumulated amortization, were $31,419 and $33,237 as of December 31, 2014 and 2015, respectively. The balance sheet as of December 31, 2014 has been recast to reflect the reclassification of debt issuances costs, net of accumulated amortization, from deferred charges and other assets — net to a reduction of long-term debt, less current portion.
In April 2015, the FASB issued Accounting Standards Update 2015-05, Intangibles — Goodwill and Other — Internal Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in Cloud Computing Arrangement, (“ASU 2015-05”). ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer’s accounting for service contracts. In addition, the guidance in this Update supersedes paragraph 350-40-25-16. Consequently, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. ASU 2015-05 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company has elected to early adopt ASU 2015-05, which had no impact on its consolidated financial statements.
In July 2015, the FASB issued Accounting Standards Update 2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory, (“ASU 2015-11”). ASU 2015-11 affects reporting entities that measure inventory using first-in, first-out (FIFO) or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company does not expect ASU 2015-11 to have an impact on its consolidated financial statements.
In August 2015, the FASB issued Accounting Standards Update 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, (“ASU 2015-14”). ASU 2015-14 defers the effective date of Accounting Standards Update 2014-09:Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09). The guidance in ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of ASU 2012-022014-09, as amended by ASU 2015-14, on its consolidated financial statements.
In August 2015, the FASB issued Accounting Standards Update 2015-15,Interest — Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Credit Arrangements, (“ASU 2015-15”). ASU 2015-15 adds clarification to the guidance presented in ASU 2015-03, as that guidance did not address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. The Company adopted this ASU along with the original guidance in ASU 2015-03 discussed above. The guidance in this ASU did not have an impact on the consolidated financial statements.
In September 2015, the FASB issued Accounting Standards Update 2015-16,Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, (“ASU 2015-16”). ASU 2015-16 was issued to simplify the accounting for adjustments made to provisional amounts recognized in a business combination and eliminates the requirement to retrospectively account for such adjustments. ASU 2015-16 requires an entity to present separately on the face of the income statement, or disclose in the notes, amounts recorded in current period earnings that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company does not expect ASU 2015-16 to have a significant impact on its consolidated financial statements.
In November 2015, the FASB issued Accounting Standards Update 2015-17,Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, (“ASU 2015-17”). ASU 2015-17 was issued to simplify the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. However, the requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments in ASU 2015-17 may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company adopted this guidance in the fourth quarter of fiscal year 2015 and elected the prospective approach. Therefore, deferred taxes as of December 31, 2015 are recorded as long-term deferred tax assets and long-term deferred tax liabilities on the consolidated balance sheet. Balances as of December 31, 2014 have not been recast.
In January 2016, the FASB issued Accounting Standards Update 2016-01,Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, (“ASU 2016-01”). ASU 2016-01 address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The guidance in ASU 2016-01 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted for financial statements of fiscal years that have not been previously issued. The Company is currently evaluating the impact of ASU 2016-01 on its consolidated financial statements.
3. | EARNINGS PER SHARE |
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 earnings per share pursuant to the two-class method. Basic earnings per share for the two classes of stock (common stock and unvested restricted stock) is calculated by dividing net income by the weighted average number of shares of common stock and unvested restricted stock outstanding during the reporting period. Diluted earnings per share is calculated using the weighted average number of shares of common stock and unvested restricted stock plus the potentially dilutive effect of common equivalent shares outstanding determined under both the two class method and the treasury stock method.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table presents computations of basic and diluted earnings per share under the two class method:
Year ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Numerator: | ||||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 146,120 | $ | 130,557 | $ | 168,949 | ||||||
Earnings allocated to participating share-based awards(1) | (1,399 | ) | (1,458 | ) | (2,061 | ) | ||||||
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Net income attributable to common stockholders | $ | 144,721 | $ | 129,099 | $ | 166,888 | ||||||
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Denominator (shares in thousands): | ||||||||||||
Basic weighted average common stock outstanding | 111,565 | 112,736 | 113,216 | |||||||||
Common equivalent shares for stock options | 213 | 41 | 36 | |||||||||
Common equivalent shares for restricted stock units | 373 | 447 | 572 | |||||||||
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Diluted | 112,151 | 113,224 | 113,824 | |||||||||
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Basic earnings per share attributable to common stockholders | $ | 1.30 | $ | 1.15 | $ | 1.47 | ||||||
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Diluted earnings per share attributable to common stockholders | $ | 1.29 | $ | 1.14 | $ | 1.47 | ||||||
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In August 2007, the Company initiated a quarterly dividend policy, which was amended in November 2010. Below is a summary of dividends declared for the fiscal periods indicated.
Date Declared | Date of Record | Date Paid | Amount per Common | Total Dividends (1) | ||||
02/25/10 | 03/05/10 | 03/19/10 | $0.18 | $20,104 | ||||
05/13/10 | 06/04/10 | 06/18/10 | $0.18 | 20,313 | ||||
07/29/10 | 08/17/10 | 09/01/10 | $0.18 | 20,519 | ||||
11/02/10 | 11/22/10 | 12/07/10 | $0.21 | 24,201 | ||||
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Total — Year ended December 31, 2010 | $85,137 | |||||||
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02/24/11 | 03/04/11 | 03/16/11 | $0.21 | $24,056 | ||||
05/12/11 | 06/06/11 | 06/17/11 | $0.21 | 24,152 | ||||
08/04/11 | 08/17/11 | 09/01/11 | $0.21 | 24,157 | ||||
11/03/11 | 11/18/11 | 12/07/11 | $0.21 | 24,157 | ||||
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Total — Year ended December 31, 2011 | $96,522 | |||||||
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02/03/12 | 03/02/12 | 03/16/12 | $0.21 | $24,141 | ||||
05/11/12 | 06/04/12 | 06/19/12 | $0.21 | 24,274 | ||||
08/08/12 | 08/21/12 | 09/05/12 | $0.21 | 24,281 | ||||
11/06/12 | 11/21/12 | 12/07/12 | $0.21 | 24,565 | ||||
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Total — Year ended December 31, 2012 | $97,261 | |||||||
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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Acquisition of Rave Theatres
During November 2012, the Company entered into an asset purchase agreement with Rave Real Property Holdco, LLC and certain of its subsidiaries, Rave Cinemas, LLC and RC Processing, LLC (collectively “Rave”), pursuant to which the Company will acquire 32 theatres with 483 screens located in 12 states. The estimated purchase price is approximately $240,000. The purchase price, the amount of which is subject to certain closing date adjustments, will consist of cash consideration and the assumption of certain liabilities. The transaction is expected to close during the first quarter of 2013, subject to the satisfaction of customary closing conditions for transactions of this type, including Department of Justice or Federal Trade Commission antitrust approval.
Acquisition of Argentina Theatres
During August 2011, the Company acquired ten theatres with 95 screens from Hoyts General Cinema South America, Inc. in a stock purchase for approximately $66,958 in cash. The acquisition resulted in an expansion of the Company’s international theatre base. The Company incurred approximately $200 in transaction costs, which are reflected in general and administrative expenses on the consolidated statement of income for the year ended December 31, 2011. The transaction was accounted for by applying the acquisition method.
The following table represents the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date:
Theatre properties and equipment | $ | 24,098 | ||
Tradename | 10,032 | |||
Favorable leases | 3,919 | |||
Other intangible assets | 884 | |||
Goodwill | 43,018 | |||
Long-term debt | (5,993 | ) | ||
Deferred tax liability | (7,240 | ) | ||
Other liabilities, net of other assets | (1,760 | ) | ||
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Total | $ | 66,958 | ||
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The weighted average amortization period for the intangible assets acquired was approximately seven years as of the acquisition date. The acquisition is subject to review by the Argentina Comisión Nacional de Defensa de la Competencia (“CNDC”).
Canada Dispositions
During November 2010, the Company sold its one theatre in Canada for approximately $6,320 in cash proceeds and recorded a gain on sale of assets and other of approximately $7,025, which also reflected the write-off of a deferred rent liability related to the theatre.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table presents computations of basic and diluted earnings per share under the two class method:
Year ended December 31, | ||||||||||||
2013 | 2014 | 2015 | ||||||||||
Numerator: | ||||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 148,470 | $ | 192,610 | $ | 216,869 | ||||||
Earnings allocated to participating share-based awards(1) | (1,530 | ) | (1,345 | ) | (1,306 | ) | ||||||
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Net income attributable to common stockholders | $ | 146,940 | $ | 191,265 | $ | 215,563 | ||||||
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Denominator (shares in thousands): | ||||||||||||
Basic weighted average common stock outstanding | 113,896 | 114,653 | 115,080 | |||||||||
Common equivalent shares for stock options | 9 | — | — | |||||||||
Common equivalent shares for restricted stock units | 491 | 313 | 319 | |||||||||
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Diluted | 114,396 | 114,966 | 115,399 | |||||||||
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Basic earnings per share attributable to common stockholders | $ | 1.28 | $ | 1.66 | $ | 1.87 | ||||||
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Diluted earnings per share attributable to common stockholders | $ | 1.28 | $ | 1.66 | $ | 1.87 | ||||||
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(1) | For the years ended December 31, 2013, 2014 and 2015, a weighted average of approximately 1,198 shares, 810 shares and 699 shares, of unvested restricted stock, respectively, are considered participating securities. |
4. | DIVIDENDS |
Below is a summary of dividends declared for the fiscal periods indicated.
Date Declared | Date of Record | Date Paid | Amount per Common | Total Dividends(1) | ||||
02/12/13 | 03/04/13 | 03/15/13 | $0.21 | $24,325 | ||||
05/24/13 | 06/06/13 | 06/20/13 | $0.21 | 24,348 | ||||
08/15/13 | 08/28/13 | 09/12/13 | $0.25 | 28,992 | ||||
11/19/13 | 12/02/13 | 12/11/13 | $0.25 | 29,152 | ||||
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Total — Year ended December 31, 2013 | $106,817 | |||||||
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02/14/14 | 03/04/14 | 03/19/14 | $0.25 | $29,015 | ||||
05/22/14 | 06/06/14 | 06/20/14 | $0.25 | 29,030 | ||||
08/13/14 | 08/28/14 | 09/12/14 | $0.25 | 29,032 | ||||
11/12/14 | 12/02/14 | 12/11/14 | $0.25 | 29,078 | ||||
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Total — Year ended December 31, 2014 | $116,155 | |||||||
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02/17/15 | 03/04/15 | 03/18/15 | $0.25 | $29,025 | ||||
05/18/15 | 06/05/15 | 06/19/15 | $0.25 | 29,075 | ||||
08/20/15 | 08/31/15 | 09/11/15 | $0.25 | 29,080 | ||||
11/13/15 | 12/02/15 | 12/16/15 | $0.25 | 29,276 | ||||
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Total — Year ended December 31, 2015 | $116,456 | |||||||
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(1) | Of the dividends recorded during 2013, 2014 and 2015, $772, $530 and $593, respectively, were related to outstanding restricted stock units and will not be paid until such units vest. See Note 16. |
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
(2) | Beginning with the dividend declared on August 15, 2013, the Company’s board of directors raised the quarterly dividend to $0.25 per common share. |
5. | ACQUISITIONS AND DISPOSITIONS |
Acquisition of Rave Theatres
On May 29, 2013, the Company acquired 32 theatres with 483 screens from Rave Real Property Holdco, LLC and certain of its subsidiaries, Rave Cinemas, LLC and RC Processing, LLC (collectively “Rave”) in an asset purchase for approximately $236,875 in cash plus the assumption of certain liabilities (the “Rave Acquisition”). The acquisition resulted in an expansion of the Company’s domestic theatre base into one new state and seven new markets. The transaction was subject to antitrust approval by the Department of Justice or Federal Trade Commission. The Department of Justice required the Company to agree to divest of three of the newly-acquired theatres, which occurred during August 2013 (see discussion below). The Company incurred approximately $500 in transaction costs, which are reflected in general and administrative expenses on the consolidated statement of income for the year ended December 31, 2013.
The transaction was accounted for by applying the acquisition method. The following table represents the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date:
Theatre properties and equipment | $ | 102,977 | ||
Tradename | 25,000 | |||
Favorable leases | 17,587 | |||
Goodwill | 186,418 | |||
Unfavorable leases | (30,718 | ) | ||
Deferred revenue | (6,634 | ) | ||
Capital lease liabilities | (61,651 | ) | ||
Other assets, net of other liabilities | 3,896 | |||
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Total | $ | 236,875 | ||
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The weighted average amortization period for the intangible assets acquired was approximately 14 years as of the acquisition date. The goodwill is fully deductible for tax purposes. The acquired theatres are reported in the Company’s U.S. segment.
The following unaudited pro forma information summarizes our results of operations as if the Rave Acquisition had occurred as of January 1, 2013:
Year Ended December 31, 2013 | ||||
Total revenues | $ | 2,777,458 | ||
Income before income taxes | $ | 273,440 |
Acquisition of Other U.S. Theatres
The Company acquired two additional theatres with 30 screens during April 2013 in two separate transactions for an aggregate purchase price of approximately $22,372 in cash plus the assumption of certain
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
liabilities. The transactions were accounted for by applying the acquisition method. The following table represents the aggregate fair values of identifiable assets acquired and the liabilities assumed as of the acquisition date:
Theatre properties and equipment | $ | 17,524 | ||
Goodwill | 17,409 | |||
Capital lease liability | (12,173 | ) | ||
Deferred revenue | (388 | ) | ||
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Total | $ | 22,372 | ||
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Disposition of Three Rave Theatres
In conjunction with the Rave Acquisition, the Company was required to divest of three theatres pursuant to a Hold Separate Agreement with the Department of Justice. On July 17, 2013, the Company entered into a definitive agreement to sell these three theatres to Carmike Cinemas, Inc. The transaction was approved by the Department of Justice and closed on August 16, 2013.
Disposition of Mexico Subsidiaries
During February 2013, the Company entered into a stock purchase agreement with Grupo Cinemex, S.A. De C.V. pursuant to which the Company would sell its Mexican subsidiaries, which consisted of 31 theatres and 290 screens. The transaction was subject to approval by the Mexican Federal Competition Commission (the “Competition Commission”). During August 2013, the Competition Commission voted three to two to block the transaction and the Company filed an appeal for the Competition Commission to reconsider the sale. During November 2010,2013, the Company also sold its interestCompetition Committee approved the sale and the transaction closed on November 15, 2013. The sales price, which was paid in a profit sharing agreement related to a previously sold Canadian property.Mexican pesos, was approximately $126,167, based on the exchange rate at November 15, 2013. The Company received proceedsrecorded a pre-tax gain of approximately $8,493 and recorded a gain$3,521 on the sale of assets and other.during the year ended December 31, 2013.
6. | INVESTMENT IN NATIONAL CINEMEDIA LLC |
The Company has an investment in National CineMedia, LLC (“NCM”). NCM operates a digital in-theatre network in the U.S. for providing cinema advertising and non-film events. Upon joining NCM, the Company entered into an Exhibitor Services Agreement, or the ESA, with NCM, pursuant to which NCM provides advertising, promotion and event services to our theatres. On February 13, 2007, National CineMedia, Inc. (“NCMI”), an entity that serves as the sole manager of NCM, completed an IPO of its common stock. In connection with the NCMI initial public offering, the Company amended its operating agreement and the ESA with NCMI. The ESA modification reflected a shift from circuit share expense under the prior ESA, which obligated NCM to pay the Company a percentage of revenue, to a monthly theatre access fee, which significantly reduced the contractual amounts paid to us by NCM. The Company recorded the proceeds related to the ESA modification as deferred revenue, which is being amortized into other revenues over the life of the agreement using the units of revenue method. In consideration for NCM’s exclusive access to the Company’s theatre attendees for on-screen advertising and use of off-screen areas within the Company’s theatres for lobby entertainment and lobby promotions, the Company receives a monthly theatre access fee under the modified ESA. The theatre access fee is composed of a fixed payment per patron, initially seven cents, and a fixed payment per digital screen, which may be adjusted for certain reasons outlined in the modified ESA. The payment per theatre patron increases by 8% every five years, with the first such increase taking effect after the
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
end of fiscal 2011, and the payment per digital screen, initially eight hundred dollars per digital screen per year, increases annually by 5%. For 2010, 20112013, 2014 and 2012,2015, the annual payment per digital screen was nineone thousand seventy-two dollars, one thousand one hundred twenty-six dollars, nine hundred seventy-twotwenty-five dollars and one thousand twenty-oneone hundred eight-two dollars, respectively. The theatre access fee paid in the aggregate to Regal Entertainment Group (“Regal”), AMC Entertainment, Inc. (“AMC”) and the Company will not be less than 12% of NCM’s Aggregate Advertising Revenue (as defined in the modified ESA), or it will be adjusted upward to reach this minimum payment. Additionally, with respect to any on-screen advertising time provided to the Company’s beverage concessionaire, the Company is required to purchase such time from NCM at a negotiated rate. The modified ESA has, except with respect to certain limited services, a remaining term of approximately 2421 years.
As a result of the application of a portion of the proceeds it received from the NCMI initial public offering, the Company had a negative basis in its original membership units in NCM, which is referred to herein as the Company’s Tranche 1 Investment. Following the NCM, Inc.NCMI IPO, the Company does not recognize undistributed equity in the earnings on its 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 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
Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCMI and the Company, AMC and Regal, which we refer to collectively as the Founding Members, annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
operated and theatre attendance generated by each Founding Member. To account for the receipt of additional common units under the Common Unit Adjustment Agreement, we follow the guidance in FASB ASC 323-10-35-29 (formerly EITF 02-18, “Accounting for Subsequent Investments in an Investee after Suspension of Equity Loss Recognition”) by analogy, which also refers to AICPA Technical Practice Aid 2220.14, which indicates that if a subsequent investment is made in an equity method investee that has experienced significant losses, the investor must determine if the subsequent investment constitutes funding of prior losses. We concluded that the construction or acquisition of new theatres that has led to the common unit adjustments equates to making additional investments in NCM. We evaluated the receipt of the additional common units in NCM and the assets exchanged for these additional units and have determined that the right to use our incremental new screens would not be considered funding of prior losses. We account for these additional common units, which we refer to herein as our Tranche 2 Investment, as a separate investment than our Tranche 1 Investment. The common units received are recorded at fair value as an increase in our investment in NCM with an offset to deferred revenue. The deferred revenue is amortized over the remaining term of the ESA. Our Tranche 2 Investment is accounted for following the equity method, with undistributed equity earnings related to our Tranche 2 Investment included as a component of earnings in equity in income (loss) of affiliates and distributions received related to our Tranche 2 Investment are recorded as a reduction of our investment basis. In the event that a common unit adjustment is determined to be a negative number, the Founding Member can elect to either transfer and surrender to NCM the number of common units equal to all or part of such Founding Member’s common unit adjustment or to pay to NCM an amount equal to such Founding Member’s common unit adjustment calculated in accordance with the Common Unit Adjustment Agreement. If the Company then elects to surrender common units as part of a negative common unit adjustment, the Company would record a reduction to deferred revenue at the then fair value of the common units surrendered and a reduction of the Company’s Tranche 2 Investment at an amount
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
equal to the weighted average cost for Tranche 2 common units, with the difference between the two values recorded as a gain or loss on sale of assets and other.
During March 2010, NCM performed its annualBelow is a summary of common unit adjustment calculationunits received by the Company under the Common Unit Adjustment Agreement. As a result ofAgreement during the calculation,years ended December 31, 2013, 2014 and 2015:
Event | Date | Number of | Fair Value of | |||||||||
2013 Annual common unit adjustment | 03/28/13 | 588,024 | $ | 8,869 | ||||||||
2013 Extraordinary common unit adjustment (as result of Rave Acquisition – see Note 5) | 05/29/13 | 5,315,837 | $ | 89,928 | ||||||||
2014 Annual common unit adjustment | 03/27/14 | 557,631 | $ | 8,216 | ||||||||
2015 Annual common unit adjustment | 03/31/15 | 1,074,910 | $ | 15,421 |
Each common unit received by the Company received an additional 1,757,548 common units of NCM, each of which is convertible into one share of NCM, Inc.NCMI common stock. The fair value of the common units received was estimated based on the market price of NCMI stock at the time that the common units were received, adjusted for volatility associated with the estimated period of time it would take to convert the common units and register the respective shares. The fair value measurement used for the common units falls under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC Topic 820-10-35. The Company recorded therecords additional common units received at fair valueit receives as part of its Tranche 2 Investment at estimated fair value with a corresponding adjustment to deferred revenue of $30,683. Subsequent to the annual common unit adjustment discussed above, in May 2010, one of NCM’s other founding members completed an acquisition of another theatre circuit that required an extraordinary common unit adjustment calculation by NCM in accordance with the Common Unit Adjustment Agreement. As a result of this extraordinary common unit adjustment, the founding member was granted additional common units of NCM, which resulted in dilution of the Company’s ownership interest in NCM. The Company recognized a change of interest gain of approximately $271 during the year ended December 31, 2010 as a result of this extraordinary common unit adjustment, which is reflected in (gain) loss on sale of assets and other on the consolidated statement of income.
During March 2011, 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 549,417 common units of NCM, each of which is convertible into one share of NCM, Inc. common stock. The Company recorded the additional common units received at fair value as part of its Tranche 2 Investment with a corresponding adjustment to deferred revenue of approximately $9,302.
During March 2012, 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 598,724 common units of NCM, each of which is convertible into one share of NCM, Inc. common stock. The Company recorded the additional common units received at fair value as part of its Tranche 2 Investment with a corresponding adjustment to deferred revenue of approximately $9,137.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
revenue.
As of December 31, 2012,2015, the Company owned a total of 18,094,64425,631,046 common units of NCM, which represented an approximate 16%19% interest. Each common unit is convertible into one share of NCMI common stock. The estimated fair value of the Company’s investment in NCM was approximately $255,677$402,664 as of December 31, 2012,2015, using NCMI’s stock price as of December 31, 20122015 of $14.13$15.71 per share.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Summary of Activity with NCM
Below is a summary of activity with NCM included in the Company’s consolidated financial statements:statements for the periods indicated:
Investment in NCM | Deferred Revenue | Distributions from NCM | Equity in Earnings | Other Revenue | Cash Received | Investment in NCM | Deferred Revenue | Distributions from NCM | Equity in Earnings | Other Revenue | Other Comprehensive (Income) Loss | Cash Received | ||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2010 | $ | 34,232 | $ | (203,006 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2013 | $ | 78,123 | $ | (241,305 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Receipt of common units due to annual common unit adjustment | $ | 30,683 | $ | (30,683 | ) | $ | — | $ | — | $ | — | $ | — | 8,869 | (8,869 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
Change of interest gain due to extraordinary common unit adjustment(2) | 271 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Receipt of common units due to extraordinary common unit adjustment | 89,928 | (89,928 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Revenues earned under ESA(1) | — | — | — | — | (5,033 | ) | 5,033 | — | — | (7,960 | ) | — | 7,960 | |||||||||||||||||||||||||||||||||||||||
Receipt of excess cash distributions | (4,753 | ) | — | (19,616 | ) | — | — | 24,369 | (13,166 | ) | — | (19,374 | ) | — | — | — | 32,540 | |||||||||||||||||||||||||||||||||||
Receipt under tax receivable agreement | (520 | ) | — | (3,742 | ) | — | — | 4,262 | (492 | ) | — | (1,327 | ) | — | — | — | 1,819 | |||||||||||||||||||||||||||||||||||
Equity in earnings | 4,463 | — | — | (4,463 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Equity in earnings(2) | 13,753 | — | — | (11,578 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Equity in other comprehensive income | 1,838 | — | — | — | — | (1,838 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
Amortization of deferred revenue | — | 3,116 | — | — | (3,116 | ) | — | — | 5,673 | — | — | (5,673 | ) | — | — | |||||||||||||||||||||||||||||||||||||
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Balance as of and for the period ended December 31, 2010 | $ | 64,376 | $ | (230,573 | ) | $ | (23,358 | ) | $ | (4,463 | ) | $ | (8,149 | ) | $ | 33,664 | ||||||||||||||||||||||||||||||||||||
Balance as of and for the period ended December 31, 2013 | $ | 178,853 | $ | (334,429 | ) | $ | (20,701 | ) | $ | (11,578 | ) | $ | (13,633 | ) | $ | (1,838 | ) | $ | 42,319 | |||||||||||||||||||||||||||||||||
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Receipt of common units due to annual common unit adjustment | $ | 9,302 | $ | (9,302 | ) | $ | — | $ | — | $ | — | $ | — | 8,216 | (8,216 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
Revenues earned under ESA(1) | — | — | — | — | (5,890 | ) | 5,890 | — | — | — | — | (9,249 | ) | — | 9,249 | |||||||||||||||||||||||||||||||||||||
Receipt of excess cash distributions | (6,322 | ) | — | (20,023 | ) | — | — | 26,345 | (12,574 | ) | — | (14,778 | ) | — | — | — | 27,352 | |||||||||||||||||||||||||||||||||||
Receipt under tax receivable agreement | (729 | ) | — | (4,138 | ) | — | — | 4,867 | (2,594 | ) | — | (3,763 | ) | — | — | — | 6,357 | |||||||||||||||||||||||||||||||||||
Equity in earnings | 5,413 | — | — | (5,413 | ) | — | — | 6,142 | — | — | (6,142 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||
Equity in other comprehensive income | 896 | — | — | — | — | (896 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
Amortization of deferred revenue | — | 3,565 | — | — | (3,565 | ) | — | — | 7,426 | — | — | (7,426 | ) | — | — | |||||||||||||||||||||||||||||||||||||
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Balance as of and for the period ended December 31, 2011 | $ | 72,040 | $ | (236,310 | ) | $ | (24,161 | ) | $ | (5,413 | ) | $ | (9,455 | ) | $ | 37,102 | ||||||||||||||||||||||||||||||||||||
Balance as of and for the period ended December 31, 2014 | $ | 178,939 | $ | (335,219 | ) | $ | (18,541 | ) | $ | (6,142 | ) | $ | (16,675 | ) | $ | (896 | ) | $ | 42,958 | |||||||||||||||||||||||||||||||||
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Receipt of common units due to annual common unit adjustment | $ | 9,137 | $ | (9,137 | ) | $ | — | $ | — | $ | — | $ | — | 15,421 | (15,421 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||
Revenues earned under ESA(1) | — | — | — | — | (7,112 | ) | 7,112 | — | — | — | — | (11,330 | ) | — | 11,330 | |||||||||||||||||||||||||||||||||||||
Receipt of excess cash distributions | (6,503 | ) | — | (17,889 | ) | — | — | 24,392 | (14,072 | ) | — | (15,396 | ) | — | — | — | 29,468 | |||||||||||||||||||||||||||||||||||
Receipt under tax receivable agreement | (967 | ) | — | (2,923 | ) | — | — | 3,890 | (2,308 | ) | — | (2,744 | ) | — | — | — | 5,052 | |||||||||||||||||||||||||||||||||||
Equity in earnings | 4,416 | — | — | (4,416 | ) | — | — | 8,510 | — | — | (8,510 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||
Equity in other comprehensive loss | (2,735 | ) | — | — | — | — | 2,735 | — | ||||||||||||||||||||||||||||||||||||||||||||
Amortization of deferred revenue | — | 4,142 | — | — | (4,142 | ) | — | — | 8,506 | — | — | (8,506 | ) | — | — | |||||||||||||||||||||||||||||||||||||
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Balance as of and for the period ended December 31, 2012 | $ | 78,123 | $ | (241,305 | ) | $ | (20,812 | ) | $ | (4,416 | ) | $ | (11,254 | ) | $ | 35,394 | ||||||||||||||||||||||||||||||||||||
Balance as of and for the period ended December 31, 2015 | $ | 183,755 | $ | (342,134 | ) | $ | (18,140 | ) | $ | (8,510 | ) | $ | (19,836 | ) | $ | 2,735 | $ | 45,850 | ||||||||||||||||||||||||||||||||||
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(1) | Amounts include the per patron and per digital screen theatre access fees due to the Company, net of amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire. The amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire were approximately |
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
(2) | A portion of the equity in earnings recorded for the year ended December 31, 2013 was recorded as a reduction in our investment basis in a joint venture (AC JV, LLC) that the Company, along with Regal and AMC, recently formed with NCM. See Note 7. |
On May 5, 2014, NCMI announced that it had entered into a merger agreement to acquire Screenvision, LLC. On November 3, 2014, the U.S. Department of Justice (“DOJ”) filed an antitrust lawsuit seeking to enjoin the proposed merger between NCMI and Screenvision, LLC. On March 16, 2015, NCMI announced that it had agreed with Screenvision, LLC to terminate the merger agreement. The termination of the merger agreement resulted in a $26.8 million termination payment to Screenvision by NCMI. NCM indemnified NCMI for the termination fee. The impact of the termination payment and related merger costs resulted in NCM not making an excess cash distribution to its shareholders during the second quarter of 2015.
The Company made payments to NCM of approximately $124 and $50 during the years ended December 31, 2014 and 2015, respectively, related to installation of certain equipment used for digital advertising, which is included in theatre furniture and equipment on the consolidated balance sheets. The Company paid event fees of $8,249 to NCM for the year ended December 31, 2013, prior to the formation of AC JV, LLC, as discussed in Note 7, which are included in film rentals and advertising costs on the consolidated statements of income.
The tables below present summary financial information for NCM for the periods indicated (information(financial information for the year ended December 28, 2012 was31, 2015 is not yet available):
Year Ended | Year Ended | Nine Months Ended October 1, 2015 | ||||||||||||||||||||||
December 31, 2009 | December 30, 2010 | December 29, 2011 | December 26, 2013 | January 1, 2015 | ||||||||||||||||||||
Gross revenues | $ | 380,667 | $ | 427,475 | $ | 435,434 | $ | 462,815 | $ | 393,994 | $ | 310,061 | ||||||||||||
Operating income | $ | 168,146 | $ | 190,559 | $ | 193,716 | $ | 202,019 | $ | 159,624 | $ | 40,442 | ||||||||||||
Net income | $ | 128,531 | $ | 139,541 | $ | 134,524 | $ | 162,870 | $ | 96,309 | $ | 38,519 |
As of | ||||||||||||||||
December 30, 2010 | December 29, 2011 | As of January 1, 2015 | As of October 1, 2015 | |||||||||||||
Total assets | $ | 425,972 | $ | 421,442 | $ | 681,107 | $ | 700,326 | ||||||||
Total liabilities | $ | 932,549 | $ | 948,938 | $ | 998,529 | $ | 1,030,243 |
7. |
The Company had the following other investments at December 31:
2014 | 2015 | |||||||
Digital Cinema Implementation Partners (“DCIP”), equity method investment | $ | 51,277 | $ | 71,579 | ||||
RealD, Inc. (“RealD”), investment in marketable security | 14,429 | 12,900 | ||||||
AC JV, LLC, equity method investment | 7,899 | 7,269 | ||||||
Digital Cinema Distribution Coalition (“DCDC”), equity method investment | 2,438 | 2,562 | ||||||
Other | 1,615 | 663 | ||||||
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Total | $ | 77,658 | $ | 94,973 | ||||
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is a summary of activity for each of the investments for the years ended December 31, 2013, 2014 and 2015:
DCIP | RealD | AC JV, LLC | DCDC | Other | Total | |||||||||||||||||||
Balance at January 1, 2013 | $ | 23,012 | $ | 13,707 | $ | — | $ | 5 | $ | 1,477 | $ | 38,201 | ||||||||||||
Cash contributions | 3,232 | — | 268 | 2,721 | — | 6,221 | ||||||||||||||||||
Issuance of promissory note to NCM | — | — | 8,333 | — | — | 8,333 | ||||||||||||||||||
Equity in income (loss) | 11,241 | — | — | (137 | ) | — | 11,104 | |||||||||||||||||
Equity in other comprehensive income | 548 | — | — | — | — | 548 | ||||||||||||||||||
Adjustment for gain recognized by NCM | — | — | (2,175 | ) | — | — | (2,175 | ) | ||||||||||||||||
Unrealized holding loss | — | (3,264 | ) | — | — | — | (3,264 | ) | ||||||||||||||||
Other | — | — | — | — | 689 | 689 | ||||||||||||||||||
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Balance at December 31, 2013 | $ | 38,033 | $ | 10,443 | $ | 6,426 | $ | 2,589 | $ | 2,166 | $ | 59,657 | ||||||||||||
Cash contributions | 2,188 | — | — | — | — | 2,188 | ||||||||||||||||||
Equity in income (loss) | 15,279 | — | 1,473 | (151 | ) | — | 16,601 | |||||||||||||||||
Equity in other comprehensive loss | (219 | ) | — | — | — | — | (219 | ) | ||||||||||||||||
Unrealized holding gain | — | 3,986 | — | — | — | 3,986 | ||||||||||||||||||
Cash distributions received | (4,004 | ) | — | — | — | — | (4,004 | ) | ||||||||||||||||
Other | — | — | — | — | (551 | ) | (551 | ) | ||||||||||||||||
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Balance at December 31, 2014 | $ | 51,277 | $ | 14,429 | $ | 7,899 | $ | 2,438 | $ | 1,615 | $ | 77,658 | ||||||||||||
Cash contributions | 3,211 | — | — | — | 500 | 3,711 | ||||||||||||||||||
Equity in income | 18,522 | — | 970 | 124 | — | 19,616 | ||||||||||||||||||
Equity in other comprehensive loss | (384 | ) | — | — | — | — | (384 | ) | ||||||||||||||||
Unrealized holding loss | — | (1,529 | ) | — | — | — | (1,529 | ) | ||||||||||||||||
Sale of investment in Taiwan(1) | — | — | — | — | (1,383 | ) | (1,383 | ) | ||||||||||||||||
Cash distributions received | (1,047 | ) | — | (1,600 | ) | — | — | (2,647 | ) | |||||||||||||||
Other | — | — | — | — | (69 | ) | (69 | ) | ||||||||||||||||
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Balance at December 31, 2015 | $ | 71,579 | $ | 12,900 | $ | 7,269 | $ | 2,562 | $ | 663 | $ | 94,973 | ||||||||||||
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(1) | The Company sold its investment in a Taiwan joint venture for approximately $2,634, resulting in a gain of $1,251, which is included in (gain) loss on sale of assets and other for the year ended December 31, 2015. |
Digital Cinema Implementation Partners LLC
On February 12, 2007, the Company, AMC and Regal entered into a joint venture known as Digital Cinema Implementation Partners LLC (“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.
On March 10, 2010, the Company signed a master equipment lease agreement and other related agreements (collectively the “Agreements”) with Kasima LLC (“Kasima”), which is an indirect subsidiary of DCIP and a related party to the Company. Upon signing the Agreements, the Company contributed the majority of its U.S. digital projection systems at a fair value of $16,380 to DCIP, which DCIP then contributed to Kasima. The net book value of the contributed equipment was approximately $18,090, and as a result, the Company recorded a loss of approximately $1,710, which is reflected in (gain) loss on sale of assets and other on the consolidated statement of income for the year ended December 31, 2010. During April 2010, the Company sold additional U.S. digital projection systems with a net book value of approximately $1,520 to Kasima for approximately $1,197, resulting in an additional loss of approximately $323, which is reflected in (gain) loss on sale of assets and other on the consolidated statement of income for the year ended December 31, 2010. During 2011, the Company sold additional U.S. digital projection systems with a net book value of approximately $3,777 to DCIP for approximately $2,739, resulting in a loss of approximately $1,038, which is reflected in (gain) loss on sale of assets and other on the consolidated statement of income for the year ended December 31, 2011.
The Company has a variable interest in Kasima through the terms of its master equipment lease agreement; however, the Company has determined that it is not the primary beneficiary of Kasima, as the Company does not have the ability to direct the activities of Kasima that most significantly impact Kasima’s economic performance.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of December 31, 2012,2015, the Company had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. The Company accounts for its investment in DCIP and its subsidiaries under the equity method of accounting. Below is a rollforward of our investment in DCIP from January 1, 2010 through December 31, 2012:
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Balance as of January 1, 2010 | $ | 640 | ||
Cash contributions | 2,813 | |||
Equipment contributions, at fair value | 16,380 | |||
Distributions received | (1,068 | ) | ||
Equity in losses | (7,927 | ) | ||
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Balance as of December 31, 2010 | $ | 10,838 | ||
Cash contributions | 1,471 | |||
Equity in income | 489 | |||
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Balance as of December 31, 2011 | $ | 12,798 | ||
Cash contributions | 1,325 | |||
Equity in income | 8,889 | |||
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Balance as of December 31, 2012 | $ | 23,012 | ||
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Below is summary financial information for DCIP as of and for the years ended December 31, 20102013, 2014 and 2011. (Financial information for the year ended December 31, 2012 is not yet available.)2015.
Year ended December31, | Year ended December 31, | |||||||||||||||||||
2010 | 2011 | 2013 | 2014 | 2015 | ||||||||||||||||
Net operating revenue | $ | 32,396 | $ | 113,424 | $ | 182,659 | $ | 170,724 | $ | 171,203 | ||||||||||
Operating income | $ | 12,817 | $ | 70,508 | $ | 116,235 | $ | 101,956 | $ | 103,449 | ||||||||||
Net loss | $ | (24,461 | ) | $ | (2,510 | ) | ||||||||||||||
Net income | $ | 48,959 | $ | 61,293 | $ | 79,255 |
As of | As of | |||||||||||||||
December 31, 2010 | December 31, 2011 | December 31, 2014 | December 31, 2015 | |||||||||||||
Total assets | $ | 532,133 | $ | 1,087,782 | $ | 1,097,467 | $ | 1,004,292 | ||||||||
Total liabilities | $ | 468,191 | $ | 997,735 | $ | 845,319 | $ | 674,727 |
As a result of the Agreements, the Company has installed digital projection systems to a majority of its first run U.S. theatres. The digital projection systems are being leased from Kasima under an operating lease with an initial term of twelve years that contains ten one-year fair value renewal options. The equipment lease agreement also contains a fair value purchase option. Under the equipment lease agreement, the Company pays minimum annual rent of one thousand dollars per digital projection system for the first six and a half years from the effective date of the agreement and minimum annual rent of three thousand dollars per digital projection system beginning at six and a half years from the effective date through the end of the lease term.system. The Company may also be subject to various types of other rent if such digital projection systems do not meet minimum performance requirements as outlined in the agreements. Certain of the other rent payments are subject to either a monthly or an annual maximum. As of December 31, 2012,2015, the Company had 3,5153,781 digital projection systems being leased under the master equipment lease agreement with Kasima. The Company recorded equipment lease expense of approximately $1,354, $5,332 and $7,802had the following transactions with DCIP during the years ended December 31, 2010, 20112013, 2014 and 2012, respectively, which is included in utilities and other costs on the consolidated statements of income.
The digital projection systems leased from Kasima replaced a majority of the Company’s existing 35 millimeter projection systems in its U.S. theatres. Therefore, upon signing the agreements, the Company began
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Year Ended December 31, | ||||||||||||
2013 | 2014 | 2015 | ||||||||||
Equipment lease payments | $ | 3,853 | $ | 4,012 | $ | 4,474 | ||||||
Warranty reimbursements from DCIP | $ | (1,893 | ) | $ | (3,169 | ) | $ | (4,329 | ) |
accelerating the depreciation of these existing 35 millimeter projection systems. The Company recorded depreciation expense of approximately $9,423 and $10,604 on its domestic 35 millimeter projection systems during the years ended December 31, 2010 and 2011. The Company’s domestic 35 millimeter projection systems were fully depreciated as of December 31, 2011.RealD, Inc.
The Company licenses 3-D systems from RealD. Under its license agreement with RealD, the Company earned options to purchase shares of RealD common stock as it installed a certain number of 3-D systems as outlined in the license agreement. During 2010 and 2011, the Company earnedvested in a total of 1,085,828 options to purchase shares of common stock in RealD.1,222,780 RealD options. Upon vesting in these options, the Company recorded a total investment in RealD of approximately $18,909, which represented the estimated aggregate fair value of the options, with an offset to deferred lease incentive liability. The fair value of the RealD options in which the company vested during the year ended December 31, 2010, as discussed above, was determined using the quoted market price of RealD’s stock adjusted for the lock-up period to which the Company was subject until January 2011, which fell under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC Topic 820-10-35.
During January, February and March 2011, the Company vested in an additional 136,952 RealD options in the aggregate by reaching additional target levels, as outlined in the license agreement. Upon vesting in these additional options, the Company recorded an increase in its investment in RealD and itsa deferred lease incentive liability of approximately $3,402, which representedusing the estimated fair value of the RealD options. The fair value measurements were based upon RealD’s quoted stock prices onoptions at the datestime of vesting. These fair value measurements fall under Level 1 of the U.S. GAAP fair value hierarchy as defined by ASC Topic 820-10-35.
During March 2011, the Company exercised all of its options to purchase shares of common stock in RealD for $0.00667 per share.
The Company owns 1,222,780 shares of RealD and accounts for its investment in RealD as a marketable security. The Company has determined that its RealD shares are available-for-sale securities in accordance with ASC Topic 320-10-35-1, therefore unrealized holding gains and losses are reported as a component of accumulated other comprehensive loss until realized. The deferred lease incentive liability recorded as a result of the option vesting events discussed above is reflected in other long-term liabilities on the consolidated balance sheets and is being amortized over the term of the license agreement, which is approximately seven and one-half years. The license agreement has a remaining term of approximately six years.
During the year ended December 31, 2011, the Company recognized an other-than-temporary impairment on its investment in RealD due to the length of time and extent to which RealD’s quoted stock price had been below the Company’s basis in the stock. As a result of the other-than-temporary impairment, the Company reclassified approximately $12,610, which represented cumulative net unrealized holding losses, from accumulated other comprehensive loss to earnings.
As of December 31, 2012,2015, the Company owned 1,222,780 shares in RealD, with an estimated fair value of $13,707. The fair value of the Company’s investment in RealD shares was determined$12,900, which is based uponon the quotedclosing price of RealD’s common stock of $10.55 per share on December 31, 2012, which2015, and falls under Level 1 of the U.S. GAAP fair value hierarchy as defined by ASC Topic 820-10-35. During the years ended December 31, 2010, 2011 and 2012, the Company recorded a pre-tax unrealized holding gain (loss) of approximately $9,084, $(21,694) and $3,998, respectively, as a component of accumulated other comprehensive loss.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
BelowAC JV, LLC
During December 2013, the Company, Regal, AMC (the “AC Founding Members”) and NCM entered into a series of agreements that resulted in the formation of AC JV, LLC (“AC”), a new joint venture that now owns “Fathom Events” (consisting of Fathom Events and Fathom Consumer Events) formerly operated by NCM. The Fathom Events business focuses on the marketing and distribution of live and pre-recorded entertainment programming to various theatre operators to provide additional programs to augment their feature film schedule. The Fathom Consumer Events business includes live and pre-recorded concerts featuring contemporary music, opera and symphony, DVD product releases and marketing events, theatrical premieres, Broadway plays, live sporting events and other special events. The Company paid event fees of $9,273 and $11,440 for the years ended December 31, 2014 and 2015, respectively, which are included in film rentals and advertising costs on the consolidated statements of income.
AC was formed by the AC Founding Members and NCM. NCM, under a contribution agreement, contributed the assets associated with its Fathom Events division to AC in exchange for 97% ownership of the Class A Units of AC. Under a separate contribution agreement, the Founding Members each contributed cash of approximately $268 to AC in exchange for 1% of the Class A Units of AC. Subsequently, NCM and the Founding Members entered into a Membership Interest Purchase Agreement, under which NCM sold each of the Founding Members 31% of its Class A Units in AC, the aggregate value of which was determined to be $25,000, in exchange for a six-year Promissory Note. Each of the Founding Members’ Promissory Notes were originally for $8,333, bear interest at 5% per annum and require annual principal and interest payments, with the first of such payments made during December 2014. The remaining outstanding balance of the note payable from the Company to AC as of December 31, 2015 was $5,555.
Digital Cinema Distribution Coalition
The Company is a rollforward ofparty to a joint venture with certain exhibitors and distributors called Digital Cinema Distribution Coalition (“DCDC”). DCDC operates a satellite distribution network that distributes all digital content to U.S. theatres via satellite. The Company has an approximate 14.6% ownership in DCDC. The Company paid approximately $741 and $807 to DCDC during the Company’s investment in RealD from January 2010 throughyears ended December 31, 2012:
Balance as of January 1, 2010 | $ | — | ||
Fair value of options earned | 18,909 | |||
Unrealized holding gain | 9,084 | |||
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Balance as of December 31, 2010 | $ | 27,993 | ||
Fair value of options earned | 3,402 | |||
Exercise of options at $0.00667 per share | 8 | |||
Unrealized holding loss | (21,694 | ) | ||
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Balance as of December 31, 2011 | $ | 9,709 | ||
Unrealized holding gain | 3,998 | |||
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Balance as of December 31, 2012 | $ | 13,707 | ||
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During April 2010, the Company’s partners2014 and 2015 related to content delivery services provided by DCDC, which is included in Colombia (the “Colombian Partners”) exercised an option available to them under an Exchange Option Agreement dated April 9, 2007 between the Companyfilm rentals and the Colombian Partners. Under this option, which was contingent upon completion of an initial public offering of common stock by the Company, the Colombian Partners were entitled to exchange their shares in Cinemark Colombia S.A. for shares of the Company’s common stock (the “Colombia Share Exchange”). The number of shares to be exchanged was determined basedadvertising costs on the Company’s equity value and the equity valueconsolidated statements of the Colombian Partners’ interest in Cinemark Colombia S.A., both of which are defined in the Exchange Option Agreement. As a result of the Colombia Share Exchange, on June 14, 2010, the Company issued 1,112,723 shares of its common stock to the Colombian Partners. The increase in the Company’s ownership interest in its Colombian subsidiary was accounted for as an equity transaction. The Company recorded an increase in additional-paid-in-capital of approximately $6,951, which represented the book value of the Colombian partners’ noncontrolling interest account of approximately $5,865 plus the Colombian partners’ share of accumulated other comprehensive loss of approximately $1,086. As a result of this transaction, the Company owns 100% of the shares in Cinemark Colombia S.A.
During November 2010, the Company purchased its noncontrolling interests’ 20% share of Cinemark Panama S.A. (“Cinemark Panama”) for approximately $888 in cash. The transaction was accounted for as an equity transaction in accordance with ASC Topic 810-10-45-23. The book value of Cinemark Panama’s noncontrolling interest was approximately $498, therefore the Company recorded an adjustment to additional paid-in-capital of approximately $390. As a result of the transaction, the Company owns 100% of the shares in Cinemark Panama.
During May 2011, the Company purchased its Chilean partners’ 2.6% share of Cinemark Chile S.A. (“Cinemark Chile”) for approximately $1,443 in cash. The increase in the Company’s ownership interest in its Chilean subsidiary was accounted for as an equity transaction in accordance with ASC Topic 810-10-45-23. The Company recorded a decrease in additional paid-in-capital of approximately $1,402, which represented the difference between the cash paid and the book value of the Chilean partners’ noncontrolling interest account of approximately $917, plus the Chilean partners’ share of accumulated other comprehensive loss of approximately $485. As a result of this transaction, the Company owns 100% of the shares in Cinemark Chile.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
GOODWILL AND OTHER INTANGIBLE ASSETS — NET |
The Company’s goodwill was as follows:
U.S. Operating Segment | International Operating Segment | Total | ||||||||||
Balance at January 1, 2011(1) | $ | 948,026 | $ | 174,945 | $ | 1,122,971 | ||||||
Acquisition of ten theatres in Argentina (see Note 5) | — | 43,018 | 43,018 | |||||||||
Foreign currency translation adjustments | — | (15,352 | ) | (15,352 | ) | |||||||
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Balance at December 31, 2011(1) | $ | 948,026 | $ | 202,611 | $ | 1,150,637 | ||||||
Acquisition of U.S. theatre | 8,971 | — | 8,971 | |||||||||
Foreign currency translation adjustments | — | (8,797 | ) | (8,797 | ) | |||||||
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Balance at December 31, 2012(1) | $ | 956,997 | $ | 193,814 | $ | 1,150,811 | ||||||
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U.S. Operating Segment | International Operating Segment | Total | ||||||||||
Balance at December 31, 2013(1) | $ | 1,150,471 | $ | 137,619 | $ | 1,288,090 | ||||||
Acquisition of U.S. theatres | 6,085 | — | 6,085 | |||||||||
Other acquisitions | — | 1,108 | 1,108 | |||||||||
Foreign currency translation adjustments | — | (17,900 | ) | (17,900 | ) | |||||||
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Balance at December 31, 2014 (1) | $ | 1,156,556 | $ | 120,827 | $ | 1,277,383 | ||||||
Acquisition of Brazil theatre | — | 356 | 356 | |||||||||
Foreign currency translation adjustments | — | (30,191 | ) | (30,191 | ) | |||||||
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Balance at December 31, 2015(1) | $ | 1,156,556 | $ | 90,992 | $ | 1,247,548 | ||||||
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(1) | Balances are presented net of accumulated impairment losses of $214,031 for the U.S. operating segment and $27,622 for the international operating segment. |
As of December 31, intangible assets-net, consisted of the following:
January 1, 2011 | Additions (2) | Amortization | Other(1) | December 31, 2011 | ||||||||||||||||
Intangible assets with finite lives: | ||||||||||||||||||||
Gross carrying amount | $ | 64,319 | $ | 14,835 | $ | — | $ | (4,773 | ) | $ | 74,381 | |||||||||
Accumulated amortization | (46,185 | ) | — | (4,579 | ) | 3,451 | (47,313 | ) | ||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total net intangible assets with finite lives | 18,134 | 14,835 | (4,579 | ) | (1,322 | ) | 27,068 | |||||||||||||
Intangible assets with indefinite lives: | ||||||||||||||||||||
Tradename | 311,070 | — | — | (1,231 | ) | 309,839 | ||||||||||||||
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|
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|
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|
| |||||||||||
Total intangible assets — net | $ | 329,204 | $ | 14,835 | $ | (4,579 | ) | $ | (2,553 | ) | $ | 336,907 | ||||||||
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|
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|
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|
|
December 31, 2011 | Amortization | Other(1) | December 31, 2012 | |||||||||||||
Intangible assets with finite lives: | ||||||||||||||||
Gross carrying amount | $ | 74,381 | $ | — | $ | (2,460 | ) | $ | 71,921 | |||||||
Accumulated amortization | (47,313 | ) | (4,611 | ) | 570 | (51,354 | ) | |||||||||
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|
|
|
|
|
| |||||||||
Total net intangible assets with finite lives | 27,068 | (4,611 | ) | (1,890 | ) | 20,567 | ||||||||||
Intangible assets with indefinite lives: | ||||||||||||||||
Tradename | 309,839 | — | 335 | 310,174 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total intangible assets — net | $ | 336,907 | $ | (4,611 | ) | $ | (1,555 | ) | $ | 330,741 | ||||||
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of December 31, intangible assets-net, consisted of the following:
December 31, 2013 | Acquisitions | Amortization | Other(1) | December 31, 2014 | ||||||||||||||||
Intangible assets with finite lives: | ||||||||||||||||||||
Gross carrying amount | $ | 101,617 | $ | 300 | $ | — | $ | (1,995 | ) | $ | 99,922 | |||||||||
Accumulated amortization | (46,297 | ) | — | (5,947 | ) | 12 | (52,232 | ) | ||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total net intangible assets with finite lives | $ | 55,320 | $ | 300 | $ | (5,947 | ) | $ | (1,983 | ) | $ | 47,690 | ||||||||
Intangible assets with indefinite lives: | ||||||||||||||||||||
Tradename | 300,824 | — | — | (490 | ) | 300,334 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total intangible assets — net | $ | 356,144 | $ | 300 | $ | (5,947 | ) | $ | (2,473 | ) | $ | 348,024 | ||||||||
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|
|
|
|
|
|
|
|
December 31, 2014 | Amortization | Other(2) | December 31, 2015 | |||||||||||||
Intangible assets with finite lives: | ||||||||||||||||
Gross carrying amount | $ | 99,922 | $ | — | $ | 46 | $ | 99,968 | ||||||||
Accumulated amortization | (52,232 | ) | (5,716 | ) | (1,758 | ) | (59,706 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total net intangible assets with finite lives | $ | 47,690 | $ | (5,716 | ) | $ | (1,712 | ) | $ | 40,262 | ||||||
Intangible assets with indefinite lives: | ||||||||||||||||
Tradename | 300,334 | — | (952 | ) | 299,382 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total intangible assets — net | $ | 348,024 | $ | (5,716 | ) | $ | (2,664 | ) | $ | 339,644 | ||||||
|
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|
|
|
|
|
|
(1) | Activity for 2014 primarily consists of $479 for impairment of a tradename intangible asset related to one U.S. theatre and foreign currency translation adjustments. |
(2) | Activity for 2015 primarily consists of the write-off of intangible assets for closed theatres, the write-off of a vendor contract intangible asset, $992 for impairment of a favorable lease and foreign currency translation adjustments. |
Estimated aggregate future amortization expense for intangible assets is as follows:
For the year ended December 31, 2013 | $ | 4,199 | ||||||
For the year ended December 31, 2014 | 3,644 | |||||||
For the year ended December 31, 2015 | 3,351 | |||||||
For the year ended December 31, 2016 | 3,128 | $ | 5,389 | |||||
For the year ended December 31, 2017 | 2,498 | 4,857 | ||||||
For the year ended December 31, 2018 | 4,857 | |||||||
For the year ended December 31, 2019 | 3,977 | |||||||
For the year ended December 31, 2020 | 4,252 | |||||||
Thereafter | 3,747 | 16,930 | ||||||
|
| |||||||
Total | $ | 20,567 | $ | 40,262 | ||||
|
|
IMPAIRMENT OF LONG-LIVED ASSETS |
The Company reviews long-lived assets for impairment indicators on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. See Note 1 for discussion of the Company’s impairment evaluation.policy.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company’s long-lived asset impairment losses are summarized in the following table:
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
United States theatre properties | $ | 5,166 | $ | 3,635 | $ | 2,693 | $ | 1,911 | $ | 6,168 | $ | 7,052 | ||||||||||||
International theatre properties | 5,668 | 3,398 | 338 | 1,175 | — | 757 | ||||||||||||||||||
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| |||||||||||||||||||
Subtotal | $ | 10,834 | $ | 7,033 | $ | 3,031 | 3,086 | 6,168 | 7,809 | |||||||||||||||
Intangible assets (see Note 10) | 1,527 | — | — | |||||||||||||||||||||
Equity investment | 177 | — | — | |||||||||||||||||||||
Intangible assets (see Note 8) | 708 | 479 | 992 | |||||||||||||||||||||
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|
|
| |||||||||||||||||||
Impairment of long-lived assets | $ | 12,538 | $ | 7,033 | $ | 3,031 | $ | 3,794 | $ | 6,647 | $ | 8,801 | ||||||||||||
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|
|
|
The long-lived asset impairment charges recorded during each of the years presented are specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics, or adverse changes in the development or the conditions of the areas surrounding the theatre. As of December 31, 2012,2015, the estimated aggregate remaining fair value of the long-lived assets impaired during the year ended December 31, 20122015 was approximately $3,876.$8,395.
DEFERRED CHARGES AND OTHER ASSETS — NET |
As of December 31, deferred charges and other assets — net consisted of the following:
December 31, | ||||||||
2011 | 2012 | |||||||
Debt issue costs, net of accumulated amortization | $ | 26,870 | $ | 40,520 | ||||
Long-term prepaid rents | 15,778 | 14,958 | ||||||
Construction related deposits | 6,463 | 11,427 | ||||||
Lease deposits | 2,208 | 4,039 | ||||||
Equipment to be placed in service | 10,495 | 22,767 | ||||||
Other | 2,166 | 8,333 | ||||||
|
|
|
| |||||
Total | $ | 63,980 | $ | 102,044 | ||||
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|
|
December 31, | ||||||||
2014 | 2015 | |||||||
Long-term prepaid rents | 7,296 | 4,278 | ||||||
Construction and other deposits | 14,171 | 8,459 | ||||||
Equipment to be placed in service | 14,124 | 15,388 | ||||||
Other | 10,980 | 10,118 | ||||||
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|
|
| |||||
Total(1) | $ | 46,571 | $ | 38,243 | ||||
|
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|
|
(1) | See Note 2 for discussion of debt issuance costs reclassification upon adoption of ASU 2015-03. |
11. | LONG-TERM DEBT |
As of December 31, long-term debt consisted of the following:
December 31, | ||||||||
2014 | 2015 | |||||||
Cinemark USA, Inc. term loan | $ | 686,000 | $ | 679,000 | ||||
Cinemark USA, Inc. 4.875% senior notes due 2023 | 530,000 | 530,000 | ||||||
Cinemark USA, Inc. 5.125% senior notes due 2022 | 400,000 | 400,000 | ||||||
Cinemark USA, Inc. 7.375% senior subordinated notes due 2021 | 200,000 | 200,000 | ||||||
Other(1) | 6,997 | 5,572 | ||||||
|
|
|
| |||||
Total long-term debt | 1,822,997 | 1,814,572 | ||||||
Less current portion | 8,423 | 8,405 | ||||||
Less debt issuance costs, net of accumulated amortization of $10,918 and $16,058, respectively (2) | 31,419 | 33,237 | ||||||
|
|
|
| |||||
Long-term debt, less current portion | $ | 1,783,155 | $ | 1,772,930 | ||||
|
|
|
|
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
During the year ended December 31, 2012, the Company paid debt issue costs of $18,453 primarily related to the issuance of its 5.125% senior notes and the amendment and restatement of its senior secured credit facility. See Note 13 for discussion of long term debt activity.
As of December 31, long-term debt consisted of the following:
December 31, | ||||||||
2011 | 2012 | |||||||
Cinemark USA, Inc. term loan | $ | 905,887 | $ | 700,000 | ||||
Cinemark USA, Inc. 8.625% senior notes due 2019(1) | 460,530 | 461,464 | ||||||
Cinemark USA, Inc. 5.125% senior notes due 2022 | — | 400,000 | ||||||
Cinemark USA, Inc. 7.375% senior subordinated notes due 2021 | 200,000 | 200,000 | ||||||
Hoyts General Cinema (Argentina) bank loan due 2013 | 5,804 | 2,546 | ||||||
|
|
|
| |||||
Total long-term debt | 1,572,221 | 1,764,010 | ||||||
Less current portion | 12,145 | 9,546 | ||||||
|
|
|
| |||||
Long-term debt, less current portion | $ | 1,560,076 | $ | 1,754,464 | ||||
|
|
|
|
(1) |
|
(2) | See Note 2 for discussion of |
Amended Senior Secured Credit Facility
On December 18, 2012, Cinemark USA, Inc. amended and restated itshas a senior secured credit facility to includethat includes a seven year $700,000 term loan and a five year $100,000 revolving credit line referred to herein as the Amended Senior(the “Senior Secured Credit Facility. The proceeds fromFacility”). On May 8, 2015, Cinemark USA, Inc., our wholly-owned subsidiary, amended its senior secured credit facility to extend the Amended Senior Secured Credit Facility, combined with a portionmaturity of the proceeds from the 5.125% Senior Notes discussed below, were used to refinance the Company’s Former Senior Secured Credit Facility, also discussed below. The Company incurred debt issue costs of approximately $12,000 during the year ended December 31, 2012 related to the amendment and restatement. The$700,000 term loan under the Amended Senior Secured Credit Facility matures infrom December 2019. The revolving credit line, which was undrawn at closing and remained undrawn as of December 31, 2012, matures in December 2017.2019 to May 2022. Quarterly principal payments in the amount of $1,750 are due on the term loan beginningthrough March 2013 through September 201931, 2022, with the remaining principal of $652,750$635,250 due on May 8, 2022. The Company incurred debt issue costs of approximately $6,875 in connection with the amendment. In addition, the Company incurred approximately $925 in legal and other fees that are reflected as loss on amendment to debt agreement on the consolidated statement of income for the year ended December 18, 2019.31, 2015.
Interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin of 2.0% per annum, or (B) a “eurodollar rate” plus a margin of 3.0% per annum. Interest on the revolving credit line accrues, at Cinemark USA, Inc.’s option, at: (A) a base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5 and (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 1.00% to 1.75% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 2.00% to 2.75% 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 Amended Senior Secured Credit Facility are guaranteed by Cinemark Holdings, Inc. and certain of Cinemark USA, Inc.’s domestic subsidiaries and are secured by
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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 Amended Senior Secured Credit Facility 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 Cinemark Holdings, Inc.’s 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, and 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 determined in accordance with the Amended Senior Secured Credit Facility.
The dividend restriction contained in the Amended Senior Secured Credit Facility 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 the CompanyCinemark USA, Inc. to be in default, under the Amended Senior Secured Credit Facility; 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
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Amended Senior Secured Credit Facility, and (c) certain other defined amounts. As of December 31, 2012,2015, Cinemark USA, Inc. could have distributed up to approximately $1,409,000$1,905,096 to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the Amended Senior Secured Credit Facility, subject to its available cash and other borrowing restrictions outlined in the agreement.
At December 31, 2012,2015, there was $700,000$679,000 outstanding under the term loan and no borrowings outstanding under the revolving credit line. Cinemark USA, Inc. had $100,000 in available borrowing capacity on the revolving credit line. Cinemark USA, Inc. had no borrowings under the revolving credit line during the years ended December 31, 2014 or 2015. The average interest rate on outstanding term loan borrowings under the Amended Senior Secured Credit Facility at December 31, 20122015 was approximately 4.0%3.6% per annum.
4.875% Senior Notes
On May 24, 2013, Cinemark USA, Inc. issued $530,000 aggregate principal amount of 4.875% senior notes due 2023, at par value, (the “4.875% Senior Notes”). Proceeds, after payment of fees, were used to finance a redemption of the 8.625% Senior Notes due 2019, discussed below. Interest on the 4.875% Senior Notes is payable on June 1 and December 1 of each year, beginning December 1, 2013. The 4.875% Senior Notes mature on June 1, 2023.
The 4.875% 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 4.875% 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 unsecured debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior subordinated debt. The 4.875% 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 assets securing such debt, including all borrowings under Cinemark USA, Inc.’s senior secured credit facility. The 4.875% 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 4.875% Senior Notes.
The indenture to the 4.875% 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. As of December 31, 2015, Cinemark USA, Inc. could have distributed up to approximately $2,079,680 to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 4.875% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control, as defined in the indenture governing the 4.875% Senior Notes, Cinemark USA, Inc. would be required to make an offer to repurchase the 4.875% Senior 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 indenture governing the 4.875% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies 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 December 31, 2015 was approximately 7.7 to 1.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Prior to June 1, 2018, Cinemark USA, Inc. may redeem all or any part of the 4.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 4.875% Senior Notes to the date of redemption. After June 1, 2018, Cinemark USA, Inc. may redeem the 4.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to June 1, 2016, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal amount of the 4.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
5.125% Senior Notes
On December 18, 2012, Cinemark USA, Inc. issued $400,000 aggregate principal amount of 5.125% senior notes due 2022, at par value referred to herein as the 5.125%(the “5.125% Senior Notes.Notes”). A portion of the proceeds were used to refinance a portion of the Former Senior Secured Credit Facilityformer senior secured credit facility and a portion of the proceeds are expected to be used to fund the purchase price for the Rave Acquisition (see Note 5) and for general corporate purposes.5 to the consolidated financial statements). Interest on the 5.125% Senior Notes is payable on June 15 and December 15 of each year, beginning June 15, 2013. The senior notes5.125% Senior Notes mature on December 15, 2022. The Company incurred debt issue costs of approximately $6,400 in connection with the issuance during the year ended December 31, 2012.
The 5.125% 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 5.125% 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 unsecured debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantor’s existing and future subordinated debt. The 5.125% Senior Notes and the guarantees are effectively
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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 assets securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.125% 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 senior notes.5.125% Senior Notes.
The indenture to the 5.125% 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. As of December 31, 2012,2015, Cinemark USA, Inc. could have distributed up to approximately $1,118,500$2,083,985 to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 5.125% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control, of Cinemark Holdings, Inc. or Cinemark USA, Inc.,as defined in the indenture governing the 5.125% Senior Notes, Cinemark USA, Inc. would be required to make an offer to repurchase the 5.125% Senior 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 indenture governing the 5.125% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies 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 December 31, 20122015 was 5.6approximately 7.7 to 1.
Prior to December 15, 2017, Cinemark USA, Inc. may redeem all or any part of the 5.125% Senior Notes at its option at 100% of the principal amount plus a make-whole premium. After December 15, 2017, Cinemark USA, Inc. may redeem the 5.125% Senior Notes in whole or in part at redemption prices described in the 5.125% Senior Notes. In addition, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal amount of the 5.125% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the senior notes.
Under a registration rights agreement entered into in conjunction with the issuance of the 5.125% Senior Notes, the Company and its guarantor subsidiaries are obligated to use its commercially reasonable best efforts to file a registration statement with the Securities and Exchange Commission, or the Commission, on or prior to 120 days from the issuance date, pursuant to which the Company will offer to exchange the 5.125% Senior Notes for substantially identical notes registered under the Securities Act of 1933, as amended, that will not contain terms restricting the transfer thereof or providing for registration rights. The Company will use its commercially reasonable best efforts to have the registration statement declared effective by the Commission on or prior to 210 days from the issuance date, or the Effective Date. The Company will use its commercially reasonable best efforts to issue on the earliest practicable date after the Effective Date, but not later than 30 days thereafter, exchange registered 5.125% Senior Notes in exchange for all 5.125% Senior Notes tendered prior thereto in the exchange offer. If the Company is obligated to file a shelf registration statement, the Company will use its commercially reasonable best efforts to file the shelf registration statement with the Commission on or prior to 30 days after such filing obligation arises (and in any event within 240 days after the closing of the 5.125% Senior Notes offering) and to cause the shelf registration statement to be declared effective by the Commission on or prior to 210 days after such obligation arises. The Company will use its commercially reasonable best efforts to keep the shelf registration statement effective for a period of one year after the closing of the 5.125% Senior Notes offering, subject to certain exceptions.Notes.
If (a) the Company fails to file the registration statement on or before the date specified, (b) if such registration statement is not declared effective by the Commission on or prior to the date specified for such
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
effectiveness, (c) if the Company fails to consummate the exchange offer within 30 business days of the Effective Date with respect to the exchange offer registration statement or (d) if the date the shelf registration statement is declared effective by the Commission or the exchange offer registration statement thereafter ceases to be effective or usable during the periods specified in the registration rights agreement without being succeeded within two business days by a post-effective amendment to such registration statement that cures such failure and that is itself immediately declared effective (each such event a “Registration Default”), the Company will pay additional interest to each holder of the 5.125% Senior Notes. Such additional interest, with respect to the first 90-day period immediately following the occurrence of any such Registration Default, shall equal an increase in the annual interest rate on the notes by 0.5% per annum.
The amount of the additional interest will increase by an additional 0.5% per annum with respect to each subsequent 90-day period relating to such Registration Default until all Registration Defaults have been cured, up to a maximum amount of additional interest for all Registration Defaults of 1.0% per annum. The 5.125% Senior Notes will not accrue additional interest from and after the second anniversary of the closing of the 5.125% Senior Notes offering even if the Company is not in compliance with its obligations under the registration rights agreement. The receipt of additional interest shall be the sole remedy available to holders of 5.125% Senior Notes as a result of one or more Registration Defaults. Following the cure of all Registration Defaults, the accrual of additional interest will cease.
7.375% Senior Subordinated Notes
On June 3, 2011, Cinemark USA, Inc. issued $200,000 aggregate principal amount of 7.375% senior subordinated notes due 2021, at par value referred to herein as the Senior(the “Senior Subordinated Notes. The proceeds, after payment of fees, were primarily used to fund the prepayment of the remaining $157,235 of the Company’s unextended portion of term loan debt under its former senior secured credit facility.Notes”). Interest on the Senior Subordinated Notes is payable on June 15 and December 15 of each year. The Senior Subordinated Notes mature on June 15, 2021. The Company incurred debt issue costs of approximately $4,500 during the year ended December 31, 2011 in connection with the issuance.
The Senior Subordinated Notes are fully and unconditionally guaranteed on a joint and several senior subordinated unsecured basis by certain of the Company’sCinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of the Company’sCinemark USA, Inc.’s or a guarantor’s other debt. The Senior Subordinated Notes and the guarantees are senior subordinated unsecured obligations and rank equally in right of payment with all of the Company’sCinemark USA, Inc.’s and a guarantor’s future senior subordinated indebtedness; are subordinate in right of payment to all of the Company’sCinemark USA, Inc.’s and a guarantor’s existing and future senior indebtedness, whether secured or unsecured, including the Company’sCinemark USA, Inc.’s obligations under its Amended Senior Secured Credit Facility, its 8.625%5.125% Senior Notes and its 5.125%4.875% Senior Notes; and structurally subordinate to all existing and future indebtedness and other liabilities of the Company’sCinemark USA, Inc.’s non-guarantor subsidiaries.
The indenture to the Senior Subordinated 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. As of December 31, 2012,2015, Cinemark USA, Inc. could have distributed up to approximately $1,107,400$2,072,800 to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 7.375% Senior Subordinated Notes, subject to its available cash and other borrowing restrictions outlined in the indenture.indenture governing the Senior Subordinated Notes. Upon a change of control, as defined in the indenture, the CompanyCinemark USA, Inc. would be required to make an
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
offer to repurchase the senior subordinated notesSenior Subordinated 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 indenture governing the Senior Subordinated Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies 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 December 31, 20122015 was 5.5approximately 7.7 to 1.
Prior to June 15, 2016, Cinemark USA, Inc. may redeem all or any part of the Senior Subordinated Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the senior subordinated notes to the date of redemption. After June 15, 2016, Cinemark USA, Inc. may redeem the Senior Subordinated Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to June 15, 2014, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal amount of the Senior Subordinated Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
Cinemark USA, Inc. and its guarantor subsidiaries filed a registration statement with the Securities and Exchange Commission (the “Commission”) on July 27, 2011 pursuant to which Cinemark USA, Inc. offered to exchange the Senior Subordinated Notes for substantially similar registered Senior Subordinated Notes. The registration statement became effective August 4, 2011, and approximately $199,500 of the notes were exchanged on September 7, 2011. The registered Senior Subordinated Notes, issued in the exchange, do not have transfer restrictions. Approximately $500 of the notes were not exchanged as of December 31, 2012.
8.625% Senior Notes
On June 29, 2009, Cinemark USA, Inc. issued $470,000 aggregate principal amount of 8.625% senior notes due 2019 referred to herein as the 8.625%(the “8.625% Senior Notes,Notes”), with an original issue discount of $11,468, resulting in proceeds of approximately $458,532. The proceeds were primarily used to fund the repurchase of the then remaining outstanding $419,403 aggregate principal amount at maturity ofOn June 24, 2013, Cinemark USA, Inc.’s 9.75% senior discount notes. Interest on the redeemed its 8.625% Senior Notes is payable on June 15at 112.035% of the principal amount, inclusive of a make-whole premium, plus accrued and December 15unpaid interest, utilizing the proceeds from the issuance of each year. The 8.625%the 4.875% Senior Notes mature on June 15, 2019. The original issue discount is being amortized on the effective interest method over the termdiscussed above. As a result of the 8.625% Senior Notes. Asredemption, we wrote-off approximately $8,054 in unamortized bond discount and $7,634 in unamortized debt issue costs, paid a make-whole premium of approximately $56,564 and paid other fees of $50, all of which are reflected in loss on early retirement of debt during the year ended December 31, 2012, the carrying value of the 8.625% Senior Notes was $461,464.2013.
Cinemark USA, Inc. filed a registration statement with the Securities and Exchange Commission on September 24, 2009 pursuant to which Cinemark USA, Inc. offered to exchange the 8.625% Senior Notes for substantially similar registered 8.625% Senior Notes. The registration statement became effective and the notes were exchanged on December 17, 2009. The registered 8.625% Senior Notes, issued in the exchange, do not have transfer restrictions.
The 8.625% 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 8.625% 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 unsecured debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantor’s existing and future subordinated debt. The 8.625% 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 assets securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 8.625% 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 8.625% Senior Notes.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The indenture to the 8.625% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) consummate specified asset sales, (2) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (3) incur additional indebtedness and issue preferred stock, (4) enter into transactions with affiliates, (5) enter new lines of business, (6) merge or consolidate with, or sell all or substantially all of its assets to, another person and (7) create liens. As of December 31, 2012, Cinemark USA, Inc. could have distributed up to approximately $1,060,200 to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 8.625% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. Upon a change of control of Cinemark Holdings, Inc. or Cinemark USA, Inc., Cinemark USA, Inc. would be required to make an offer to repurchase the 8.625% Senior 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. Certain asset dispositions are considered triggering events that may require Cinemark USA, Inc. to use the proceeds from those asset dispositions to make an offer to purchase the notes at 100% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase if such proceeds are not otherwise used within 365 days as described in the indenture. The indenture governing the 8.625% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies 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 December 31, 2012 was 5.5 to 1.
Prior to June 15, 2014, Cinemark USA, Inc. may redeem all or any part of the 8.625% Senior Notes at its option at 100% of the principal amount plus a make-whole premium. After June 15, 2014, Cinemark USA, Inc. may redeem the 8.625% Senior Notes in whole or in part at redemption prices described in the senior notes. In addition, Cinemark USA, Inc. may redeem up to 35% of the aggregate principal amount of the 8.625% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the 8.625% Senior Notes.
Former Senior Secured Credit Facility
On October 5, 2006, in connection with the Century Acquisition, Cinemark USA, Inc. entered into its former senior secured credit facility that provided for a seven year $1,120,000 term loan and a six year $150,000 revolving credit line. On March 2, 2010, the Company completed an amendment and extension to this former senior secured credit facility to primarily extend the maturities of the facility and make certain other modifications. Approximately $924,375 of the Company’s then remaining outstanding $1,083,600 term loan debt was extended from an original maturity date of October 2013 to a maturity date of April 2016. The then remaining term loan debt of $159,225 that was not extended continued to have a maturity date of October 2013. On June 3, 2011, the Company prepaid the remaining $157,235 of its unextended term loan debt utilizing a portion of the proceeds from the issuance of the Cinemark USA, Inc. 7.375% senior subordinated notes discussed above. There were no prepayment penalties incurred upon the prepayment of the term loan debt. Subsequent to the prepayment, the quarterly payments due on the term loan were approximately $2,311 per quarter through March 2016 with the remaining principal amount of approximately $866,602 due April 30, 2016. The prepayment did not impact the interest rate applicable to the remaining portion of the term loan debt, which accrued interest at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a 2.25% margin per annum, or (B) a “eurodollar rate” plus a 3.25% margin per annum.
The prepayment did not impact the interest rate applicable to or the maturity of the Company’s revolving credit line. The maturity date of $73,500 of Cinemark USA, Inc.’s $150,000 revolving credit line had been
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
extended from October 2012 to March 2015. The maturity date of the remaining $76,500 of Cinemark USA, Inc.’s revolving credit line did not change and remained October 2012. The interest rate on the original revolving credit line accrued interest, at Cinemark USA, Inc.’s option, at: (A) a base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5 and (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 0.50% to 1.00% per annum, or (B) a “eurodollar rate” plus a margin that ranged from 1.50% to 2.00% per annum. The interest rate on the extended revolving credit line accrued interest, at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 1.75% to 2.0% per annum, or (B) a “eurodollar rate” plus a margin that ranged from 2.75% to 3.0% per annum. The margin of the revolving credit line was determined by the consolidated net senior secured leverage ratio as defined in the Former Senior Secured Credit Facility.
As a result of the prepayment made in June 2011, the Company wrote-off approximately $2,183 in unamortized debt issue costs related to the unextended portion of term loan debt that was prepaid. In addition, the Company determined that a portion of the quarterly interest payments hedged by two of its current interest rate swap agreements under cash flow hedges and the quarterly interest payments related to its previously terminated interest rate swap agreement were probable not to occur and therefore reclassified approximately $2,760 of its accumulated other comprehensive loss related to these cash flow hedges to earnings, as a component of loss on early retirement of debt. These write-offs, combined with related fees, are reflected in loss on early retirement of debt for the year ended December 31, 2011.
On December 18, 2012, the remaining outstanding term loan of $898,955 was paid in full with proceeds from the Amended Senior Secured Credit Facility combined with a portion of the proceeds from the 5.125% Senior Notes issuance, both of which are discussed above.
Fair Value of Long Term Debt
The Company estimates the fair value of its long-term debt primarily using quoted market prices, which fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35. The carrying value of the Company’s long term debt was $1,764,010$1,822,997 and $1,572,221$1,814,572 as of December 31, 20122014 and 2011,2015, respectively, excluding debt issuance costs of $31,419 and $33,237, respectively. The fair value of the Company’s long term debt was $1,851,246$1,790,987 and $1,622,286$1,806,276 as of December 31, 20122014 and 2011,2015, respectively.
Covenant Compliance and Debt Maturity
As of December 31, 2012,2015, the Company believes it was in full compliance with all agreements, including related covenants, governing its outstanding debt.
The Company’s long-term debt, excluding debt issuance costs, at December 31, 20122015 matures as follows:
2013 | 9,546 | |||||||
2014 | 7,000 | |||||||
2015 | 7,000 | |||||||
2016 | 7,000 | $ | 8,405 | |||||
2017 | 7,000 | 8,389 | ||||||
2018 | 8,389 | |||||||
2019 | 8,389 | |||||||
2020 | 7,000 | |||||||
Thereafter | 1,735,000 | (1) | 1,774,000 | |||||
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Total | 1,772,546 | $ | 1,814,572 | |||||
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
INTEREST RATE SWAP |
The Company is currently a party to threeone interest rate swap agreementsagreement that qualifyis used to hedge a portion of the interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualifies for cash flow hedge accounting. No premium or discount was incurred upon the Company entering into any of its interest rate swap agreements because the pay rates and receive rates on the interest rate swap agreements represented prevailing rates for each counterparty at the time eachThe fair value of the interest rate swap agreements was consummated. The fair values of the interest rate swaps areis recorded on the Company’s consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’swap’s gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings. The changes in fair valuesvalue are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged items affect earnings. For the years ended December 31, 2010, 2011 and 2012, the Company reclassified $11,771, $15,929 and $12,979, respectively, from accumulated other comprehensive loss intoitem affects earnings.
The valuation technique used to determine fair value is the income approach and under this approach, the Company uses projected future interest rates as provided by counterpartiescounterparty to the interest rate swap agreementsagreement and the fixed rates that the Company is obligated to pay under these agreements.the agreement. Therefore, the Company’s measurements use significant unobservable inputs, which fall in Level 3 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35. There were no changes in valuation techniques during the period and no transfers in or out of Level 3. See Note 13 for a summary of unrealized gains or losses recorded in accumulated other comprehensive loss and earnings.
Below is a summary of the Company’s interest rate swap agreements, all of which areagreement designated as cash flow hedges,hedge as of December 31, 2012:2015:
Nominal Amount | Effective Date | Pay Rate | Receive Rate | Expiration Date | Current Liability (1) | Long-Term Liability(2) | Estimated Total Fair Value at December 31, 2012 | |||||||||||||||||||||
$175,000 | December 2010 | 1.3975 | % | 1-Month LIBOR | September 2015 | $ | 1,959 | $ | 2,991 | $ | 4,950 | |||||||||||||||||
$175,000 | December 2010 | 1.4000 | % | 1-Month LIBOR | September 2015 | 1,978 | 3,004 | 4,982 | ||||||||||||||||||||
$100,000 | November 2011 | 1.7150 | % | 1-Month LIBOR | April 2016 | 1,566 | 2,694 | 4,260 | ||||||||||||||||||||
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$450,000 | $ | 5,503 | $ | 8,689 | $ | 14,192 | ||||||||||||||||||||||
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The Company was previously a party to an interest rate swap agreement that was effective during 2007 with a counterparty that filed for bankruptcy during September 2008 and whose credit rating was downgraded as a result. Prior to the counterparty’s credit rating downgrade, the change in fair value of the interest rate swap was recorded as a component of accumulated other comprehensive loss. Subsequent to the counterparty’s credit rating downgrade, the change in fair value of the interest rate swap was recorded in earnings as a component of interest expense. The Company terminated the interest rate swap agreement during October 2008. The Company determined that the forecasted transactions hedged by this interest rate swap are still probable to occur, thus the total amount previously reported in accumulated other comprehensive loss related to this interest rate swap agreement of $18,147 was amortized on a straight-line basis to interest expense over the period during which the forecasted transactions were expected to occur, which was September 15, 2008 through August 13, 2012. The Company amortized approximately $4,633, $4,236 and $2,470 to interest expense during the years ended December 31, 2010, 2011 and 2012, respectively.
Notional $100,000See Note 15 for additional information about the Company’s fair value measurements related to its interest rate swap agreements.
Amount Effective Date Pay Rate Receive Rate Expiration Date Estimated
Total Fair
Value at
December 31,
2015 (1) November 2011 1.7150 % 1-Month LIBOR April 2016 $ 373
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Included in accrued other current liabilities on the consolidated balance sheet as of December 31, 2015. |
The changes in accumulated other comprehensive loss, net of taxes, related to the Company’s interest rate swap agreements for the years ended December 31, 2013, 2014 and 2015 were as follows:
2013 | 2014 | 2015 | ||||||||||
Beginning balances — January 1 | $ | (8,867 | ) | $ | (5,716 | ) | $ | (2,870 | ) | |||
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Other comprehensive loss before reclassifications, net of taxes | (2,668 | ) | (3,169 | ) | (2,154 | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of taxes | 5,819 | 6,015 | 4,790 | |||||||||
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Net other comprehensive income | 3,151 | 2,846 | 2,636 | |||||||||
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Ending balances — December 31 | $ | (5,716 | ) | $ | (2,870 | ) | $ | (234 | ) | |||
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13. | FAIR VALUE MEASUREMENTS |
The Company determines fair value measurements in accordance with FASB 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 FASB 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 assets and liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of December 31, 2012:2014:
Carrying Value | Fair Value | |||||||||||||||
Description | Level 1 | Level 2 | Level 3 | |||||||||||||
Interest rate swap liabilities — current (see Note 14) | $ | (5,503 | ) | $ | — | $ | — | $ | (5,503 | ) | ||||||
Interest rate swap liabilities — long term (see Note 14) | $ | (8,689 | ) | $ | — | $ | — | $ | (8,689 | ) | ||||||
Investment in RealD (see Note 8) | $ | 13,707 | $ | 13,707 | $ | — | $ | — |
Description | Carrying Value | Fair Value | ||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Interest rate swap liabilities — current (see Note 12) | $ | (4,255 | ) | $ | — | $ | — | $ | (4,255 | ) | ||||||
Interest rate swap liabilities — long term (see Note 12) | $ | (317 | ) | $ | — | $ | — | $ | (317 | ) | ||||||
Investment in RealD (see Note 7) | $ | 14,429 | $ | 14,429 | $ | — | $ | — |
Below is a summary of assets and liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of December 31, 2011:2015:
Carrying Value | Fair Value | |||||||||||||||
Description | Level 1 | Level 2 | Level 3 | |||||||||||||
Interest rate swap liabilities — current (see Note 14) | $ | (9,979 | ) | $ | — | $ | — | $ | (9,979 | ) | ||||||
Interest rate swap liabilities — long term (see Note 14) | $ | (6,597 | ) | $ | — | $ | — | $ | (6,597 | ) | ||||||
Investment in RealD (see Note 8) | $ | 9,709 | $ | 9,709 | $ | — | $ | — |
Below is a reconciliation of the beginning and ending balance for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Liabilities | Assets | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Beginning balances — January 1 | $ | 16,576 | $ | 15,970 | $ | — | $ | 8,955 | ||||||||
Total gain (loss) included in accumulated other comprehensive loss | (1,576 | ) | 1,736 | — | (8,955 | ) | ||||||||||
Total gain included in earnings | (808 | ) | (1,130 | ) | — | — | ||||||||||
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Ending balances — December 31 | $ | 14,192 | $ | 16,576 | $ | — | $ | — | ||||||||
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Description Interest rate swap liabilities — current (see Note 12) Investment in RealD (see Note 7)The Company also uses fair value measurements on a nonrecurring basis in the impairment evaluations of its long-lived assets (see Note 1 and Note 11 for further discussions). There were no changes in valuation techniques during the period. The fair value measurement for the Company’s investment in RealD transferred from Level 2 to Level 1 during the year ended December 31, 2011. Previous fair value estimates for the investment were based on RealD’s quoted stock price, discounted to reflect the impact of a lock-up period to which the Company was subject. The lock-up period expired during January 2011; therefore, the fair value Carrying
Value Fair Value Level 1 Level
2 Level 3 $ (373 ) $ — $ — $ (373 ) $ 12,900 $ 12,900 $ — $ —
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is a reconciliation of the beginning and ending balance for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Liabilities | ||||||||
2014 | 2015 | |||||||
Beginning balances — January 1 | $ | 9,176 | $ | 4,572 | ||||
Total (gain) loss included in accumulated other comprehensive loss | 1,411 | (155 | ) | |||||
Settlements | (6,015 | ) | (4,790 | ) | ||||
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Ending balances — December 31 | $ | 4,572 | $ | 373 | ||||
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estimatesThe Company also uses the market approach for fair value measurements on a nonrecurring basis in the investment subsequent to January 2011 were based on RealD’s stock price with no adjustments. Seeimpairment evaluations of its long-lived assets (see Note 8 for more information onand Note 9). Additionally, the Company’s investmentCompany uses the market approach to estimate the fair value of its long-term debt (see Note 11). There were no changes in RealD.valuation techniques during the period. There were no transfers in or out of Level 1, Level 2 or Level 3 during the yearyears ended December 31, 2012.2013, 2014 and 2015.
FOREIGN CURRENCY TRANSLATION |
The accumulated other comprehensive loss account in stockholders’ equity of $23,682$144,772 and $37,698$271,686 at December 31, 20112014 and 2012,2015, respectively, includes the cumulative foreign currency losses of $11,325$147,930 and $31,330,$273,404, respectively, from translating the financial statements of the Company’s international subsidiaries, the change in fair values of the Company’s interest rate swap agreements that are designated as hedges and the change in fair value of the Company’s available-for-sale securities.
All foreign countries where the Company has operations 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.
Below is a summary of the impact of translating the December 31, 2012 financial statements of certain of the Company’s international subsidiaries:subsidiaries as of and for the years ended December 31, 2013, 2014 and 2015.
Other Comprehensive | ||||||||||||||||||||||||||||||||||||||||
Country | Exchange Rate as of | Total Assets at December 31, 2012 | Other Comprehensive Income (Loss) For Year Ended December 31, 2012 | Exchange Rates as of December 31, | Income (Loss) For Year Ended December 31, | |||||||||||||||||||||||||||||||||||
December 31, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2013 | 2014 | 2015 | |||||||||||||||||||||||||||||||||||
Brazil | 2.05 | 1.87 | $ | 348,405 | $ | (21,690 | ) | 2.36 | 2.69 | 3.96 | $ | (34,451 | ) | $ | (30,723 | ) | $ | (74,559 | ) | |||||||||||||||||||||
Mexico | 13.02 | 14.00 | $ | 137,705 | 6,601 | |||||||||||||||||||||||||||||||||||
Argentina | 4.91 | 4.31 | $ | 133,152 | (12,926 | ) | 6.52 | 8.55 | 12.95 | (24,845 | ) | (20,197 | ) | (30,520 | ) | |||||||||||||||||||||||||
Colombia | 1,768.23 | 1,950.0 | $ | 46,898 | 2,790 | 1,926.83 | 2,392.46 | 3,149.47 | (2,969 | ) | (7,632 | ) | (8,043 | ) | ||||||||||||||||||||||||||
Chile | 479.8 | 520.7 | $ | 49,749 | 2,958 | 525.5 | 606.2 | 709.16 | (3,570 | ) | (5,580 | ) | (6,572 | ) | ||||||||||||||||||||||||||
Peru | 2.84 | 3.05 | 3.46 | (3,685 | ) | (2,785 | ) | (4,882 | ) | |||||||||||||||||||||||||||||||
All other | 2,262 | (185 | ) | (2,066 | ) | (898 | ) | |||||||||||||||||||||||||||||||||
Sale of Mexico subsidiary | 22,088 | — | — | |||||||||||||||||||||||||||||||||||||
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$ | (20,005 | ) | $ | (47,617 | ) | $ | (68,983 | ) | $ | (125,474 | ) | |||||||||||||||||||||||||||||
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Below is a summary ofDuring November 2013, the impact of translatingCompany completed the December 31, 2011 financial statementssale of certain of its Mexico subsidiaries. As a result of this sale, the Company’s international subsidiaries:accumulated other comprehensive loss previously unrealized for these Mexico subsidiaries of $22,088 was recognized by the Company as part of the gain on sale. See Note 5 for additional information.
Exchange Rate as of | Total Assets at December 31, 2011 | Other Comprehensive Income (Loss) For Year Ended December 31, 2011 | ||||||||||||||
Country | December 31, 2011 | December 31, 2010 | ||||||||||||||
Brazil | 1.87 | 1.67 | $ | 327,679 | $ | (28,000 | ) | |||||||||
Mexico | 14.00 | 12.39 | $ | 121,935 | (11,818 | ) | ||||||||||
Argentina | 4.31 | 3.98 | $ | 128,524 | (4,196 | ) | ||||||||||
Colombia | 1,950.0 | 1,950.0 | $ | 34,568 | 153 | |||||||||||
Chile | 520.7 | 473.2 | $ | 40,084 | (3,324 | ) | ||||||||||
All other | 1,127 | |||||||||||||||
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$ | (46,058 | ) | ||||||||||||||
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
During May 2011, the Company’s ownership in its Chilean subsidiary increased from 97.4% to 100% as a result of the Company’s purchase of the noncontrolling interests’ shares of Cinemark Chile. As part of this transaction, the Company recorded the amount of accumulated other comprehensive loss previously allocated to the noncontrolling interest of $485, related to the translation of the Chilean financial statements into U.S. dollars, as an increase to accumulated other comprehensive loss with an offsetting decrease to additional paid-in-capital. See Note 9.
The Company had the following investments in and advances to affiliates at December 31:
December 31, | ||||||||
2011 | 2012 | |||||||
Cinemark — Core Pacific, Ltd. (Taiwan) — investment, at cost — 14% interest | $ | 1,383 | $ | 1,383 | ||||
Other | 160 | 99 | ||||||
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Total | $ | 1,543 | $ | 1,482 | ||||
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NONCONTROLLING INTERESTS IN SUBSIDIARIES |
Noncontrolling interests in subsidiaries of the Company were as follows at December 31:
December 31, | December 31, | |||||||||||||||
2011 | 2012 | 2014 | 2015 | |||||||||||||
Cinemark Partners II — 49.2% interest (in one theatre) | $ | 7,864 | $ | 7,701 | ||||||||||||
Cinemark Partners II — 24.6% interest (in one theatre) | $ | 7,769 | $ | 7,753 | ||||||||||||
Laredo Theatres — 25% interest (in two theatres) | 372 | 913 | 1,112 | 1,761 | ||||||||||||
Greeley Ltd. — 49.0% interest (in one theatre) | 695 | 622 | 589 | 740 | ||||||||||||
Others | 1,831 | 1,683 | ||||||||||||||
Other | 859 | 851 | ||||||||||||||
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Total | $ | 10,762 | $ | 10,919 | $ | 10,329 | $ | 11,105 | ||||||||
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During August 2013, the Company purchased the 49.9% noncontrolling interest share of one of its Brazilian subsidiaries, Adamark Cinemas S.A. (“Adamark”), for approximately $5,621 in cash. Adamark had investments in two of the Company’s Brazilian theatres. The increase in the Company’s ownership interest in the Brazilian subsidiary was accounted for as an equity transaction in accordance with ASC Topic 810-10-45-23. The Company recorded a decrease in additional paid-in-capital of approximately $4,618, which represented the difference between the cash paid and the book value of the Brazilian subsidiary’s noncontrolling interest account. As a result of this transaction, the Company owns 100% of the shares in Adamark.
Below is a summary of the impact of changes in the Company’s ownership interest in its subsidiaries on its equity:
Years ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 146,120 | $ | 130,557 | $ | 168,949 | ||||||
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Transfers from noncontrolling interests | ||||||||||||
Increase in Cinemark Holdings, Inc. common stock and additional paid-in-capital for the Colombia Share Exchange (see Note 9) | $ | 6,951 | $ | — | $ | — | ||||||
Decrease in Cinemark Holdings, Inc. additional paid-in-capital for the buyout of Panama noncontrolling interests (see Note 9) | (390 | ) | — | — | ||||||||
Decrease in Cinemark Holdings, Inc. additional paid-in-capital for the buyout of Chile noncontrolling interests (see Note 9) | — | (1,402 | ) | — | ||||||||
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Net transfers from non-controlling interests | 6,561 | (1,402 | ) | — | ||||||||
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Change from net income attributable to Cinemark Holdings, Inc. and transfers from noncontrolling interests | $ | 152,681 | $ | 129,155 | $ | 168,949 | ||||||
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Year ended December 31, | ||||||||||||
2013 | 2014 | 2015 | ||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 148,470 | $ | 192,610 | $ | 216,869 | ||||||
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Transfers from noncontrolling interests | ||||||||||||
Decrease in Cinemark Holdings, Inc. additional paid-in-capital for the buyout of Adamark non-controlling interest | (4,618 | ) | — | — | ||||||||
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Net transfers from non-controlling interests | (4,618 | ) | — | — | ||||||||
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Change from net income attributable to Cinemark Holdings, Inc. and transfers from noncontrolling interests | $ | 143,852 | $ | 192,610 | $ | 216,869 | ||||||
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CAPITAL STOCK |
Common Stock —Common stockholders are entitled to vote on all matters submitted to a vote of the Company’s stockholders. Subject to the rights of holders of any then outstanding shares of the Company’s preferred stock, the Company’s common stockholders are entitled to any dividends that may be declared by the board of directors. The shares of the Company’s common stock are not subject to any redemption provisions. The Company has no issued and outstanding shares of preferred stock.
The Company’s ability to pay dividends is effectively limited by its status as a holding company and the terms of its subsidiary’s indentures and its subsidiary’s amended senior secured credit facility, which also significantly restricts the ability of certain of the Company’s subsidiaries to pay dividends directly or indirectly to the Company. See Note 13.11. Furthermore, certain of the Company’s foreign subsidiaries currently have a deficit in retained earnings which prevents the Company from declaring and paying dividends from those subsidiaries.
During April 2010, the Company’s partners in Colombia (the “Colombian Partners”) exercised an option available to them under an Exchange Option Agreement dated April 9, 2007 between the Company
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and the Colombian Partners. Under this option, which was contingent upon completion of an initial public offering of common stock by the Company, the Colombian Partners were entitled to exchange their shares in Cinemark Colombia S.A. for shares of the Company’s common stock. The number of shares to be exchanged was determined based on the Company’s equity value and the equity value of the Colombian Partners’ interest in Cinemark Colombia S.A., both of which are defined in the Exchange Option Agreement. As a result of this exchange, on June 14, 2010, the Company issued 1,112,723 shares of its common stock to the Colombian Partners. See Note 9.per share data
Treasury Stock —Treasury stock represents shares of common stock repurchased by the Company and not yet retired. The Company has applied the cost method in recording its treasury shares.
Below is a summary of the Company’s treasury stock activity for the years ended December 31, 20112013, 2014 and 2012:2015:
Number of Treasury Shares | Cost | Number of | ||||||||||||||
Balance at January 1, 2011 | 3,359,859 | $ | 44,725 | |||||||||||||
Restricted stock forfeitures(1) | 1,920 | — | ||||||||||||||
Restricted stock withholdings(2) | 25,200 | 494 | ||||||||||||||
Restricted stock awards canceled(1) | 4,613 | — | ||||||||||||||
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| Treasury Shares | Cost | |||||||||||||
Balance at December 31, 2011 | 3,391,592 | $ | 45,219 | |||||||||||||
Balance at January 1, 2013 | 3,553,085 | $ | 48,482 | |||||||||||||
Restricted stock forfeitures(1) | 14,423 | — | 22,653 | — | ||||||||||||
Restricted stock withholdings(2) | 147,070 | 3,263 | 119,197 | 3,464 | ||||||||||||
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Balance at December 31, 2012 | 3,553,085 | $ | 48,482 | |||||||||||||
Balance at December 31, 2013 | 3,694,935 | $ | 51,946 | |||||||||||||
Restricted stock forfeitures(1) | 25,947 | — | ||||||||||||||
Restricted stock withholdings(2) | 336,253 | 9,861 | ||||||||||||||
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Balance at December 31, 2014 | 4,057,135 | $ | 61,807 | |||||||||||||
Restricted stock forfeitures(1) | 17,897 | — | ||||||||||||||
Restricted stock withholdings(2) | 108,472 | 4,770 | ||||||||||||||
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Balance at December 31, 2015 | 4,183,504 | $ | 66,577 | |||||||||||||
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(1) | The Company repurchased forfeited and canceled restricted shares at a cost of $0.001 per share in accordance with the Company’s Amended and Restated 2006 Long Term Incentive Plan. |
(2) | The Company withheld restricted shares as a result of the election by certain employees to satisfy their tax liabilities upon vesting in restricted stock. The Company determined the number of shares to be withheld based upon market values that ranged from |
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of December 31, 2012,2015, the Company had no plans to retire any shares of treasury stock.
Stock Options — Below is a summary of stock option activity and related information for the years ended December 31, 2010, 20112013 and 2012:2014:
Year Ended December 31, 2010 | Year Ended December 31, 2011 | Year Ended December 31, 2012 | Year Ended December 31, 2013 | Year Ended December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | ||||||||||||||||||||||||||||||||||
Outstanding at January 1 | 1,231,892 | $ | 7.63 | 140,356 | $ | 7.63 | 82,166 | $ | 7.63 | 22,022 | $ | 7.63 | 14,584 | $ | 7.63 | |||||||||||||||||||||||||||||
Exercised | (1,091,536 | ) | $ | 7.63 | (58,190 | ) | $ | 7.63 | (60,144 | ) | $ | 7.63 | (7,438 | ) | $ | 7.63 | (14,584 | ) | $ | 7.63 | ||||||||||||||||||||||||
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Outstanding at December 31 | 140,356 | $ | 7.63 | 82,166 | $ | 7.63 | 22,022 | $ | 7.63 | $ | 404 | 14,584 | $ | 7.63 | — | |||||||||||||||||||||||||||||
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Vested options at December 31 | 140,356 | $ | 7.63 | 82,166 | $ | 7.63 | 22,022 | $ | 7.63 | $ | 404 | 14,584 | $ | 7.63 | — | |||||||||||||||||||||||||||||
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All outstanding stock options were fully vested as of April 2, 2009. There were no options granted or forfeited during any of the periods presented. The total intrinsic value of options exercised during the years ended December 31, 2010, 20112013 and 2012,2014 was $9,836, $699$168 and $1,070,$296, respectively. The Company recognized tax benefits of approximately $2,680, $238$71 and $449$124 related to the options exercised during the year ended December 31, 2010, 20112013 and 2012,2014, respectively.
Options outstanding at December 31, 2012 have an average remaining contractual life of approximately two years.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Restricted Stock — Below is a summary of restricted stock activity for the years ended December 31, 2010, 20112013, 2014 and 2012:2015:
Year Ended December 31, 2010 | Year Ended December 31, 2011 | Year Ended December 31, 2012 | Year Ended December 31, 2013 | Year Ended December 31, 2014 | Year Ended December 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | Shares of Restricted Stock | Weighted Average Grant Date Fair Value | Shares of Restricted Stock | Weighted Average Grant Date Fair Value | Shares of Restricted Stock | Weighted Average Grant Date Fair Value | |||||||||||||||||||||||||||||||||||||
Outstanding at January 1 | 764,078 | $ | 11.10 | 1,254,691 | $ | 14.60 | 1,384,390 | $ | 16.85 | 1,534,163 | $ | 18.85 | 1,260,913 | $ | 21.86 | 878,897 | $ | 24.92 | ||||||||||||||||||||||||||||||
Granted | 683,921 | $ | 17.94 | 424,436 | $ | 19.45 | 653,229 | $ | 21.70 | 271,532 | $ | 30.09 | 269,774 | $ | 28.93 | 226,212 | $ | 42.79 | ||||||||||||||||||||||||||||||
Vested | (190,589 | ) | $ | 12.63 | (288,204 | ) | $ | 10.84 | (489,033 | ) | $ | 17.00 | (522,129 | ) | $ | 17.27 | (625,843 | ) | $ | 20.53 | (329,437 | ) | $ | 23.72 | ||||||||||||||||||||||||
Canceled | — | $ | — | (4,613 | ) | $ | 18.35 | — | $ | — | ||||||||||||||||||||||||||||||||||||||
Forfeited | (2,719 | ) | $ | 11.03 | (1,920 | ) | $ | 14.34 | (14,423 | ) | $ | 18.58 | (22,653 | ) | $ | 22.92 | (25,947 | ) | $ | 22.94 | (17,897 | ) | $ | 27.58 | ||||||||||||||||||||||||
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Outstanding at December 31 | 1,254,691 | $ | 14.60 | 1,384,390 | $ | 16.85 | 1,534,163 | $ | 18.85 | 1,260,913 | $ | 21.86 | 878,897 | $ | 24.92 | 757,775 | $ | 30.73 | ||||||||||||||||||||||||||||||
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During the year ended December 31, 2012,2015, the Company granted 653,229226,212 shares of restricted stock to directors and employees of the Company. The fair valuesvalue of the restricted stock granted werewas determined based on the market valuesvalue of the Company’s common stock on the datesdate of grant, which ranged from $21.63$40.75 to $22.97$43.28 per share. The Company assumed forfeiture rates ranging from 0% to 5%10% for the restricted stock awards. Certain of the restrictedRestricted stock granted to directors vests over a one-year period. Restricted stock granted to employees vests over three years based on continued service and the remaining restricted stock grantedperiods ranging from one year to employees vests over four years based on continued service. The restricted stock granted to the directors vests over one year based on continued service. The recipients of restricted stock are entitled to receive dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company recorded total compensation expense of $4,928, $6,591 and $10,637 related to restricted stock awards during the years ended December 31, 2010, 2011 and 2012, respectively. Upon vesting, the Company receives an income tax deduction. The total fair value of shares vested during the years ended December 31, 2010, 2011 and 2012 was $3,272, $5,658 and $9,702, respectively. The Company recognized tax benefits of approximately $1,087, $2,188 and $4,075 related to shares that vested during the years ended December 2010, 2011 and 2012, respectively.
Year Ended December 31, | ||||||||||||
2013 | 2014 | 2015 | ||||||||||
Compensation expense recognized during the period | $ | 12,738 | $ | 9,534 | $ | 9,600 | ||||||
Fair value of restricted shares that vested during the period | $ | 10,161 | $ | 18,773 | $ | 14,424 | ||||||
Income tax deduction upon vesting of restricted stock awards | $ | 4,268 | $ | 5,625 | $ | 3,823 |
As of December 31, 2012,2015, the remaining unrecognized compensation expense related to these restricted stock awards was approximately $18,341.$11,944. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.
Restricted Stock Units— During the years ended December 31, 2010, 20112013, 2014 and 2012,2015, the Company granted restricted stock units representing 396,429, 153,727115,107, 197,515 and 152,955142,917 hypothetical shares of common stock, respectively, under the Restated Incentive Plan.to employees. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on an implied equity value concept that determines an internal rate of return (“IRR”) duringfor a three fiscal yearmeasurement period, as defined in the award agreement, based on a formula utilizing a multiple of Adjusted EBITDA subject to certain specified adjustments (as defined in the restricted stock unit award agreement). The measurement period for the restricted stock unit awards granted during the year ended December 31, 2013 is a three year period and the measurement period for the restricted stock unit awards granted during the years ended December 31, 2014 and 2015 is a two year period. The financial performance factors for the restricted stock units have a threshold, target and maximum level of payment opportunity.opportunity and vest on a prorata basis according to the IRR achieved by the Company during the performance period. If the IRR for the three yeardefined measurement period is at least 8.5% (7.5% for the 2015 grant), which is the threshold, at least one-third of the restricted stock units vest. If the IRR for the three yeardefined measurement period is at least 10.5% (9.5% for the 2015 grant), which is the target, at least two-thirds of the restricted stock units vest. If the IRR for the three yeardefined measurement period is at least 12.5% (11.5% for the 2015 grant), which is
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
the maximum, 100% of the restricted stock units vest. Further, as an example, if the Company achieves an IRR equal to 11.0%, the number of restricted stock units that shall vest will be greater than the target but less than the maximum number that would have vested had the Company achieved the highest IRR. All payouts of restricted stock units that vest will be subject to an additional one year service requirement and will be paid in the form of common stock if the participant continues to provide services through the fourth anniversary of the grant date.
At the time of each of the 2010, 2011 and 2012 restricted stock unit grants, the Company was not able to determine whichassumes the IRR level wouldto be reached for the respective three year performancedefined measurement period therefore the Company assumedwill be the mid-point IRR level for these grants in determining the amount of compensation expense to record for such grants. The fair values ofIf and when additional information becomes available to indicate that something other than the restricted stock unit awards granted were determined basedmid-point IRR level will be achieved, the Company adjusts compensation expense on a prospective basis over the market values of the Company’s common stock on the dates of grant, which ranged from $18.34 to $21.63 per share.remaining service period. The Company assumed forfeiture rates ranging from 0% to 5% for the restricted stock unit awards.awards granted during 2015. Restricted stock unit award participants are eligible to receive dividend equivalent payments if and at the time the restricted stock unit awards vest.
Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the years ended December 31, 2010, 20112013, 2014 and 20122015 at each of the three levels of financial performance (excluding forfeitures):
Granted During the Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2011 | 2012 | ||||||||||||||||||||||
Number of Shares Vesting | Value at Grant | Number of Shares Vesting | Value at Grant | Number of Shares Vesting | Value at Grant | |||||||||||||||||||
at IRR of at least 8.5% | 132,144 | $ | 2,423 | 51,239 | $ | 991 | 50,981 | $ | 1,103 | |||||||||||||||
at IRR of at least 10.5% | 264,288 | $ | 4,847 | 102,488 | $ | 1,983 | 101,974 | $ | 2,206 | |||||||||||||||
at IRR of at least 12.5% | 396,429 | $ | 7,271 | 153,727 | $ | 2,975 | 152,955 | $ | 3,308 |
Granted During the Year Ended December 31, | ||||||||||||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||||||
Number of | Value at | Number of | Value at | Number of | Value at | |||||||||||||||||||
Units | Grant (1) | Units | Grant (1) | Units | Grant (1) | |||||||||||||||||||
at IRR of at least 8.5% (7.5% for 2015 grant) | 38,366 | $ | 1,129 | 65,832 | $ | 1,879 | 47,640 | $ | 2,057 | |||||||||||||||
at IRR of at least 10.5% (9.5% for 2015 grant) | 76,741 | $ | 2,259 | 131,683 | $ | 3,758 | 95,282 | $ | 4,115 | |||||||||||||||
at IRR of at least 12.5% (11.5% for 2015 grant) | 115,107 | $ | 3,389 | 197,515 | $ | 5,637 | 142,917 | $ | 6,173 |
(1) | The weighted average grant date fair values for units issued during the years ended December 31, 2013, 2014, and 2015 were $29.44, $28.54 and $43.19, respectively. |
Below is a summary of activity for restricted stock unit awards for the periods indicated:
Year Ended December 31, | ||||||||||||
2013 | 2014 | 2015 | ||||||||||
Number of restricted stock unit awards that vested during the period | 295,751 | 395,751 | 123,769 | |||||||||
Fair value of restricted stock unit awards that vested during the period | $ | 8,723 | $ | 11,420 | $ | 5,483 | ||||||
Accumulated dividends paid upon vesting of restricted stock unit awards | $ | 939 | $ | 1,352 | $ | 442 | ||||||
Income tax benefit recognized upon vesting of restricted stock unit awards | $ | 3,663 | $ | 4,796 | $ | 2,303 | ||||||
Compensation expense recognized during the period | $ | 4,148 | $ | 3,284 | $ | 6,158 |
During the year ended December 31, 2010,2015, the Compensation Committee of the Company’s boardBoard of directorsDirectors approved a modification to each of the 2013 and 2014 restricted stock unit awards grantedgrants. The modifications resulted in a cap on the foreign currency exchange rate devaluation impact to employees during 2008.be used in calculating the IRR for the respective measurement periods. The Compensation Committee also approvedCompany revalued each of the cancellation and replacementgrants based on the Company’s stock price at the date of modification, which was $33.02. The modifications resulted in incremental compensation expense of approximately $2,460 for the year ended December 31, 2015.
As of December 31, 2015, the Company had restricted stock units outstanding that represented a total 544,076 hypothetical shares of common stock, net of actual cumulative forfeitures of 22,985 units, assuming the maximum IRR is achieved for all of the outstanding restricted stock unit awards grantedawards.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
to the Company’s top five executive officers during 2008. Both the modification and the cancellation and replacement were accounted for as modifications of share based awards. As a result of these modifications, the Company recorded incremental compensation expense of approximately $435 during the year ended December 31, 2010, which represented the difference between the grant date fair value and the modification date fair value of these awards for the portion of the service period that had been satisfied at the time of the modification. The service period for the modified awards did not change.
During the year ended December 31, 2010, based upon additional information, the Company determined that the 12.5% IRR level would be reached for the 2008 grant and recorded incremental compensation expense of approximately $823. During the year ended December 31, 2010, based upon additional information, the Company also determined that the 12.5% IRR level was expected to be reached for the 2009 grant and recorded incremental compensation expense of $377 during the year ended December 31, 2010.
During the year ended December 31, 2012, 196,051 restricted stock unit awards vested. Upon vesting, each restricted stock unit was converted into one share of the Company’s common stock. In addition, the Company paid approximately $600 in dividends on the vested restricted stock units, which represented dividends that had accumulated on the awards since they were granted in 2008. The fair value of the restricted stock unit awards that vested during the year ended December 31, 2012 was approximately $4,400. The Company recognized a tax benefit of approximately $1,848 during the year ended December 31, 2012 related to these vested awards. There were no forfeitures of restricted stock unit awards during the year ended December 31, 2012.
During the year ended December 31, 2012, based upon additional information, the Company determined that the 12.5% IRR level was reached for the 2010 grant and recorded incremental compensation expense of approximately $1,609.
The Company recorded total compensation expense of $3,424, $3,101 and $4,433 related to these restricted stock unit awards during the years ended December 31, 2010, 2011 and 2012, respectively. As of December 31, 2012, the Company had restricted stock units outstanding that represented a total of 994,671 hypothetical shares of common stock, net of actual cumulative forfeitures of 11,608 units, assuming the maximum IRR of at least 12.5% is achieved for all of the outstanding restricted stock unit awards. As of December 31, 2012,2015, the remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $4,890,$6,600, which assumes the high-pointreflects an IRR level willof 11.1% that was achieved for the 2012 grants, an IRR level of 12.5% that was achieved for the 2013 and 2014 grants and an IRR level of 9.5% that is estimated to be achieved for the 2009 and 2010 grants and the mid-point IRR level will be achieved for the 2011 and 2012 grants.2015 grant. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.
17. | SUPPLEMENTAL CASH FLOW INFORMATION |
The following is provided as supplemental information to the consolidated statements of cash flows:
Year Ended December 31, | ||||||||||||
2013 | 2014 | 2015 | ||||||||||
Cash paid for interest | $ | 116,890 | $ | 107,926 | $ | 105,155 | ||||||
Cash paid for income taxes, net of refunds received | $ | 136,124 | $ | 122,972 | $ | 108,435 | ||||||
Noncash investing and financing activities: | ||||||||||||
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment(1) | $ | (7,325 | ) | $ | (1,225 | ) | $ | 2,491 | ||||
Theatre properties and equipment acquired under capital lease | $ | 69,541 | $ | 19,908 | $ | 36,544 | ||||||
Investment in NCM — receipt of common units (see Note 6) | $ | 98,797 | $ | 8,216 | $ | 15,421 | ||||||
Dividends accrued on unvested restricted stock unit awards | $ | (772 | ) | $ | (530 | ) | $ | (593 | ) | |||
Investment in AC JV, LLC (see Note 7) | $ | 8,333 | $ | — | $ | — | ||||||
Issuance of promissory note related to investment in AC JV, LLC (see Note 7) | $ | (8,333 | ) | $ | — | $ | — | |||||
Receipt of promissory note related to sale of investment in a Taiwan joint venture | $ | — | $ | — | $ | 2,304 |
(1) | Additions to theatre properties and equipment included in accounts payable as of December 31, 2014 and 2015 were $13,235 and $10,744, respectively. |
18. | INCOME TAXES |
Income before income taxes consisted of the following:
Year Ended December 31, | ||||||||||||
2013 | 2014 | 2015 | ||||||||||
Income before income taxes: | ||||||||||||
U.S. | $ | 162,687 | $ | 205,521 | $ | 259,652 | ||||||
Foreign | 101,177 | 84,542 | 88,015 | |||||||||
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Total | $ | 263,864 | $ | 290,063 | $ | 347,667 | ||||||
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Current and deferred income taxes were as follows:
The following is provided as supplemental information to the consolidated statements of cash flows:
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Cash paid for interest | $ | 103,047 | $ | 113,084 | $ | 117,172 | ||||||
Cash paid for income taxes, net of refunds received | $ | 93,435 | $ | 29,106 | $ | 89,034 | ||||||
Noncash investing and financing activities: | ||||||||||||
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment(1) | $ | 3,339 | $ | 7,349 | $ | (13,827 | ) | |||||
Theatre properties and equipment acquired under capital lease | $ | 6,934 | $ | 6,696 | $ | 18,754 | ||||||
Change in fair market values of interest rate swap agreements, net of taxes | $ | 7,170 | $ | 4,867 | $ | 1,827 | ||||||
Investment in NCM — receipt of common units (See Note 6) | $ | 30,683 | $ | 9,302 | $ | 9,137 | ||||||
Investment in NCM — change of interest gain (See Note 6) | $ | 271 | $ | — | $ | — | ||||||
Net book value of equipment contributed to DCIP (See Note 7) | $ | 18,090 | $ | — | $ | — | ||||||
Dividends accrued on unvested restricted stock unit awards | $ | (635 | ) | $ | (684 | ) | $ | (894 | ) | |||
Shares issued upon non-cash stock option exercises, at exercise price of $7.63 per share | $ | 413 | $ | — | $ | — | ||||||
Investment in RealD (See Note 8) | $ | 18,909 | $ | 3,402 | $ | — | ||||||
Change in fair market value of available-for-sale securities, net of taxes (See Note 8) | $ | 5,659 | $ | (13,566 | ) | $ | 2,499 | |||||
Issuance of common stock as a result of the Colombia Share Exchange (See Note 9) | $ | 6,951 | $ | — | $ | — |
|
Income before income taxes consisted of the following:
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Income before income taxes: | ||||||||||||
U.S. | $ | 124,335 | $ | 114,692 | $ | 183,207 | ||||||
Foreign | 83,166 | 90,940 | 113,611 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 207,501 | $ | 205,632 | $ | 296,818 | ||||||
|
|
|
|
|
| |||||||
Current: | ||||||||||||
Federal | $ | 35,172 | $ | 17,070 | $ | 55,399 | ||||||
Foreign | 21,933 | 26,830 | 53,964 | |||||||||
State | 9,336 | 7,099 | 8,494 | |||||||||
|
|
|
|
|
| |||||||
Total current expense | 66,441 | 50,999 | 117,857 | |||||||||
|
|
|
|
|
| |||||||
Deferred: | ||||||||||||
Federal | (143 | ) | 22,100 | 12,096 | ||||||||
Foreign | (7,188 | ) | (2,332 | ) | (6,007 | ) | ||||||
State | (1,272 | ) | 2,283 | 1,452 | ||||||||
|
|
|
|
|
| |||||||
Total deferred taxes | (8,603 | ) | 22,051 | 7,541 | ||||||||
|
|
|
|
|
| |||||||
Income taxes | $ | 57,838 | $ | 73,050 | $ | 125,398 | ||||||
|
|
|
|
|
|
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Year Ended December 31, | ||||||||||||
2013 | 2014 | 2015 | ||||||||||
Current: | ||||||||||||
Federal | $ | 97,467 | $ | 61,732 | $ | 71,288 | ||||||
Foreign | 42,690 | 27,681 | 35,874 | |||||||||
State | 10,951 | 6,125 | 10,682 | |||||||||
|
|
|
|
|
| |||||||
Total current expense | $ | 151,108 | $ | 95,538 | $ | 117,844 | ||||||
|
|
|
|
|
| |||||||
Deferred: | ||||||||||||
Federal | $ | (30,833 | ) | $ | 6,322 | $ | 10,420 | |||||
Foreign | 2,653 | (6,437 | ) | (3,339 | ) | |||||||
State | (9,612 | ) | 641 | 4,014 | ||||||||
|
|
|
|
|
| |||||||
Total deferred taxes | (37,792 | ) | 526 | 11,095 | ||||||||
|
|
|
|
|
| |||||||
Income taxes | $ | 113,316 | $ | 96,064 | $ | 128,939 | ||||||
|
|
|
|
|
|
A reconciliation between income tax expense and taxes computed by applying the applicable statutory federal income tax rate to income before income taxes follows:
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Computed normal tax expense | $ | 72,625 | $ | 71,972 | $ | 103,886 | ||||||||||||||||||
Computed statutory tax expense | $ | 92,353 | $ | 101,522 | $ | 121,683 | ||||||||||||||||||
Foreign inflation adjustments | 47 | (1,587 | ) | (33 | ) | 67 | 641 | (1,295 | ) | |||||||||||||||
State and local income taxes, net of federal income tax impact | 5,195 | 7,310 | 7,456 | 789 | 4,549 | 9,559 | ||||||||||||||||||
Foreign losses not benefited and other changes in valuation allowance | (5,685 | ) | (676 | ) | (711 | ) | (2,052 | ) | (275 | ) | (2,408 | ) | ||||||||||||
Foreign tax rate differential | (4,798 | ) | (3,321 | ) | (1,545 | ) | (336 | ) | (2,125 | ) | (2,660 | ) | ||||||||||||
Foreign dividends | 3,952 | 4,173 | 10,576 | 3,294 | 1,083 | — | ||||||||||||||||||
Sale of Mexican subsidiaries and related changes in intangible assets | 21,406 | (10,065 | ) | — | ||||||||||||||||||||
Changes in uncertain tax positions | (8,080 | ) | 396 | 13,729 | (2,024 | ) | (1,540 | ) | 3,717 | |||||||||||||||
Other — net | (5,418 | ) | (5,217 | ) | (7,960 | ) | (181 | ) | 2,274 | 343 | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Income taxes | $ | 57,838 | $ | 73,050 | $ | 125,398 | $ | 113,316 | $ | 96,064 | $ | 128,939 | ||||||||||||
|
|
|
|
|
|
The Company reinvests the undistributed earnings of its foreignnon-U.S. subsidiaries with the exception of its subsidiary in Ecuador. Accordingly, deferred U.S. federal and state income taxes are provided only on the undistributed earnings of the Company’s Ecuador subsidiary.subsidiary in Ecuador. As of December 31, 2012,2015, the cumulative amountCompany has not provided deferred taxes on approximately $316,000 of undistributed earnings of non-U.S. subsidiaries, as it is the foreign subsidiaries on whichCompany’s policy to indefinitely reinvest these earnings in non-U.S. operations. However, the Company hasmay periodically repatriate a portion of these earnings to the extent that it does not recognized income taxes was approximately $339,000. Determinationincur an additional U.S. tax liability. Quantification of the amount of any unrecognized deferred income tax liability, on this temporary differenceif any, associated with indefinitely reinvested earnings is not practicable because of the complexities of the hypothetical calculation.practicable.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Deferred Income Taxes
The tax effects of significant temporary differences and tax loss and tax credit carryforwards comprising the net long-term deferred income tax liabilities as of December 31, 20112014 and 20122015 consisted of the following:
December 31, | December 31, | |||||||||||||||
2011 | 2012 | 2014 | 2015 | |||||||||||||
Deferred liabilities: | ||||||||||||||||
Theatre properties and equipment | $ | 92,466 | $ | 96,733 | $ | 127,010 | $ | 141,155 | ||||||||
Deferred intercompany sales | 12,051 | 14,551 | ||||||||||||||
Tax impact of items in accumulated other comprehensive income (loss) | 55 | 158 | ||||||||||||||
Intangible asset — other | 24,749 | 23,944 | 29,342 | 28,889 | ||||||||||||
Intangible asset — tradenames | 116,333 | 115,939 | 111,726 | 112,413 | ||||||||||||
Investment in partnerships | 98,742 | 113,199 | 111,328 | 108,733 | ||||||||||||
|
|
|
| |||||||||||||
Total deferred liabilities | 344,341 | 364,366 | 379,461 | 391,348 | ||||||||||||
|
|
|
| |||||||||||||
Deferred assets: | ||||||||||||||||
Deferred lease expenses | 23,225 | 27,255 | 27,341 | 26,966 | ||||||||||||
Theatre properties and equipment | 5,910 | 5,884 | ||||||||||||||
Deferred revenue — NCM and Fandango | 88,616 | 90,972 | ||||||||||||||
Exchange loss | — | 3,736 | ||||||||||||||
Deferred revenue — NCM | 124,366 | 128,642 | ||||||||||||||
Capital lease obligations | 51,211 | 54,551 | 73,306 | 75,966 | ||||||||||||
Interest rate swap agreements | 5,882 | 3,825 | ||||||||||||||
Tax loss carryforwards | 10,602 | 7,700 | 7,764 | 7,379 | ||||||||||||
Alternative minimum tax and other credit carryforwards | 7,548 | 6,405 | 43,384 | 41,300 | ||||||||||||
Other expenses, not currently deductible for tax purposes | 23,750 | 30,724 | 25,807 | 20,204 | ||||||||||||
|
|
|
| |||||||||||||
Total deferred assets | 216,744 | 227,316 | 301,968 | 304,193 | ||||||||||||
|
|
|
| |||||||||||||
Net deferred income tax liability before valuation allowance | 127,597 | 137,050 | 77,493 | 87,155 | ||||||||||||
Valuation allowance against deferred assets | 15,443 | 13,326 | ||||||||||||||
Valuation allowance against deferred assets — current | 2,384 | — | ||||||||||||||
Valuation allowance against deferred assets — non-current | 50,489 | 50,636 | ||||||||||||||
|
|
|
| |||||||||||||
Net deferred income tax liability | $ | 143,040 | $ | 150,376 | $ | 130,366 | $ | 137,791 | ||||||||
|
|
|
| |||||||||||||
Net deferred tax liability — Foreign | $ | 10,757 | $ | 2,488 | $ | 12,213 | $ | 4,212 | ||||||||
Net deferred tax liability — U.S. | 132,283 | 147,888 | 118,153 | 133,579 | ||||||||||||
|
|
|
| |||||||||||||
Total | $ | 143,040 | $ | 150,376 | $ | 130,366 | $ | 137,791 | ||||||||
|
|
|
|
The Company’s foreign tax credit carryforwards begin expiring inbegan to expire 2015. Some foreign net operating losses will expire in the next reporting period; however, some losses may be carried forward indefinitely. State net operating losses may be carried forward for periods of between five and twenty years with the last expiring year being 2029.2035.
During November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax assets and liabilities be classified as long-term on the balance sheet. The Company elected to early adopt ASU 2015-17 effective December 31, 2015, on a prospective basis. Adoption of ASU 2015-17 resulted in a reclassification of the Company’s net current deferred tax asset to the net long-term deferred tax asset on the Company’s consolidated balance sheet as of December 31, 2015. Balances as of December 31, 2014 have not been recast.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Uncertain Tax Positions
The following is a reconciliation of the total amounts of unrecognized tax benefits excluding interest and penalties, for the years ended December 31, 2010, 20112013, 2014 and 2012:2015:
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Balance at January 1, | $ | 23,857 | $ | 15,197 | $ | 18,660 | $ | 33,222 | $ | 18,780 | $ | 16,515 | ||||||||||||
Gross increases — tax positions in prior periods | — | 3,153 | 14,462 | 413 | 10 | 40 | ||||||||||||||||||
Gross decreases — tax positions in prior periods | (1,392 | ) | — | (3,321 | ) | — | (2,379 | ) | — | |||||||||||||||
Gross increases — current period tax positions | 3,551 | 3,729 | 3,672 | 1,476 | 1,324 | 2,112 | ||||||||||||||||||
Gross decreases — current period tax positions | (613 | ) | (633 | ) | — | — | — | — | ||||||||||||||||
Settlements | (10,383 | ) | (2,467 | ) | — | (15,444 | ) | (963 | ) | (871 | ) | |||||||||||||
Foreign currency translation adjustments | 177 | (319 | ) | (251 | ) | (887 | ) | (257 | ) | (663 | ) | |||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Balance at December 31, | $ | 15,197 | $ | 18,660 | $ | 33,222 | $ | 18,780 | $ | 16,515 | $ | 17,133 | ||||||||||||
|
|
|
|
|
|
The Company had $22,411$15,693 and $34,475$17,008 of unrecognized tax benefits, including interest and penalties, as of December 31, 20112014 and December 31, 2012,2015, respectively. Of these amounts, $16,274$15,693 and $30,085$17,008 represent the amount of unrecognized tax benefits that if recognized would impact the effective income tax rate for the years ended December 31, 20112014 and 2012,2015, respectively. The Company had $3,751$2,500 and $4,576$3,198 accrued for interest and penalties as of December 31, 20112014 and 2012,2015, respectively.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and in certain state and foreign jurisdictions and isare routinely under audit by many different tax authorities. The Company believes that its accrual for tax liabilities is adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. The Company is no longer subject to income tax audits from the Internal Revenue Service for years before 2007.2012. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2007.2011. Certain state returns were amended as a result of the Internal Revenue Service examination closures for 20022007 through 2006,2009, and the statutes remain open for those amendments. The Company is no longer subject to non-U.S. income tax examinations by tax authorities in its major non-U.S. tax jurisdictions for years before 2004.
The Company is currently under audit in the non-U.S. tax jurisdictions of Brazil Chile and Mexico. The Company is currently under examination by the Internal Revenue Service for the 2007, 2008 and 2009 tax years.Chile. The Company believes that it is reasonably possible that the U.S. Internal Revenue Service and the Mexico auditsChile audit will be completed within the next twelve months.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
COMMITMENTS AND CONTINGENCIES |
Leases— The Company conducts a significant part of its theatre operations in leased properties under noncancelable operating and capital leases with terms generally ranging from 10 to 25 years. In addition to the minimum annual lease payments, some of the leases provide for contingent rentals based on operating results of the theatre and most require the payment of taxes, insurance and other costs applicable to the property. The Company can renew, at its option, a substantial portion of the leases at defined or then market rental rates for various periods. Some leases also provide for escalating rent payments throughout the lease term. A liability for deferred lease expenses of $34,466$46,003 and $38,297$43,333 at December 31, 20112014 and 2012,2015, respectively, has been provided
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
to account for lease expenses on a straight-line basis, where lease payments are not made on such a basis. Theatre rent expense was as follows:
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Fixed rent expense | $ | 186,893 | $ | 200,006 | $ | 205,770 | $ | 224,056 | $ | 237,891 | $ | 240,057 | ||||||||||||
Contingent rent and other facility lease expenses | 68,824 | 76,272 | 75,845 | 83,795 | 79,205 | 79,704 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total facility lease expense | $ | 255,717 | $ | 276,278 | $ | 281,615 | $ | 307,851 | $ | 317,096 | $ | 319,761 | ||||||||||||
|
|
|
|
|
|
Future minimum lease payments under noncancelable operating and capital leases that have initial or remaining terms in excess of one year at December 31, 20122015 are due as follows:
Operating Leases | Capital Leases | Operating Leases | Capital Leases | |||||||||||||
2013 | $ | 225,814 | $ | 25,304 | ||||||||||||
2014 | 227,238 | 25,117 | ||||||||||||||
2015 | 222,469 | 25,299 | ||||||||||||||
2016 | 212,861 | 25,158 | $ | 248,498 | $ | 35,156 | ||||||||||
2017 | 193,672 | 23,436 | 236,630 | 33,640 | ||||||||||||
2018 | 210,089 | 34,050 | ||||||||||||||
2019 | 181,967 | 33,394 | ||||||||||||||
2020 | 161,279 | 32,441 | ||||||||||||||
Thereafter | 807,121 | 110,934 | 661,398 | 155,164 | ||||||||||||
|
|
|
| |||||||||||||
Total | $ | 1,889,175 | $ | 235,248 | $ | 1,699,861 | 323,845 | |||||||||
|
| |||||||||||||||
Amounts representing interest payments | 85,077 | (96,113 | ) | |||||||||||||
|
| |||||||||||||||
Present value of future minimum payments | $ | 150,171 | 227,732 | |||||||||||||
Current portion of capital lease obligations | 11,064 | (18,780 | ) | |||||||||||||
|
| |||||||||||||||
Capital lease obligations, less current portion | $ | 139,107 | $ | 208,952 | ||||||||||||
|
|
Employment Agreements— On August 20, 2015 the Company’s board of directors announced that Mr. Mark Zoradi will be the Company’s Chief Executive Officer. The Company and Mr. Zoradi entered into an Employment Agreement effective as of August 24, 2015. The Company has three-year employment agreements with Lee Roy Mitchell, TimothyTim Warner, Mark Zoradi, Sean Gamble, Robert Copple, Valmir Fernandes, Michael Cavalier and Rob Carmony thatCarmony. Except for Mr. Warner’s, the employment agreements are subject to automatic extensions for a one-year period, unless the employment agreements are terminated. Effective May 25, 2009, the Company entered into anMr. Warner’s employment agreement with Steve Bunnell that has an initial term of two years subject to an extension for a one year period, unless the agreement is terminated. Effective February 15, 2010, the Company entered into an employment agreement with Valmir Fernandes that has an initial term of three years.terminates on April 1, 2016. The base salaries stipulated in the employment agreements are subject to review at least annually during the term of the agreements for increase (but not decrease) each year by the Company’s Compensation Committee. Management personnel subject to these employment agreements are eligible to receive annual cash incentive bonuses upon the Company meeting certain performance targets established by itsthe Compensation Committee.
On February 15, 2012,Committee within the Company’s Chief Executive Officer (“CEO”), Alan Stock, announced his retirement. As a resultfirst 90 days of the retirement, the Company’s employment agreement with Mr. Stock was effectively terminated. Mr. Stock served in a transitional role until May 1, 2012 and then became a consultant for the Company for a two-year period that ends April 30, 2014. Mr. Stock has retained his share based awards under their original vesting terms.
Upon Mr. Stock’s retirement, the Company appointed Tim Warner as its CEO. Mr. Warner previously served as the Company’s President and Chief Operating Officer. In connection with his appointment as the CEO, the Company and Mr. Warner entered into an Amended and Restated Employment Agreement dated as of
CINEMARK HOLDINGS, INC. AND SUBSIDIARIESfiscal year.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
March 30, 2012 (the “Amended and Restated Agreement”). The Amended and Restated Agreement amends and restates the Employment Agreement dated June 16, 2008 by and between the Company and Mr. Warner. The term of the Amended and Restated Agreement goes through April 1, 2014 and may be extended at the Company’s election for an additional one-year period upon six months prior written notice by the Company to Mr. Warner. The base salary stipulated in the Amended and Restated Agreement is subject to review during the term of the agreement for increase (but not decrease) each year by the Company’s Compensation Committee. Mr. Warner is eligible to receive annual cash incentive bonuses upon the Company meeting certain performance targets established by its Compensation Committee and will continue to be eligible to participate in and receive grants of equity incentive awards under the Company’s long-term incentive plan.
Retirement Savings Plan — The Company has a 401(k) retirement savings plan for the benefit of all employees and makes contributions as determined annually by the board of directors. Contribution Employer contribution
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
payments of $2,311$2,718 and $2,410$3,043 were made in 20112014 (for plan year 2010)2013) and 20122015 (for plan year 2011)2014), respectively. A liability of approximately $2,500$3,333 has been recorded at December 31, 20122015 for employer contribution payments to be made in 20132016 (for plan year 2012)2015).
Litigation— Joseph Amey, et al. v. Cinemark USA, Inc.,Case No. 3:13cv05669, In the United States District Court for the Northern District of California, San Francisco Division. The case presents putative class action claims for damages and Litigation Settlements — attorney’s fees arising from employee wage and hour claims under California law for alleged meal period, rest break, reporting time pay, unpaid wages, pay upon termination, and wage statements violations. The claims are also asserted as a representative action under the California Private Attorney General Act (“PAGA”). The Company denies the claims, denies that class certification is appropriate and denies that a PAGA representative action is appropriate, and is vigorously defending against the claims. The Company denies any violation of law and plans to vigorously defend against all claims. The Court recently determined that class certification is not appropriate and determined that a PAGA representative action is not appropriate. The plaintiff may appeal these rulings. The Company is unable to predict the outcome of the litigation or the range of potential loss.
The Company received a Civil Investigative Demand (“CID”) from the Antitrust Division of the United States Department of Justice. The CID relates to an investigation under Sections 1 and 2 of the Sherman Act. The Company also received CIDs from the Antitrust Section of the Office of the Attorney General of the State of Ohio and later from other states regarding similar inquiries under state antitrust laws. The CIDs request the Company to answer interrogatories, and produce documents, or both, related to the investigation of matters including film clearances, potential coordination and/or communication with other major theatre circuits and related joint ventures. The Company intends to fully cooperate with all federal and state government agencies. Although the Company does not believe that it has violated any federal or state antitrust or competition laws, it cannot predict the ultimate scope, duration or outcome of these investigations.
From time to time, the Company is involved in other various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, landlord-tenant disputes, patent claims and contractual disputes, some of which are covered by insurance or by indemnification from vendors. The Company believes its potential liability with respect to these types of proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.
SEGMENTS |
The Company manages its international market and its U.S. market as separate reportable operating segments. The international segment consists of operations in Brazil, Mexico, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia and Guatemala.Curacao. The U.S. segment includes U.S. and Canada operations. (Note that the Company’s only Canadian theatre wasCompany sold duringits theatres in Mexico on November 2010.)15, 2013. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues, primarily screen advertising. The measure of segment profit and loss the Company uses to evaluate performance and allocate its resources is Adjusted EBITDA, as defined in the reconciliation table below. The Company does not report asset information by segment because that information is not used to evaluate the performance or allocate resources between segments.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is a breakdown of select financial information by reportable operating segment:
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
U.S. | $ | 1,584,281 | $ | 1,593,667 | $ | 1,706,511 | $ | 1,912,674 | $ | 1,934,990 | $ | 2,137,733 | ||||||||||||
International | 564,240 | 696,119 | 777,663 | 783,053 | 704,623 | 728,735 | ||||||||||||||||||
Eliminations | (7,377 | ) | (10,173 | ) | (10,643 | ) | (12,833 | ) | (12,623 | ) | (13,859 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total revenues | $ | 2,141,144 | $ | 2,279,613 | $ | 2,473,531 | $ | 2,682,894 | $ | 2,626,990 | $ | 2,852,609 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||||||
Adjusted EBITDA(1): | ||||||||||||||||||||||||
U.S. | $ | 455,489 | $ | 436,863 | $ | 497,339 | ||||||||||||||||||
International | 169,834 | 159,662 | 166,416 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total Adjusted EBITDA | $ | 625,323 | $ | 596,525 | $ | 663,755 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||||||
Capital expenditures: | ||||||||||||||||||||||||
U.S. | $ | 117,488 | $ | 148,532 | $ | 223,213 | ||||||||||||||||||
International | 142,182 | 96,173 | 108,513 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total capital expenditures | $ | 259,670 | $ | 244,705 | $ | 331,726 | ||||||||||||||||||
|
|
|
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Adjusted EBITDA: | ||||||||||||
U.S. | $ | 363,345 | $ | 371,212 | $ | 409,860 | ||||||
International | 122,575 | 148,261 | 179,375 | |||||||||
|
|
|
|
|
| |||||||
Total Adjusted EBITDA | $ | 485,920 | $ | 519,473 | $ | 589,235 | ||||||
|
|
|
|
|
|
Year Ended December 31, | ||||||||
2011 | 2012 | |||||||
Capital Expenditures: | ||||||||
U.S. | $ | 79,510 | $ | 107,323 | ||||
International | 105,309 | 113,404 | ||||||
|
|
|
| |||||
Total capital expenditures | $ | 184,819 | $ | 220,727 | ||||
|
|
|
|
(1) | Distributions from NCM are reported entirely within the U.S. operating segment |
The following table sets forth a reconciliation of net income to Adjusted EBITDA:
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Net income | $ | 149,663 | $ | 132,582 | $ | 171,420 | $ | 150,548 | $ | 193,999 | $ | 218,728 | ||||||||||||
Add (deduct): | ||||||||||||||||||||||||
Income taxes | 57,838 | 73,050 | 125,398 | 113,316 | 96,064 | 128,939 | ||||||||||||||||||
Interest expense(1) | 112,444 | 123,102 | 123,665 | 124,714 | 113,698 | 112,741 | ||||||||||||||||||
Loss on early retirement of debt | 3 | 4,945 | 5,599 | 72,302 | — | — | ||||||||||||||||||
Loss on marketable securities — RealD | — | 12,610 | — | |||||||||||||||||||||
Loss on amendment to debt agreement | — | — | 925 | |||||||||||||||||||||
Other income(2) | (3,721 | ) | (13,594 | ) | (21,568 | ) | (24,688 | ) | (22,150 | ) | (20,041 | ) | ||||||||||||
Depreciation and amortization | 143,508 | 154,449 | 147,675 | 163,970 | 175,656 | 189,206 | ||||||||||||||||||
Impairment of long-lived assets | 12,538 | 7,033 | 3,031 | 3,794 | 6,647 | 8,801 | ||||||||||||||||||
(Gain) loss on sale of assets and other | (431 | ) | 8,792 | 12,168 | (3,845 | ) | 15,715 | 8,143 | ||||||||||||||||
Deferred lease expenses | 3,940 | 4,155 | 4,104 | 5,701 | 2,536 | (1,806 | ) | |||||||||||||||||
Amortization of long-term prepaid rents | 1,786 | 2,657 | 2,673 | 2,625 | 1,542 | 2,361 | ||||||||||||||||||
Share based awards compensation expense | 8,352 | 9,692 | 15,070 | 16,886 | 12,818 | 15,758 | ||||||||||||||||||
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| |||||||||||||||||||
Adjusted EBITDA | $ | 485,920 | $ | 519,473 | $ | 589,235 | $ | 625,323 | $ | 596,525 | $ | 663,755 | ||||||||||||
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(1) | Includes amortization of debt issue costs. |
(2) | Includes interest income, foreign currency exchange |
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CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Financial Information About Geographic AreasArea
Below is a breakdown of select financial information by geographic area:
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Revenues | ||||||||||||
U.S. | $ | 1,584,281 | $ | 1,593,667 | $ | 1,706,511 | ||||||
Brazil | 315,884 | 358,820 | 328,136 | |||||||||
Other foreign countries | 248,356 | 337,299 | 449,527 | |||||||||
Eliminations | (7,377 | ) | (10,173 | ) | (10,643 | ) | ||||||
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|
|
| |||||||
Total | $ | 2,141,144 | $ | 2,279,613 | $ | 2,473,531 | ||||||
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|
|
Year Ended December 31, | ||||||||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||
Revenues | ||||||||||||||||||||
U.S. | $ | 1,912,674 | $ | 1,934,990 | $ | 2,137,733 | ||||||||||||||
Brazil | 325,762 | 333,919 | 291,959 | |||||||||||||||||
Other foreign countries | 457,291 | 370,704 | 436,776 | |||||||||||||||||
Eliminations | (12,833 | ) | (12,623 | ) | (13,859 | ) | ||||||||||||||
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| ||||||||||||||||||
Total | $ | 2,682,894 | $ | 2,626,990 | $ | 2,852,609 | ||||||||||||||
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| ||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2011 | 2012 | 2014 | 2015 | |||||||||||||||||
Theatres properties and equipment, net | ||||||||||||||||||||
U.S. | $ | 934,279 | $ | 940,922 | $ | 1,094,076 | $ | 1,175,535 | ||||||||||||
Brazil | 149,294 | 190,990 | 204,107 | 163,505 | ||||||||||||||||
Other foreign countries | 155,277 | 173,046 | 152,629 | 166,029 | ||||||||||||||||
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| |||||||||||||||||
Total | $ | 1,238,850 | $ | 1,304,958 | $ | 1,450,812 | $ | 1,505,069 | ||||||||||||
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RELATED PARTY TRANSACTIONS |
Prior to March 2010, the Company leased one theatre from Plitt Plaza Joint Venture (“Plitt Plaza”) on a month-to-month basis. Plitt Plaza is indirectly owned by Lee Roy Mitchell, the Company’s Chairman of the Board, who directly and indirectly owns approximately 9% of the Company’s issued and outstanding shares of common stock. The Company closed this theatre during March 2010. The Company recorded $30 of facility lease and other operating expenses payable to Plitt Plaza joint venture during the year ended December 31, 2010. During the year ended December 31, 2010, the Company recorded approximately $111 related to the termination of the lease, which is reflected in (gain) loss on sale of assets and other on the consolidated statement of income.
The Company manages theatres for Laredo Theatre,Theatres, Ltd. (“Laredo”). The Company is the sole general partner and owns 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Lee Roy Mitchell is the Company’s Chairman of the Board and directly and indirectly owns approximately 9% of the Company’s common stock. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5% of annual theatre revenues up to $50,000 and 3% of annual theatre revenues in excess of $50,000. The Company recorded $105, $476$558, $564 and $522$567 of management fee revenues during the years ended December 31, 2010, 20112013, 2014 and 2012,2015, respectively. All such amounts are included in the Company’s consolidated financial statements with the intercompany amounts eliminated in consolidation. The Company also paid distributions to Lone Star Theatres, Inc. of $1,000 during the year ended December 31, 2013.
The Company has an Aircraft Time Sharing Agreement with Copper Beech Capital, LLC to use, on occasion, a private aircraft owned by Copper Beech Capital, LLC. Copper Beech Capital, LLC 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 Capital, LLC 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 years ended December 31, 2010, 20112013, 2014 and 2012,2015, the aggregate amounts paid to Copper Beech Capital, LLC for the use of the aircraft was approximately $73, $86$91, $74 and $82,$410, respectively.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company currently leases 1915 theatres and one parking facility from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy. Raymond Syufy is one of the Company’s directors and is an officer of the general partner of Syufy. Of these 2016 leases, 1715 have fixed minimum annual rent. The three leasesone lease without minimum annual rent havehas rent based upon a specified percentage of gross sales as defined in the lease with no minimum annual rent.lease. For the years ended December 31, 2010, 2011 and 2012, the Company paid total rent of approximately $18,058, $18,881 and $18,602, respectively, to Syufy.
The Company’s valuation allowance for deferred tax assets for the years ended December 31, 2010, 2011 and 2012 were as follows:
Valuation Allowance for Deferred Tax Assets | ||||
Balance at January 1, 2010 | $ | 18,228 | ||
Additions | 3,398 | |||
Deductions | (6,201 | ) | ||
|
| |||
Balance at December 31, 2010 | $ | 15,425 | ||
Additions | 2,338 | |||
Deductions | (2,320 | ) | ||
|
| |||
Balance at December 31, 2011 | $ | 15,443 | ||
Additions | 6,298 | |||
Deductions | (8,415 | ) | ||
|
| |||
Balance at December 31, 2012 | $ | 13,326 | ||
|
|
2011 | ||||||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Full Year | ||||||||||||||||
Revenues | $ | 483,136 | $ | 620,593 | $ | 640,013 | $ | 535,871 | $ | 2,279,613 | ||||||||||
Operating income | $ | 48,756 | $ | 97,001 | $ | 101,310 | $ | 61,467 | $ | 308,534 | ||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 24,963 | $ | 40,411 | $ | 46,920 | $ | 18,263 | $ | 130,557 | ||||||||||
Net income per share attributable to Cinemark Holdings, Inc.’s common stockholders: | ||||||||||||||||||||
Basic | $ | 0.22 | $ | 0.35 | $ | 0.41 | $ | 0.16 | $ | 1.15 | ||||||||||
Diluted | $ | 0.22 | $ | 0.35 | $ | 0.41 | $ | 0.16 | $ | 1.14 |
2012 | ||||||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Full Year | ||||||||||||||||
Revenues | $ | 578,818 | $ | 649,606 | $ | 633,573 | $ | 611,534 | $ | 2,473,531 | ||||||||||
Operating income | $ | 89,488 | $ | 113,909 | $ | 94,153 | $ | 86,152 | $ | 383,702 | ||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 42,104 | $ | 51,638 | $ | 47,385 | $ | 27,822 | $ | 168,949 | ||||||||||
Net income per share attributable to Cinemark Holdings, Inc.’s common stockholders: | ||||||||||||||||||||
Basic | $ | 0.37 | $ | 0.45 | $ | 0.41 | $ | 0.24 | $ | 1.47 | ||||||||||
Diluted | $ | 0.37 | $ | 0.45 | $ | 0.41 | $ | 0.24 | $ | 1.47 |
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
2013, 2014 and 2015, the Company paid total rent of approximately $22,876, $21,040 and $20,581, respectively, to Syufy.
VALUATION AND QUALIFYING ACCOUNTS |
The Company’s valuation allowance for deferred tax assets for the years ended December 31, 2013, 2014 and 2015 were as follows:
Valuation Allowance for Deferred Tax Assets | ||||
Balance at January 1, 2013 | $ | 13,326 | ||
Additions | 14,162 | |||
Deductions | (1,777 | ) | ||
|
| |||
Balance at December 31, 2013 | $ | 25,711 | ||
Additions | 28,612 | |||
Deductions | (1,450 | ) | ||
|
| |||
Balance at December 31, 2014 | $ | 52,873 | ||
Additions | 437 | |||
Deductions | (2,674 | ) | ||
|
| |||
Balance at December 31, 2015 | $ | 50,636 | ||
|
|
23. | QUARTERLY FINANCIAL INFORMATION (UNAUDITED) |
2014 | ||||||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Full Year | ||||||||||||||||
Revenues | $ | 602,280 | $ | 717,863 | $ | 646,903 | $ | 659,944 | $ | 2,626,990 | ||||||||||
Operating income | $ | 67,855 | $ | 116,866 | $ | 82,284 | $ | 96,065 | $ | 363,070 | ||||||||||
Net income | $ | 35,696 | $ | 72,134 | $ | 38,532 | $ | 47,637 | $ | 193,999 | ||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 35,443 | $ | 71,731 | $ | 38,129 | $ | 47,307 | $ | 192,610 | ||||||||||
Net income per share attributable to Cinemark Holdings, Inc.’s common stockholders: | ||||||||||||||||||||
Basic | $ | 0.31 | $ | 0.62 | $ | 0.33 | $ | 0.41 | $ | 1.66 | ||||||||||
Diluted | $ | 0.31 | $ | 0.62 | $ | 0.33 | $ | 0.41 | $ | 1.66 | ||||||||||
2015 | ||||||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Full Year | ||||||||||||||||
Revenues | $ | 645,398 | $ | 799,932 | $ | 700,056 | $ | 707,223 | $ | 2,852,609 | ||||||||||
Operating income | $ | 90,438 | $ | 134,493 | $ | 99,127 | $ | 99,094 | $ | 423,152 | ||||||||||
Net income | $ | 42,902 | $ | 70,890 | $ | 46,701 | $ | 58,235 | $ | 218,728 | ||||||||||
Net income attributable to Cinemark Holdings, Inc. | $ | 42,521 | $ | 70,258 | $ | 46,339 | $ | 57,751 | $ | 216,869 | ||||||||||
Net income per share attributable to Cinemark Holdings, Inc.’s common stockholders: | ||||||||||||||||||||
Basic | $ | 0.37 | $ | 0.61 | $ | 0.40 | $ | 0.50 | $ | 1.87 | ||||||||||
Diluted | $ | 0.37 | $ | 0.61 | $ | 0.40 | $ | 0.50 | $ | 1.87 |
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
24. | SUBSEQUENT |
On February 12, 2013,16, 2016, the Compensation Committee of the Company’s board of directors declaredapproved the Amended and Restated Employment Agreement of Mark Zoradi, to be effective February 19, 2016 (the “Amended Agreement”). The Amended Agreement amends Section 3.2(c) by providing that the Equity Awards (as defined in the Amended Agreement) shall be at least 200% of Mr. Zoradi’s base salary and providing for an additional amount for personal expenses. The amendments conform the Amended Agreement to the terms of Mr. Zoradi’s employment offer in August 2015.
The Company’s board of directors approved a cash dividend for the fourth quarter of 20122015 of $0.21$0.27 per share of common stock payable to stockholders of record on March 4, 2013.7, 2016. The dividend will be paid on March 15, 2013.
During February 2013, the Company entered into a stock purchase agreement with Grupo Cinemex, S.A. De C.V. pursuant to which the Company will sell its Mexican subsidiaries, which consist of 31 theatres and 290 screens. The sales price, which will be paid in Mexican pesos and is subject to certain closing date adjustments, will be approximately $125,000, based on the exchange rate on the date of this report. The transaction, which is subject to review by the Mexican Federal Competition Commission, is expected to close during the second half of 2013. Total revenues for the Company’s Mexican subsidiaries for the years ended December 31, 2010, 2011 and 2012 were $70,859, $74,448 and $75,333, respectively.18, 2016.
*****
SCHEDULE 1 — CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CINEMARK HOLDINGS, INC.
PARENT COMPANY BALANCE SHEETS
(In thousands, except share data)
December 31, 2011 | December 31, 2012 | December 31, 2014 | December 31, 2015 | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 156 | $ | 569 | $ | 29 | $ | 36 | ||||||||
Prepaid assets | 55 | — | ||||||||||||||
Investment in subsidiaries | 1,014,532 | 1,085,783 | 1,126,395 | 1,102,148 | ||||||||||||
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| |||||||||||||
Total assets | $ | 1,014,688 | $ | 1,086,352 | $ | 1,126,479 | $ | 1,102,184 | ||||||||
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| |||||||||||||
Liabilities and equity | ||||||||||||||||
Liabilities | ||||||||||||||||
Accrued other current liabilities | $ | 780 | $ | 1,258 | ||||||||||||
Accrued other current liabilities, including accounts payable to subsidiaries | $ | 13,163 | $ | 1,794 | ||||||||||||
Other long-term liabilities | 1,031 | 1,029 | 516 | 682 | ||||||||||||
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|
| |||||||||||||
Total liabilities | 1,811 | 2,287 | 13,679 | 2,476 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Commitments and contingencies (see Note 6) | ||||||||||||||||
Equity | ||||||||||||||||
Common stock, $0.001 par value: 300,000,000 shares authorized; | ||||||||||||||||
117,593,329 shares issued and 114,201,737 shares outstanding at December 31, 2011 and 118,502,752 shares issued and 114,949,667 shares outstanding at December 31, 2012 | 118 | 118 | ||||||||||||||
Common stock, $0.001 par value: 300,000,000 shares authorized; 119,757,582 shares issued and 115,700,447 shares outstanding at December 31, 2014 and 120,107,563 shares issued and 115,924,059 shares outstanding at December 31, 2015 | 120 | 120 | ||||||||||||||
Additional paid-in-capital | 1,047,237 | 1,064,016 | 1,095,040 | 1,113,219 | ||||||||||||
Treasury stock, 3,391,592 and 3,553,085 common shares at cost at December 31, 2011 and 2012, respectively | (45,219 | ) | (48,482 | ) | ||||||||||||
Treasury stock, 4,057,135 and 4,183,504 common shares at cost at December 31, 2014 and December 31, 2015, respectively | (61,807 | ) | (66,577 | ) | ||||||||||||
Retained earnings | 34,423 | 106,111 | 224,219 | 324,632 | ||||||||||||
Accumulated other comprehensive loss | (23,682 | ) | (37,698 | ) | (144,772 | ) | (271,686 | ) | ||||||||
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| |||||||||||||
Total equity | 1,012,877 | 1,084,065 | 1,112,800 | 1,099,708 | ||||||||||||
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| |||||||||||||
Total liabilities and equity | $ | 1,014,688 | $ | 1,086,352 | $ | 1,126,479 | $ | 1,102,184 | ||||||||
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The accompanying notes are an integral part of the consolidatedcondensed financial statements.information of the registrant.
CINEMARK HOLDINGS, INC.
PARENT COMPANY STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2010, 20112013, 2014 and 20122015
(in thousands)
Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Cost of operations | 2,030 | 2,193 | 2,182 | 2,215 | 2,857 | 2,684 | ||||||||||||||||||
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| |||||||||||||||||||
Operating loss | (2,030 | ) | (2,193 | ) | (2,182 | ) | (2,215 | ) | (2,857 | ) | (2,684 | ) | ||||||||||||
Other income | 1 | — | — | — | — | — | ||||||||||||||||||
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Loss before income taxes and equity in income of subsidiaries | (2,029 | ) | (2,193 | ) | (2,182 | ) | (2,215 | ) | (2,857 | ) | (2,684 | ) | ||||||||||||
Income taxes | 762 | 823 | 818 | 842 | 1,086 | 1,020 | ||||||||||||||||||
Equity in income of subsidiaries, net of taxes | 147,387 | 131,927 | 170,313 | 149,843 | 194,381 | 218,533 | ||||||||||||||||||
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Net income | $ | 146,120 | $ | 130,557 | $ | 168,949 | $ | 148,470 | $ | 192,610 | $ | 216,869 | ||||||||||||
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The accompanying notes are an integral part of the consolidatedcondensed financial statements.information of the registrant.
CINEMARK HOLDINGS, INC.
PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2010, 2011 AND 20122013, 2014 and 2015
(In thousands)
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Net income | $ | 146,120 | $ | 130,557 | $ | 168,949 | $ | 148,470 | $ | 192,610 | $ | 216,869 | ||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes of $1,865, $1,759 and $1,562, net of settlements | 3,151 | 2,846 | 2,636 | |||||||||||||||||||||
Unrealized gain (loss) due to fair value adjustments on available-for-sale securities, net of taxes of $1,223, $1,479 and $572 | (2,041 | ) | 2,507 | (957 | ) | |||||||||||||||||||
Other comprehensive income (loss) in equity method investments | 2,386 | 676 | (3,119 | ) | ||||||||||||||||||||
Foreign currency translation adjustments, net of taxes of $0, $0, and $888 | (47,617 | ) | (68,982 | ) | (125,474 | ) | ||||||||||||||||||
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Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||
Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $4,339, $3,786 and $557 | 7,170 | (2,830 | ) | 1,020 | ||||||||||||||||||||
Unrealized gain (loss) due to fair value adjustments on available-for-sale securities, net of taxes of $3,425, $8,128 and $1,499 | 5,659 | (13,566 | ) | 2,499 | ||||||||||||||||||||
Amortization of accumulated other comprehensive loss on terminated swap agreement | 4,633 | 4,236 | 2,470 | |||||||||||||||||||||
Foreign currency translation adjustment | 19,432 | (46,280 | ) | (20,232 | ) | |||||||||||||||||||
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Total other comprehensive income (loss), net of tax | 36,894 | (58,440 | ) | (14,243 | ) | |||||||||||||||||||
Total other comprehensive loss, net of tax | (44,121 | ) | (62,953 | ) | (126,914 | ) | ||||||||||||||||||
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Total comprehensive income, net of tax | 183,014 | 72,117 | 154,706 | 104,349 | 129,657 | 89,955 | ||||||||||||||||||
Comprehensive income attributable to noncontrolling interests | (3,711 | ) | (1,803 | ) | (2,244 | ) | — | — | — | |||||||||||||||
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Comprehensive income attributable to Cinemark Holdings, Inc. | $ | 179,303 | $ | 70,314 | $ | 152,462 | $ | 104,349 | $ | 129,657 | $ | 89,955 | ||||||||||||
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The accompanying notes are an integral part of the consolidatedcondensed financial statements.information of the registrant.
CINEMARK HOLDINGS, INC.
PARENT COMPANY STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2010, 20112013, 2014 and 20122015
(in thousands)
Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
Operating Activities | ||||||||||||||||||||||||
Net income | $ | 146,120 | $ | 130,557 | $ | 168,949 | $ | 148,470 | $ | 192,610 | $ | 216,869 | ||||||||||||
Adjustments to reconcile net income to cash provided by (used for) operating activities: | ||||||||||||||||||||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||||||||||
Share based awards compensation expense | 765 | 666 | 750 | 840 | 943 | 885 | ||||||||||||||||||
Equity in income of subsidiaries | (147,387 | ) | (131,927 | ) | (170,313 | ) | (149,843 | ) | (194,381 | ) | (218,533 | ) | ||||||||||||
Changes in other assets and liabilities | (561 | ) | 1,516 | 4,448 | 4,301 | 11,196 | 6,194 | |||||||||||||||||
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| |||||||||||||||||||
Net cash provided by (used for) operating activities | (1,063 | ) | 812 | 3,834 | ||||||||||||||||||||
Net cash provided by operating activities | 3,768 | 10,368 | 5,415 | |||||||||||||||||||||
Investing Activities | ||||||||||||||||||||||||
Dividends received from subsidiaries | 78,100 | 95,000 | 95,750 | 105,150 | 115,000 | 115,225 | ||||||||||||||||||
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| |||||||||||||||||||
Net cash provided by investing activities | 78,100 | 95,000 | 95,750 | 105,150 | 115,000 | 115,225 | ||||||||||||||||||
Financing Activities | ||||||||||||||||||||||||
Proceeds from stock option exercises | 7,914 | 444 | 459 | 57 | 112 | — | ||||||||||||||||||
Payroll taxes paid as a result of noncash stock option exercises and restricted stock withholdings | (416 | ) | (494 | ) | (3,263 | ) | (3,464 | ) | (9,861 | ) | (4,770 | ) | ||||||||||||
Dividends paid to stockholders | (84,502 | ) | (95,838 | ) | (96,367 | ) | (106,045 | ) | (115,625 | ) | (115,863 | ) | ||||||||||||
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Net cash used for financing activities | (77,004 | ) | (95,888 | ) | (99,171 | ) | (109,452 | ) | (125,374 | ) | (120,633 | ) | ||||||||||||
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Increase (decrease) in cash and cash equivalents | 33 | (76 | ) | 413 | (534 | ) | (6 | ) | 7 | |||||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||||||
Beginning of period | 199 | 232 | 156 | 569 | 35 | 29 | ||||||||||||||||||
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End of period | $ | 232 | $ | 156 | $ | 569 | $ | 35 | $ | 29 | $ | 36 | ||||||||||||
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The accompanying notes are an integral part of the consolidatedcondensed financial statements.information of the registrant.
CINEMARK HOLDINGS, INC.
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS
In thousands, except share and per share data
1. | BASIS OF PRESENTATION |
Cinemark Holdings, Inc. conducts substantially all of its operations through its subsidiaries. These statements should be read in conjunction with the Company’s consolidated financial statements and notes included elsewhere in this annual report on Form 10-K. There are significant restrictions over Cinemark Holdings, Inc.’s ability to obtain funds from its subsidiaries through dividends, loans or advances as contained in Cinemark USA, Inc.’s senior secured credit facility and the indentures to each of the 8.625%4.875% Senior Notes, the 5.125% Senior Notes and the 7.375% Senior Subordinated Notes (collectively referred to herein as the “Notes”). These condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of Cinemark Holdings, Inc.’s subsidiaries under each of the debt agreements previously noted exceeds 25 percent of the consolidated net assets of Cinemark Holdings, Inc. As of December 31, 2012,2015, the restricted net assets totaled approximately $824,862$811,988 and $1,036,509$980,128 under the senior secured credit facility and the Notes, respectively. See Note 1311 to the Company’s consolidated financial statements included elsewhere in this annual report on Form 10-K.
2. | DIVIDEND PAYMENTS |
In August 2007, Cinemark Holdings, Inc. initiated a quarterly dividend policy, which was amended in November 2010. Below is a summary of dividends declared for the fiscal periods indicated.
Date Declared | Date of Record | Date Paid | Amount per Common Share(2) | Total Dividends(1) | ||||
02/25/10 | 03/05/10 | 03/19/10 | $0.18 | $20,104 | ||||
05/13/10 | 06/04/10 | 06/18/10 | $0.18 | 20,313 | ||||
07/29/10 | 08/17/10 | 09/01/10 | $0.18 | 20,519 | ||||
11/02/10 | 11/22/10 | 12/07/10 | $0.21 | 24,201 | ||||
| ||||||||
Total — Year ended December 31, 2010 | $85,137 | |||||||
| ||||||||
02/24/11 | 03/04/11 | 03/16/11 | $0.21 | $24,056 | ||||
05/12/11 | 06/06/11 | 06/17/11 | $0.21 | 24,152 | ||||
08/04/11 | 08/17/11 | 09/01/11 | $0.21 | 24,157 | ||||
11/03/11 | 11/18/11 | 12/07/11 | $0.21 | 24,157 | ||||
| ||||||||
Total — Year ended December 31, 2011 | $96,522 | |||||||
| ||||||||
02/03/12 | 03/02/12 | 03/16/12 | $0.21 | $24,141 | ||||
05/11/12 | 06/04/12 | 06/19/12 | $0.21 | 24,274 | ||||
08/08/12 | 08/21/12 | 09/05/12 | $0.21 | 24,281 | ||||
11/06/12 | 11/21/12 | 12/07/12 | $0.21 | 24,565 | ||||
| ||||||||
Total — Year ended December 31, 2012 | $97,261 | |||||||
|
Date | Date of Record | Date Paid | Amount per Common Share(2) | Total Dividends (1) | ||||||||
02/12/13 | 03/04/13 | 03/15/13 | $ | 0.21 | $ | 24,325 | ||||||
05/24/13 | 06/06/13 | 06/20/13 | $ | 0.21 | 24,348 | |||||||
08/15/13 | 08/28/13 | 09/12/13 | $ | 0.25 | 28,992 | |||||||
11/19/13 | 12/02/13 | 12/11/13 | $ | 0.25 | 29,152 | |||||||
|
| |||||||||||
Total – Year ended December 31, 2013 |
| $ | 106,817 | |||||||||
|
| |||||||||||
02/14/14 | 03/04/14 | 03/19/14 | $ | 0.25 | $ | 29,015 | ||||||
05/22/14 | 06/06/14 | 06/20/14 | $ | 0.25 | 29,030 | |||||||
08/13/14 | 08/28/14 | 09/12/14 | $ | 0.25 | 29,032 | |||||||
11/12/14 | 12/02/14 | 12/11/14 | $ | 0.25 | 29,078 | |||||||
|
| |||||||||||
Total – Year ended December 31, 2014 |
| $ | 116,155 | |||||||||
|
| |||||||||||
02/17/15 | 03/04/15 | 03/18/15 | $ | 0.25 | $ | 29,025 | ||||||
05/18/15 | 06/05/15 | 06/19/15 | $ | 0.25 | 29,075 | |||||||
08/20/15 | 08/31/15 | 09/11/15 | $ | 0.25 | 29,080 | |||||||
11/13/15 | 12/02/15 | 12/16/15 | $ | 0.25 | 29,276 | |||||||
|
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Total – Year ended December 31, 2015 | $ | 116,456 | ||||||||||
|
|
(1) | Of the dividends recorded during |
(2) | Beginning with the dividend declared on |
3. | DIVIDENDS RECEIVED FROM SUBSIDIARIES |
During the years ended December 31, 2013, 2014 and 2015, Cinemark Holdings, Inc. received cash dividends of $105,150, $115,000 and $115,225, respectively, from its subsidiary, Cinemark USA, Inc. Cinemark USA, Inc. also declared a noncash distribution to Cinemark Holdings, Inc. during the years ended December 31, 2013 and 2015 of approximately $4,971 and $17,935, respectively.
CINEMARK HOLDINGS, INC.
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS
In thousands, except share and per share data
During the years ended December 31, 2010, 2011 and 2012, Cinemark Holdings, Inc. received cash dividends of $78,100, $95,000 and $95,750, respectively, from its subsidiary, Cinemark USA, Inc. Cinemark USA, Inc. also declared a noncash distribution to Cinemark Holdings, Inc. during the year ended December 31, 2012 of approximately $5,356.
4. | LONG-TERM DEBT |
Cinemark Holdings, Inc. has no direct outstanding debt obligations, but its subsidiaries do. For a discussion of the debt obligations of Cinemark Holdings, Inc.’s subsidiaries, see Note 1311 to the Company’s consolidated financial statements included elsewhere in this annual report on Form 10-K.
5. | CAPITAL STOCK |
Cinemark Holdings, Inc.’s capital stock along with its long-term incentive plan and related activity are discussed in Note 1916 of the Company’s consolidated financial statements included elsewhere in this annual report on Form 10-K.
6. | COMMITMENTS AND CONTINGENCIES |
Cinemark Holdings, Inc. has no direct commitments and contingencies, but its subsidiaries do. See Note 2219 of the Company’s consolidated financial statements included elsewhere in this annual report on Form 10-K.
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR
CINEMARK HOLDINGS, INC.
FOR FISCAL YEAR ENDED
DECEMBER 31, 20122015
EXHIBIT INDEX
Number | Exhibit Title | |
2.1(a) | Stock Contribution and Exchange Agreement, dated as of August 7, 2006, by and between Cinemark Holdings, Inc., Cinemark, Inc., Syufy Enterprises, LP and Century Theatres Holdings, LLC (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K, File No. 000-47040, filed by Cinemark USA, Inc. on August 11, 2006). | |
2.1(b) | Stock Purchase Agreement, dated as of August 7, 2006, by and among Cinemark USA, Inc., Cinemark Holdings, Inc., Syufy Enterprises LP, Century Theatres, Inc. and Century Theatres Holdings, LLC (incorporated by reference to Exhibit 10.1 to | |
2.2 | Contribution and Exchange Agreement, dated as of August 7, 2006, by and among Cinemark Holdings, Inc. and Lee Roy Mitchell, The Mitchell Special Trust, Alan W. Stock, Timothy Warner, Robert Copple, Michael Cavalier, Northwestern University, John Madigan, Quadrangle Select Partners LP, Quadrangle Capital Partners A LP, Madison Dearborn Capital Partners IV, L.P., K&E Investment Partners, LLC — 2004-B-DIF, Piola Investments Ltd., Quadrangle (Cinemark) Capital Partners LP and Quadrangle Capital Partners LP (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K, File No. 000-47040, filed by Cinemark USA, Inc. on August 11, 2006). | |
Asset Purchase Agreement, dated as of November 16, 2012, by and among Cinemark USA, Inc., Rave Real Property Holdco, LLC and certain of its subsidiaries, Rave Cinemas, LLC and RC Processing, LLC. (incorporated by reference to Exhibit 2.3 to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 28, 2013). | ||
3.1 | Second Amended and Restated Certificate of Incorporation of Cinemark Holdings, Inc. filed with the Delaware Secretary of State on April 9, 2007 (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to our Registration Statement on Form S-1, File No. 333-140390, filed April 9, 2007). | |
3.2(a) | Amended and Restated Bylaws of Cinemark Holdings, Inc. dated April 9, 2007 (incorporated by reference to Exhibit 3.2 to Amendment No. 2 to our Registration Statement on Form S-1, File No. 333-140390, filed April 9, 2007). | |
3.2(b) | First Amendment to the Amended and Restated Bylaws of Cinemark Holdings, Inc. dated April 16, 2007 (incorporated by reference to Exhibit 3.2(b) to Amendment No. 4 to our Registration Statement on Form S-1, File No. 333-140390, filed April 19, 2007). | |
3.2(c) | Second Amendment to the Amended and Restated Bylaws of Cinemark Holdings, Inc. dated August 20, 2015 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8K, File No. 001-33401, filed August 21, 2015). | |
4.1 | Specimen stock certificate of Cinemark Holdings, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to our Registration Statement on Form S-1, File No. 333-140390, filed April 9, 2007). | |
4.2(a) | Indenture dated as of June 29, 2009, between Cinemark USA, Inc. and Wells Fargo Bank, N.A., as trustee governing the 8 5/8% senior notes of Cinemark USA, Inc. issued thereunder (incorporated by reference to Exhibit 4.2 to the Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed July 6, 2009). | |
4.2(b) | Form of 8 5/8% senior notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit |
4.3(a) | Indenture, dated as of June 3, 2011, between Cinemark USA, Inc. and Wells Fargo Bank, N.A. governing the 7 3/8% senior subordinated notes issued thereunder (incorporated by reference to Exhibit 4.1 to Cinemark Holdings, Inc.’s Current Report on Form 8K, File No. 001-33401, filed on July 6, 2011). | |
4.3(b) | Form of 7 3/8% senior subordinated notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit |
4.4(a) | Indenture, dated as of December 18, 2012, between Cinemark USA, Inc. and Wells Fargo Bank, N.A. governing the 5 1/8% senior notes issued thereunder (incorporated by reference to Exhibit 4.1 to Cinemark Holdings, Inc.’s Current Report on Form 8K, File No. 001-33401, filed on December 20, 2012). | ||
4.4(b) | Form of 5 1/8% senior notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit | ||
| |||
4.5(b) | Form of 4.875% Senior Notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit 4.5(a) above (incorporated by reference to Exhibit 4.3 to Cinemark Holdings, Inc.’s Current Report on | ||
10.1(a) | Management Agreement, dated December 10, 1993, between Laredo Theatre, Ltd. and Cinemark USA, Inc. (incorporated by reference to Exhibit 10.14(b) to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-47040, filed March 31, 1994). | ||
10.1(b) | First Amendment to Management Agreement of Laredo Theatre, Ltd., effective as of December 10, 2003, between CNMK Texas Properties, Ltd. (successor in interest to Cinemark USA, Inc.) and Laredo Theatre Ltd. (incorporated by reference to Exhibit 10.1(d) to Cinemark, Inc.’s Registration Statement on Form S-4, File No. 333-116292, filed June 8, 2004). | ||
10.1(c) | Second Amendment to Management Agreement of Laredo Theatres, Ltd., effective as of December 10, 2008, between CNMK Texas Properties, L.L.C. (Successor in interest to Cinemark USA, Inc.) and Laredo Theatre Ltd. (incorporated by reference to Exhibit 10.1(c) to the Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed March 13, 2009). | ||
*10.1(d) | Third Amendment to Management Agreement of Laredo Theatres, Ltd., effective as of December 10, 2013, between CNMK Texas Properties, L.L.C. (Successor in interest to Cinemark USA, Inc.) and Laredo Theatre Ltd. | ||
10.2 | License Agreement, dated December 10, 1993, between Laredo Joint Venture and Cinemark USA, Inc. (incorporated by reference to Exhibit 10.14(c) to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-47040, filed March 31, 1994). | ||
10.4(a) | Amended and Restated Credit Agreement, dated as of December 18, 2012, among Cinemark USA, Inc., Cinemark Holdings, Inc., the several banks and other financial institutions and entities from time to time parties thereto, Barclays Bank PLC, Deutsche Bank Securities Inc., Morgan Stanley Senior Funding, Inc. and Wells Fargo Securities, LLC, as joint bookrunners, Morgan Stanley Senior Funding, Inc., as syndication agent, Deutsche Bank Securities Inc., Wells Fargo Securities, Inc. and Webster Bank, N.A., as co-documentation agents, and Barclays Bank PLC, as administrative agent. (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed on December 20, 2012). |
10.4(b) | Second Amendment to the Amended and Restated Credit Agreement, dated as of May 8, 2015, among Cinemark USA, Inc., Cinemark Holdings, Inc., the several banks and other financial institutions and entities from time to time parties thereto, Barclays Bank PLC as administrative agent, Barclays Bank PLC as lead arranger, Barclays, Morgan Stanley Senior Funding, Inc., Deutsche Bank Securities Inc. and Wells Fargo Securities, LLC, as joint bookrunners, J.P.Morgan Securities LLC, Webster Bank, N.A., as co-arrangers (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed on May 14, 2015). | |
| Guarantee and Collateral Agreement, dated as of October 5, 2006, among Cinemark Holdings, Inc., Cinemark, Inc., CNMK Holding, Inc., Cinemark USA, Inc. and each subsidiary guarantor party thereto (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K, File No. 000-47040, filed by Cinemark USA, Inc. on October 12, 2006). | |
Reaffirmation agreement, dated as of December 18, 2012, between Cinemark Holdings, Inc., Cinemark USA, Inc. and each subsidiary guarantor party | ||
10.5(a) | Tax Sharing Agreement, between Cinemark USA, Inc. and Cinemark International, L.L.C. (f/k/a Cinemark II, Inc. ), dated as of June 10, 1992 (incorporated by reference to Exhibit 10.22 to Cinemark USA, Inc.’s Annual Report on Form 10-K, File No. 033-47040, filed March 31, 1993). | |
10.5(b) | Tax Sharing Agreement, dated as of July 28, 1993, between Cinemark USA, Inc. and Cinemark Mexico (USA) (incorporated by reference to Exhibit 10.10 to Cinemark Mexico (USA)’s Registration Statement on Form S-4, File No. 033-72114, filed November 24, 1993). | |
Employment Agreement, dated as of December 15, 2008, between Cinemark Holdings, Inc. and Lee Roy Mitchell (incorporated by reference to Exhibit 10.5 (q) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed March 13, 2009). | ||
Employment Agreement, dated as of December 15, 2008, between Cinemark Holdings, Inc. and Rob Carmony (incorporated by reference to Exhibit 10.5 (r) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed March 13, 2009). | ||
| Second Amended and Restated Employment Agreement, dated as of January 21, 2014 between Cinemark Holdings, Inc. and Timothy Warner (incorporated by reference to Exhibit 10.42 to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 28, 2014). | |
+10.6(d) | First Amendment to Second Amended and Restated Employment Agreement, dated as of August 20, 2015 (to be effective as of August 24, 2015), between Cinemark Holdings, Inc. and Timothy Warner (incorporated by reference to Exhibit 10.1 to Current Report on Form 8K, File No. 001-33401, filed August 21, 2015). | |
+10.6(e) | Amended and Restated Employment Agreement, dated as of January 21, 2014, between Cinemark Holdings, Inc. and Robert Copple (incorporated by reference to Exhibit 10.43 to Cinemark Holdings, Inc.’s Annual Report on Form 10-K , File No. 001-33401, filed February 28, 2014). | |
+10.6(f) | Employment Agreement dated as of June 23, 2014, by and between Cinemark Holdings, Inc. and Sean Gamble (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No.001-33401, filed June 23, 2014). | |
+10.6(g) | Employment agreement, dated as of |
Employment Agreement, dated as of February 15, 2010, between Cinemark Holdings, Inc. and Valmir Fernandes (incorporated by reference to Exhibit 10.5(v) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed March 10, 2010). | ||
+10.6(i) | Amendment to Employment Agreement dated as of November 12, 2014 between Cinemark Holdings, Inc. and Lee Roy Mitchell (incorporated by reference to Exhibit 10.6(h) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 27, 2015). | |
+10.6(j) | Employment Agreement, dated as of August 20, 2015 (to be effective as of August 24, 2015), between Cinemark Holdings, Inc. and Mark Zoradi (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K, File No. 001-33401, filed August 21, 2015). | |
+10.6(k) | Consulting Agreement, dated as of August 20, 2015 (to be effective as of April 1, 2016), between Cinemark Holdings, Inc. and Timothy Warner (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K, File No. 001-33401, filed August 21, 2015). | |
*+ | Amended and Restated Employment Agreement, dated as of February 19, 2016, between Cinemark Holdings, Inc. and Mark Zoradi. | |
+10.7(a) | Amended and Restated Cinemark Holdings, Inc. 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 4.1 to Cinemark Holdings, Inc.’s Quarterly Report on form 10-Q, File No. 001-33401, filed May 9, 2008). | |
First Amendment to the Amended and Restated Cinemark Holdings, Inc. 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, File No. 001-33401, filed February 18, 2014). | ||
+10.7(c) | Form of Stock Option Agreement (incorporated by reference to Exhibit 10.7(b) to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed February 1, 2007). | |
Form of Restricted Share Award Agreement pursuant to the Amended and Restated Cinemark Holdings, Inc. 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 4.6 to Cinemark Holdings, Inc.’s Registration Statement on Form S-8, File No. 333-146349, filed August 29, 2008). | ||
Form of Restricted Stock Unit Award Agreement pursuant to the Amended and Restated Cinemark Holdings, Inc. 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 10.7(f) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 29, 2012). | ||
+10.7(f) | First Amendment to the Amended and Restated 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed February 18, 2014). | |
+10.7(g) | Form of Restricted Stock Unit Award Agreement pursuant to the Amended and Restated Cinemark Holdings, Inc. 2006 Long Term Incentive Plan, as amended (incorporated by reference to Exhibit 10.7(f) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 27, 2015). | |
*+10.7(h) | Form of Restricted Share Award Agreement pursuant to the Amended and Restated Cinemark Holdings, Inc. 2006 Long Term Incentive Plan as amended. | |
10.8 | Amended and Restated Exhibitor Services Agreement |
10.9 | Third Amended and Restated Limited Liability Company Operating Agreement, dated as of February 12, 2007, by and between Cinemark Media, Inc., American Multi-Cinema, Inc., Regal CineMedia, LLC and National CineMedia, Inc. (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed March 16, 2007). | |
10.10(a) | Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 14, Sacramento, CA (incorporated by reference to Exhibit 10.10(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |
10.10(b) | First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 14, Sacramento, CA (incorporated by reference to Exhibit 10.10(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). |
10.10(c) | Second Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 14, Sacramento, CA (incorporated by reference to Exhibit 10.10(c) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
10.10(d) | Third Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 14, Sacramento, CA (incorporated by reference to Exhibit 10.10(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
10.10(e) | Fourth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc. (succeeded by Century Theatres, Inc.), as tenant, for Century Stadium 14, Sacramento, | ||
10.11(a) | Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Laguna 16, Elk Grove, CA (incorporated by reference to Exhibit 10.11(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
10.11(b) | First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Laguna 16, Elk Grove, CA (incorporated by reference to Exhibit 10.11(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
10.11(c) | Second Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Laguna 16, Elk Grove, CA (incorporated by reference to Exhibit 10.11(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
10.11(d) | Third Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Laguna 16, Elk Grove, CA (incorporated by reference to Exhibit 10.11(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). |
10.11(e) | Fourth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc. (succeeded by Century Theatres, Inc.), as tenant, for Century Laguna 16, Elk Grove, | |
10.12(a) | ||
Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 14, Folsom, CA (incorporated by reference to Exhibit 10.14(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007) | ||
First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 14, Folsom, CA (incorporated by reference to Exhibit 10.14(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). |
Second Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 14, Folsom, CA (incorporated by reference to Exhibit 10.14(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Third Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 14, Folsom, CA (incorporated by reference to Exhibit 10.14(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Fourth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of December 1, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc. (succeeded by Century Theatres, Inc.), as tenant, for Century 14, Folsom, | |||
Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of Nevada, Inc., as tenant, for Cinedome 12, Henderson, NV (incorporated by reference to Exhibit 10.15(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of Nevada, Inc., as tenant, for Cinedome 12, Henderson, NV (incorporated by reference to Exhibit 10.15(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
Second Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of Nevada, Inc., as tenant, for Cinedome 12, Henderson, NV (incorporated by reference to Exhibit 10.15(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Third Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of Nevada, Inc., as tenant, for Cinedome 12, Henderson, NV (incorporated by reference to Exhibit 10.15(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). |
Fourth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of Nevada, Inc., as tenant, for Cinedome 12, Henderson, NV (incorporated by reference to Exhibit 10.15(e) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.17(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.17(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
Second Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.17(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
Third Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.17(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
Fifth Amendment to Indenture of Lease dated as of | ||
Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Cinema 16, Mountain View, CA (incorporated by reference to Exhibit 10.21(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Cinema 16, Mountain View, CA (incorporated by reference to Exhibit 10.21(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). |
Second Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Cinema 16, Mountain View, CA (incorporated by reference to Exhibit 10.21(c) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
Third Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Cinema 16, Mountain View, CA (incorporated by reference to Exhibit 10.21(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
Fourth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc. (succeeded by Century Theatres, Inc.), as tenant, for Century Cinema 16, Mountain View, | ||
Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Cinedome 8, Napa, CA (incorporated by reference to Exhibit 10.24(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). |
First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Cinedome 8, Napa, CA (incorporated by reference to Exhibit 10.24(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
Second Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Cinedome 8, Napa, CA (incorporated by reference to Exhibit 10.24(c) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
Third Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Cinedome 8, Napa, CA (incorporated by reference to Exhibit 10.24(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Fourth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Cinedome 8, Napa, CA (incorporated by reference to Exhibit 10.24(e) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
Lease Agreement, dated as of April 10, 1998, by and between Dyer Triangle LLC, as landlord and Century Theatres, Inc., as tenant, for Century 25 Union Landing, Union City, CA (incorporated by reference to Exhibit 10.25(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
First Amendment, dated as of April 15, 2005, to Lease Agreement, dated as of April 10, 1998, by and between Dyer Triangle LLC, as landlord and Century Theatres, Inc., as tenant, for Century 25 Union Landing, Union City, CA (incorporated by reference to Exhibit 10.25(b) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). |
Second Amendment, dated as of September 29, 2005, to Lease Agreement, dated as of April 10, 1998, by and between Dyer Triangle LLC, as landlord and Century Theatres, Inc., as tenant, for Century 25 Union Landing, Union City, CA (incorporated by reference to Exhibit 10.25(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
Third Amendment, dated as of August 5, 2006, to Lease Agreement, dated as of April 10, 1998, by and between Dyer Triangle LLC, as landlord and Century Theatres, Inc., as tenant, for Century 25 Union Landing, Union City, | ||
Indenture of Lease, dated as of March 7, 1997, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Sparks, Sparks, NV (incorporated by reference to Exhibit 10.26(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
First Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of March 7, 1997, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Sparks, Sparks, NV (incorporated by reference to Exhibit 10.26(b) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). |
Second Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of March 7, 1997, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Sparks, Sparks, NV (incorporated by reference to Exhibit 10.26(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Third Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of March 7, 1997, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Sparks, Sparks, | |||
Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P. | |||
First Amendment, dated as of April 15, 2005, to Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P. | |||
Second Amendment, dated as of September 29, 2005, to Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P. | |||
Third Amendment, dated as of August 5, 2006, to Lease Agreement, dated as of October 1, 1996, by and between |
Indenture of Lease, dated as of July 1, 1996, by and between Synm Properties Inc. (succeeded by Syufy Properties, Inc.), as landlord and Century Theatres, Inc., as tenant, Century Rio 24, Albuquerque, NM (incorporated by reference to Exhibit 10.28(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
First Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of July 1, 1996, by and between Synm Properties Inc. (succeeded by Syufy Properties, Inc.), as landlord and Century Theatres, Inc., as tenant, Century Rio 24, Albuquerque, NM (incorporated by reference to Exhibit 10.28(b) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
Second Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of July 1, 1996, by and between Synm Properties Inc. (succeeded by Syufy Properties, Inc.), as landlord and Century Theatres, Inc., as tenant, Century Rio 24, Albuquerque, NM (incorporated by reference to Exhibit 10.28(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
Third Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of July 1, 1996, by and between |
Indenture of Lease, dated as of September 3, 1996, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century 14, Roseville, CA (incorporated by reference to Exhibit 10.29(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
First Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 3, 1996, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century 14, Roseville, CA (incorporated by reference to Exhibit 10.29(b) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Second Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of September 3, 1996, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century 14, Roseville, CA (incorporated by reference to Exhibit 10.29(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Third Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 3, 1996, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century 14, Roseville, | |||
Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 16, Ventura, CA (incorporated by reference to Exhibit 10.31(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
First Amendment, dated as of October 1, 1996, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 16, Ventura, CA (incorporated by reference to Exhibit 10.31(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). |
Second Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 16, Ventura, CA (incorporated by reference to Exhibit 10.31(c) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). |
Third Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 16, Ventura, CA (incorporated by reference to Exhibit 10.31(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Fourth Amendment dated as of September 29, 2005 to Indenture of Lease, dated September 30, 1995 between Syufy Enterprises L.P., as landlord and Century Theatres, Inc., as tenant for Century Stadium 16, Ventura, CA. (incorporated by reference to Exhibit 10.22(e) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 27, 2015). | |||
10.22(f) | Fifth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century Stadium 16, Ventura, CA (incorporated by reference to Exhibit 10.31(e) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
Sixth Amendment dated November 29, 2012 to Indenture of Lease, dated as of September 30, 1995, between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Stadium 16, Ventura, CA (incorporated by reference to Exhibit 10.22(g) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 27, 2015). | |||
10.23(a) | Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Northridge 14, Salinas, CA (incorporated by reference to Exhibit 10.32(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Northridge 14, Salinas, CA (incorporated by reference to Exhibit 10.32(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
Second Amendment, dated as of October 1, 2001, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Northridge 14, Salinas, CA (incorporated by reference to Exhibit 10.32(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Third Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc. (succeeded by Century Theatres, Inc.), as tenant, for Northridge 14, Salinas, | |||
Indenture of Lease, dated as of September 30, 1995, by and between Syufy Properties, Inc. (succeeded by Syufy Enterprises, L.P.), as landlord and Century Theatres of Utah, Inc., as tenant, for Century 16, Salt Lake City, UT (incorporated by reference to Exhibit 10.33(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). |
First Amendment, dated as of January 4, 1998, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Properties, Inc. (succeeded by Syufy Enterprises, L.P.), as landlord and Century Theatres of Utah, Inc., as tenant, for Century 16, Salt Lake City, UT (incorporated by reference to Exhibit 10.33(b) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
Second Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Properties, Inc. (succeeded by Syufy Enterprises, L.P.), as landlord and Century Theatres of Utah, Inc., as tenant, for Century 16, Salt Lake City, UT (incorporated by reference to Exhibit 10.33(c) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
Third Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Properties, Inc. (succeeded by Syufy Enterprises, L.P.), as landlord and Century Theatres of Utah, Inc., as tenant, for Century 16, Salt Lake City, UT (incorporated by reference to Exhibit 10.33(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). |
Fourth Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Properties, Inc. (succeeded by Syufy Enterprises, L.P.), as landlord and Century Theatres of Utah, Inc., as tenant, for Century 16, Salt Lake City, UT (incorporated by reference to Exhibit 10.33(e) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
Indenture of Lease, dated as of April 17, 1998, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Larkspur, Larkspur, CA (incorporated by reference to Exhibit 10.34(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
First Amendment, dated as of April 30, 2003, to Indenture of Lease, dated as of April 17, 1998, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Larkspur, Larkspur, CA (incorporated by reference to Exhibit 10.34(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
Second Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of April 17, 1998, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Larkspur, Larkspur, CA (incorporated by reference to Exhibit 10.34(c) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
Third Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of April 17, 1998, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Larkspur, Larkspur, CA (incorporated by reference to Exhibit 10.34(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). |
Fourth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of April 17, 1998, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Larkspur, Larkspur, | ||
Indenture of Lease, dated as of August 1, 1997, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Park Lane 16, Reno, NV (incorporated by reference to Exhibit 10.35(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | ||
First Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of August 1, 1997, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Park Lane 16, Reno, NV (incorporated by reference to Exhibit 10.35(b) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
Second Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of August 1, 1997, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Park Lane 16, Reno, NV (incorporated by reference to Exhibit 10.35(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). |
Third Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of August 1, 1997, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant, for Century Park Lane 16, Reno, | |||
Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 16, Sacramento, CA (incorporated by reference to Exhibit 10.36(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
First Amendment, dated as of September 1, 2000, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 16, Sacramento, CA (incorporated by reference to Exhibit 10.36(b) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007). | |||
Second Amendment, dated as of October 1, 2001, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 16, Sacramento, CA (incorporated by reference to Exhibit 10.36(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | |||
| Third Amendment, dated as of April 15, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 16, Sacramento, CA (incorporated by reference to Exhibit 10.36(d) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). | ||
| Fourth Amendment, dated as of September 29, 2005, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc., as tenant, for Century 16, Sacramento, CA (incorporated by reference to Exhibit 10.36(e) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007). |
| Fifth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between Syufy Enterprises, L.P., as landlord and Century Theatres of California, Inc. (succeeded by Century Theatres, Inc.), as tenant, for Century 16, Sacramento, CA (incorporated by reference to Exhibit | |
| ||
Cinemark Holdings, Inc. Performance Bonus Plan, as amended (incorporated by reference to Appendix B to Cinemark Holdings, Inc.’s Definitive Proxy Statement filed on April | ||
Amended and Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.40 to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February | ||
Calculation of Ratio of Earnings to Fixed Charges. | ||
Subsidiaries of Cinemark Holdings, Inc. | ||
Consent of Deloitte & Touche LLP. | ||
Certification of | ||
Certification of | ||
Certification of | ||
Certification of | ||
*101 | The following financial information from Cinemark Holdings, Inc.’s Annual Report on Form 10-K for the year ended December 31, |
* | Filed herewith. |
+ | Any management contract, compensatory plan or arrangement. |
E-18E-15