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, 20152018

Commission File Number 33-47040

 

CINEMARK USA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Texas

Texas

75-2206284

(State or other jurisdiction of

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:

None

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 ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ¨  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

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 x  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. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

Non-accelerated filerx  (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ Nox

This registrant is privately held and there is no public trading market for its equity securities; therefore the registrant is unable to calculate the aggregate market value of the voting and non-voting common equity held by non-affiliates.

As of February 29, 2016,March 1, 2019, 1,500 shares of Class A common stock and 182,648 shares of Class B common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the definitive proxy statement of Cinemark Holdings, Inc. the registrant’s parent company, to be filed within 120 days of December 31, 2015,2018, are incorporated by reference into Part III, Items 10-14, of this annual report on Form 10-K.

 

 

 


Table of Contents

 

Page

Page

Cautionary Statement Regarding Forward-Looking Statements

1

PART I

Item 1.

Business

2

Item 1A.

Risk Factors

12

13

Item 1B.

Unresolved Staff Comments

17

18

Item 2.

Properties

17

18

Item 3.

Legal Proceedings

18

19

Item 4.

Mine Safety Disclosures

18

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

19

21

Item 6.

Selected Financial Data

19

21

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

23

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

38

42

Item 8.

Financial Statements and Supplementary Data

39

43

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

39

43

Item 9A.

Controls and Procedures

40

44

Item 9B.

Other Information

40

44

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

41

45

Item 11.

Executive Compensation

41

45

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersStockholderMatters

41

45

Item 13.

Certain Relationships and Related Transactions, and Director Independence

41

45

Item 14.

Principal Accounting Fees and Services

41

45

PART IV

Item 15.

Exhibits, Financial Statement Schedules

41

45

SIGNATURES

56

42


Cautionary Statement RegardingRegarding 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 USA, Inc. and its consolidated subsidiaries. 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, Curacao and Curacao.Paraguay. Unless otherwise specified, all operating and other statistical data are as of and for the year ended December 31, 2015.

PART I2018.

 

Item 1.Business

PART I

Item 1. Business

Our Company

Cinemark USA, 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, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Curacao.Paraguay.

As of December 31, 2015,2018, we managed our business under two reportable operating segments: U.S. markets and international markets. See Note 1817 to the consolidated financial statements.

Cinemark USA, Inc. is a Texas corporation incorporated in 1984 and a wholly-owned subsidiary of Cinemark Holdings, Inc. 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 “About - Investor“Investor Relations – Financials - SEC Filings” as soon as practicable after such reports are filed or furnished electronically to the Securities and Exchange 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.www.sec.gov.

Description of Business

We are a leader and one of the leadersmost geographically diverse operators in the motion picture exhibition industry. As of December 31, 2015,2018, we operated 513546 theatres and 5,7966,048 screens in the U.S. and Latin America and approximately 280more than 282 million patronsguests attended our theatres worldwide during the year ended December 31, 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, our2018. Our U.S. circuit had 337341 theatres and 4,5184,586 screens in 41 states and our international circuit had 176205 theatres and 1,278 screens.

Revenues, operating income1,462 screens in 15 countries.  Our significant and net income attributable to Cinemark USA, Inc.diverse presence in the U.S. and Latin America has made us an important distribution channel for the year ended December 31, 2015, were $2,852.6 million, $425.8 million and $218.5 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.

movie studios. We believe our portfolio of modern, high-quality theatres with multiple platforms provides a preferred destination for moviegoers and contributes to our solidconsistent financial performance.  

Revenues, operating income and consistent cash flows from operating activities. Our significant and diverse presence innet income attributable to Cinemark USA, Inc. for the U.S. and Latin America has made us an important distribution channel for movie studios, particularly considering the expanding worldwide box office.

We continue to develop and expand new platforms and market adaptive concepts for our theatre 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 the industry. Our XD auditorium offers a premium experience utilizing the latest in digital projection and enhanced custom sound, 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 immersive 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 without any print enhancements required. As ofyear ended December 31, 2015,2018, were $3,221.8 million, $390.9 million and $215.7 million, respectively. At December 31, 2018 we had 210 XD auditoriums in our worldwide circuit with plans to install 15 to 20 more XD auditoriums during 2016.

The Movie Bistro locations offer in-theatre dining with expanded food offerings, such as fresh wraps, hot sandwiches, burgers,cash and gourmet pizzas,cash equivalents of $426.2 million and a selectiontotal long-term debt 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 2014, we opened our first Cinemark Reserve theatre in the U.S.$1,809.3 million. Approximately $202.9 million, or 11%, which features a VIP area with luxury recliner seating and other amenities, along with a wide variety of food and beverage products. We opened our second Cinemark Reserve theatre in the U.S. during 2015. We have a similar VIP concept offering recliner seating in five other domestic locations and in 22 of our international theatres, referred to locally as either Cinemark Premiere or Cinemark Prime. We plan to continue to incorporate this concept in fourlong-term debt accrues interest at variable rates and $8.0 million of our new domestic and international theatres and convert three of our existing locations during 2016.long-term debt matures in 2019.

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 2016.2


We currently have auditoriums throughout our worldwide circuit that offer seats with immersive cinematic motion, calledD-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 art and independent cinema in a captivating, unique environment and has 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 other domestic theatres also 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. 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. This format enables us to more efficiently move titles between auditoriums within a theatre to appropriately address demand for each title.

Currently, all of our first-run domestic and international theatres are fully digital. Digital projection allows us to present 3-D content and alternative entertainment such as live and pre-recorded sports programs, concert events, the Metropolitan Opera, gaming events and other special presentations. Three-dimensional technology offers a premium experience with crisp, bright, ultra-realistic images. According to Motion Picture Association of America, or MPAA, approximately 17% and 13% of domestic box office for 2013 and 2014, respectively, was generated by 3-D tickets.

During 2013, through a joint venture named Digital Cinema Distribution Coalition, or DCDC, the motion picture exhibition industry developed a content delivery network that allows for delivery of all digital content to U.S. theatres via satellite. Delivery of content via satellite 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 set an all-time box office record during 2015 with an estimated $11.1 billion in revenues. This represents an increase of approximately 7% over 2014 and an increase of 2% overreported box office revenues of approximately $11.1 billion for the previous record set during 2013.2017.  Preliminary estimates for 2018 indicate that box office revenues reached an all-time high of $11.9 billion, an approximate 7% increase over 2017. The following table represents the results of a survey by MPAA published during March 2015,2018, outlining the historical trends in U.S. box office performance for the ten year period from 20052008 to 20142017 (industry data for 20152018 has not yet been released):

 

 

U.S. Box

 

 

 

 

 

 

 

 

 

  

U.S. Box

Office Revenues

   Attendance  Average Ticket 

 

Office Revenues

 

 

Attendance

 

 

Average Ticket

 

Year

  ($ in billions)   (in billions)  Price 

 

($ in billions)

 

 

(in billions)

 

 

Price

 

2005

  $8.8    1.38  $6.41  

2006

  $9.2    1.40  $6.55  

2007

  $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  

 

$

10.8

 

 

 

1.36

 

 

$

7.96

 

2013

  $10.9    1.34  $8.13  

 

$

10.9

 

 

 

1.34

 

 

$

8.13

 

2014

  $10.4    1.27  $8.17  

 

$

10.4

 

 

 

1.27

 

 

$

8.17

 

2015

 

$

11.1

 

 

 

1.32

 

 

$

8.43

 

2016

 

$

11.4

 

 

 

1.32

 

 

$

8.65

 

2017

 

$

11.1

 

 

 

1.24

 

 

$

8.97

 

Films leading the box office during the year ended December 31, 2015 includedStar Wars: The Force Awakens, Jurassic World,Avengers: Age of Ultron,Hunger Games: Mockingjay Part II, Furious 7, American Sniper, 50 Shades of Grey,Inside Out,Minions,Spectre andMission: Impossible 5,among other films.

Films scheduled for release 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 Secret Life Of Pets,Zootopia, Alice Through The Looking Glass, andSing; and spin-off films such asRogue One: A Star Wars Storyand the Harry Potter spin-offFantastic Beasts And Where To Find Them, among other films.

International Markets

According to MPAA, international box office revenues were $26.0 billion for the year ended December 31, 2014, 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 $3.0 billion for the year ended December 31, 2014, consistent with 2013 performance.

Growth in Latin America continues to be fueled by a combination of growing populations, attractive demographics (i.e., a significant teenage population), continued retail development, and quality product from Hollywood, including 3-D and alternative content offerings. In many Latin American countries, including Brazil, Argentina, Colombia, Peru and Chile, successful local film product can also provide incremental box office growth opportunities.

We believe many international markets will continue to experience growth as new theatre technologies and platforms are introduced, as film and other product offerings continue to expand and as ancillary revenue opportunities grow.

Drivers of Continued Industry Success

We believe the following market trends will drive the continued strength of our industry:

Importance of Theatrical Success in Establishing Movie Brands.Theatrical exhibition has long been the primary distribution channel for new motion picture releases. A successful theatrical release “brands” a film and is one of the major contributors to a film’s success in “downstream” markets, such as digital downloads, video on-demand, pay-per-view television, DVDs, and 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 $26.0 billion, or approximately 72%, of 2014 total worldwide box office revenues according to MPAA. (As of the date of this report, 2015 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 during 2015 also performed exceptionally well in international markets. Such films includedFurious 7, which grossed approximately $1,162.0 million in international markets, or approximately 77% of its

worldwide box office,Avengers: Age of Ultron, which grossed approximately $946.0 million in international markets, or approximately 67% of its worldwide box office, and Jurassic World, which grossed approximately $1,014.0 million in international markets, or approximately 61% of its worldwide box office.

Stable Box Office Levels.Over the past ten years, industry statistics have shown slight increases and decreases in attendance from 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 stability of the industry, and its continued ability to attract consumers.consumers and the fact that box office performance is primarily dependent on the quality and quantity of film product rather than economic cycles.  Average ticket prices can also be driven by the mix of film product and availability of films in premium formats.

Films leading the box office during the year ended December 31, 2018 included Black Panther, Avengers: Infinity War, Incredibles 2, Jurassic World: Fallen Kingdom, Aquaman, Deadpool 2, Dr. Seuss’ The Grinch, Mission Impossible – Fallout, Ant-Man and the Wasp, Solo: A Star Wars Story, Venom, A Quiet Place, Crazy Rich Asians, Halloween, Bumblebee, Ralph Breaks the Internet, Fantastic Beasts: The Crimes of Grindelwald, Mary Poppins Returns, A Star is Born, Bohemian Rhapsody and other films, as well as the carryover of The Greatest Showman, Jumanji: Welcome to the Jungle and Star Wars: The Last Jedi.

Films scheduled for release during 2019 include Avengers: Endgame, Star Wars: Episode IX, The Lion King, Frozen 2, Toy Story 4, Aladdin, Captain Marvel, It 2, Spider-Man: Far From Home, The Secret Life of Pets 2, Joker, Dumbo, and Godzilla 2 among other films.

International Markets

According to MPAA, international box office revenues increased approximately 7% to $29.5 billion for the year ended December 31, 2017, from $27.4 billion for the year ended December 31, 2016.  More specifically, Latin American box office revenues were $3.4 billion for the year ended December 31, 2017, compared to $2.8 billion for the year ended December 31, 2016, an increase of approximately 22%.  (Industry data for 2018 has not yet been released.)

While certain Latin American countries have experienced recent political and economic challenges, performance is also impacted by social behaviors, growing populations, continued retail development in select markets, and quality product from Hollywood, including 3-D and alternative content offerings. In many Latin American countries, including Brazil, Argentina, Colombia, Peru and Chile, successful local film product can also provide incremental box office growth opportunities.

3


We believe many international markets will expand as new theatre technologies are introduced to more locations, as film and other content offerings continue to broaden, as ancillary revenue opportunities grow and as local economies strengthen. We also believe most of these markets are underscreened in comparison to the U.S. and European markets.

Drivers of Continued Industry Success

We believe the following market trends will continue to drive the strength of our industry:

Importance of Theatrical Success in Establishing Movie Brands. Theatrical exhibition has long been the primary distribution channel for new major motion picture releases. A successful theatrical release “brands” a film and is one of the major contributors to a film’s success in “downstream” markets, such as digital downloads, video on-demand, pay-per-view television, DVDs, SVOD, and network and syndicated television, as well as branded retail merchandise.

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 $8.17$8.97 in 2014.2017. Average prices in 20142017 for other forms of out-of-home entertainment in the U.S., including sporting events and theme parks, ranged from approximately $28.00$31.67 to $84.00$94.98 per ticket according to MPAA. (As of the date of this report, 20152018 industry data was not yet available.)

Innovation Using Digital and Satellite Technology. Our industry began converting to digital projection technology during 2009. Our domestic circuit also converted to satellite technology during 2014 and our international circuit has started 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, including the presentationExpansion of 3-D content and alternative entertainment. Alternative entertainment may include pre-recorded programs as well as live sports programs, concert events, the Metropolitan Opera, e-sports gaming events and other special presentations. New and enhanced programming alternatives expands the industry’s offerings to attract a broader customer base.

Introduction of New PlatformsConcepts and Product Offerings.Offerings that Enhance the Movie-Going Experience.  The motion picture exhibition industry continues to develop new movie theatre platforms and concepts to respond to varying and changing consumer preferences.preferences and to continue to differentiate the movie-going experience from watching a movie at home. 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. SomeMany locations now offer hot foods, adult beveragesalcohol offerings and/or healthier snack options for patrons.guests.  Motion seats are offered in some locations, further enhancing the movie viewing experience. Virtual reality has also been developed for in-theatre enjoyment. New and enhanced programming alternatives expand the industry’s entertainment offerings to attract a broader customer base.  

Contribution of International Markets to Box Office Performance. International markets continue to be an increasingly important component of the overall box office revenues generated by Hollywood films, accounting for $29.5 billion, or approximately 73%, of 2017 total worldwide box office revenues according to MPAA. (As of the date of this report, 2018 industry data was not yet available.)With the meaningful contribution of the international motion picture exhibition industry, we believe the relative contribution of markets outside North America will continue to be impactful. Many of the top U.S. films released during 2018 also performed exceptionally well in international markets.  Avengers: Infinity War grossed $1,370.0 million in international markets, or 67% of its worldwide box office.   Jurassic World: Fallen Kingdom generated $887.1 million in international markets, or 68% of its worldwide box office. Aquaman generated $774.2 million in international markets, or 71% of its worldwide box office.

Our Strategy

Key components of our strategy include:

Focus on Providing an Extraordinary Guest Experience to Maximize Attendance. We differentiate our theatres by focusing on providing an extraordinary guest experience through a variety of initiatives, as discussed below. We believe our focus on the guest experience is a catalyst for attendance growth and is a primary factor in our consistent industry-leading results.

We have a market-adaptive approach with our theatre amenities, including Luxury Lounger recliner seats, enhanced food and beverage offerings, and our exhibitor-branded premium large format, XD, IMAX, motion seats, and a new virtual reality offering in one of our domestic theatres.  Our innovative and advanced technology selections allow us to consistently deliver the highest quality presentation to fully immerse our guests in the on-screen action.  

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We have taken a retail approach to our food and beverage offerings, which include the traditional concession items such as popcorn, soft drinks and candy as well as enhanced menu items, alcohol and various cultural foods.  We also have merchandise stands in most theatres, bringing apparel, toys and other unique movie-themed products to our guests.  

Through our various marketing initiatives, including enhanced and tailored customer interactions, continued investment in our website and app experiences and development of our loyalty and membership programs, we are dedicated to further understanding our guests and enriching their movie-going experience.  We are also committed to providing a great employee experience through ongoing training, incentive programs and offering a supportive environment, as our engaged employees are empowered to provide first-rate customer service to our guests.  

Sustained Investment in Core Circuit Combined with Targeted Growth. We continually utilize our cash flows from operations to invest in our circuit to ensure the highest quality experience for our guests.  Our commitment to investing in our theatre assets is demonstrated by our level of capital expenditures for the years ended December 31, 2017 and 2018, at approximately $380.9 million and $346.1 million, respectively. 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, 2018, we built eleven new theatres with 81 screens and acquired three theatres with 19 screens.

Competitive Strengths

We believe the following strengths allow us to compete effectively:

Disciplined Operating Philosophy. We generated operating income and net income attributable to Cinemark USA, Inc. of $390.9 million and $215.7 million, respectively, for the year ended December 31, 2018. Our solid operating performance is a result of our disciplined and consistent operating philosophy that centers on building new, and reinvesting in our existing, high-quality theatres, focusing on the guest experience, maintaining favorable theatre-level economics, controlling operating costs and effectively reacting to economic and market changes.

We continue to grow organically as well as through the acquisition of high-quality theatres in select markets.  Our growth strategy has centered around meeting our stringent return on investment thresholds while also complementing our existing theatre circuit.  We continue to generate consistent cash flows from operating activities, which demonstrates the success of our growth strategy. We believe the combination of our strong balance sheet and our continued commitment to earn a strong return on our capital investments, will continue to provide us with the financial flexibility to pursue further expansion opportunities and maintain our existing locations at a high standard, while also allowing us to effectively service our debt obligations and continue to offer our stockholders a strong dividend yield.

Leading Position in Our U.S. Markets. We have a leading market share in most of the U.S. markets we serve, which includes a presence in 41 states. For the year ended December 31, 2018, we ranked either first or second, based on box office revenues, in 20 out of our top 25 U.S. markets, including the San Francisco Bay Area, Dallas, Houston, Salt Lake City, Sacramento, Cleveland, Austin and Las Vegas.

Located in Top Latin American Markets. We have successfully established a significant presence in major cities in Latin America, with theatres in fourteen of the twenty largest metropolitan areas in South America. As of December 31, 2018, we operated 205 theatres and 1,462 screens in 15 countries. Our international screens generated revenues of $682.8 million, or 21.2% of our total revenues, for the year ended December 31, 2018. We are the largest exhibitor in Brazil and Argentina and have significant market presence in Colombia, Peru and Chile. Our geographic diversity makes us an important global distribution channel for the movie studios.

State-of-the-Art Theatre Circuit. We offer a state-of-the-art movie-going experience, which we believe makes our theatres a preferred destination for moviegoers in our markets. During 2018, we built 81 new screens worldwide. As of December 31, 2018, we had commitments to open 212 additional new screens over the next three years.

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We have incorporated Luxury Lounger recliner seats in all of our recent domestic new builds and have also repositioned many of our existing domestic theatres to offer this premium seating feature. We currently feature Luxury Loungers in 2,565 domestic auditoriums, representing 55.9% of our domestic circuit. We plan to continue to add additional Luxury Loungers in certain of our domestic locations during 2019.

Our XD screens represent the largest exhibitor-sponsored premium large format footprint in the industry. Our XD auditoriums offer a premium experience utilizing the latest in digital projection and enhanced custom sound, including a Barco Auro 11.1 or Dolby Atmos sound system in select locations. The XD experience includes wall-to-wall screens, wrap-around sound, plush seating and a maximum comfort entertainment environment for an immersive experience. The exceptional XD technology does not require special format movie prints, which allows us the flexibility to showcase any available digital print we choose, including 3-D content, in our XD auditoriums. We also prefer the economies of our exhibitor-sponsored format since there is no additional revenue share component outside of routine film rental. As of December 31, 2018, we had 256 XD auditoriums in our worldwide circuit. We expect to further expand our XD footprint during 2019.  

We offer enhanced food and beverages 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, at approximately 58% of our worldwide theatres. We also offer market-adaptive concepts with full bars or dine-in areas in certain of our theatres, and continue to expand to additional locations.

We currently have auditoriums that offer seats with immersive cinematic motion, which we refer to as motion seats, throughout our worldwide circuit. These motion seats are programmed in harmony with the audio and video content of the film and further immerse guests in the on-screen action. We offer motion seats in 229 auditoriums throughout our worldwide circuit. We plan to add motion seats to additional locations during 2019.  

During 2018, we collaborated on an in-theatre immersive virtual reality technology in one of our domestic theatres that takes guests on a real-life, full-body journey where they engage with characters and their environment through sight, sound, touch, smell and motion. We plan to install this technology in at least one additional domestic theatre during 2019 and we are continuing to evaluate other locations at which we can offer our guests this unique entertainment option.

Experienced Management.Led by Chairman and founder Lee Roy Mitchell, Chief Executive Officer Mark Zoradi, Chief Operating Officer and 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 $425.8 million and $218.5 million, respectively, for the year ended December 31, 2015. Our solid operating performance is a result of our disciplined operating philosophy that centers on building high-quality theatres, while maintaining favorable theatre-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. markets we serve, which includes a presence in 41 states. For the year ended December 31, 2015, we ranked either first or second, based on box office revenues, in 22 out of our top 30 U.S. markets, including the San Francisco Bay Area, Dallas, Houston, Salt Lake City, Sacramento, Cleveland and Austin.

Located in Top Latin American Markets.We have continued to invest throughout Latin America. As of December 31, 2015, we operated 176 theatres and 1,278 screens in 14 countries. Our international screens generated revenues of $728.7 million, or 25.5% of our total revenues, for the year ended December 31, 2015. We have successfully established a significant presence in major cities in the region, with theatres in thirteen of the fifteen largest metropolitan areas in South America. We are the largest exhibitor in Brazil and Argentina. Our geographic diversity makes us an important distribution channel for the movie studios.

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 2015, we built 182 new screens worldwide. We currently have commitments to open 184 additional new screenscycles over the next three years. We have installed digital projection technology in all of our worldwide auditoriums. Currently, approximately 55% of our U.S. screens and 65% of our international screens are 3-D compatible. We currently have 14 digital IMAX screens. As of December 31, 2015, we had the industry-leading private label premium large format circuit with 210 XD auditoriums in our theatres. We have plans to install 15 to 20 additional XD auditoriums during 2016. We also continue to develop new market-adaptive theatre concepts 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 worldwide circuit on real-time basis.

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 flows from operating activities, which demonstrates the success of our growth strategy. We believe a combination of our strong balance sheet and our expected level of cash flows will continue to provide us with the financial flexibility to pursue further growth opportunities, while also allowing us to efficiently service our debt obligations and continue to offer our stockholders a strong dividend yield under our current dividend policy.6


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:

Focus on Operational Excellence and Customer Satisfaction.We continue to focus on achieving operational excellence by controlling theatre operating costs and training and motivating our staff all while focusing on making each of our customer’s experiences memorable. We strive for first-rate customer service and focus on driving attendance. Our consistent industry-leading margins reflect our ability to deliver the highest quality presentation to our patrons while also managing changes in product and consumer preferences.

Growth in Existing and New Markets.We continue to seek growth opportunities by building or acquiring high-quality theatres that meet our strategic, financial and demographic criteria. We added 25 new theatres with 201 screens to our worldwide circuit during the year ended December 31, 2015. We also monitor economic and market trends to ensure 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 preferences. During 2014, we acquired one theatre in Alabama, a new state for us and we opened our first theatre in Bolivia. During 2015, we opened our first theatre in Curacao, adding another new country to our diverse circuit. We have plans to open a theatre in Paraguay, another new country, in 2016.

Commitment to Technological and Product Innovation. Our commitment to technological innovation has resulted in us being 100% digital in our worldwide circuit as of December 31, 2015. In the U.S., 100% of our 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 committed 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 existing 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, 2014 and 2015, respectively. Our efforts during 2015 included remodeling some of our existing theatres to include reclining seats and expanded concession offerings, the purchase of our corporate headquarters building in Plano, TX and routine improvements to ensure our theatres offer the highest quality guest experience.

Theatre Operations

As of December 31, 2015,2018, we operated 513546 theatres and 5,7966,048 screens in 41 U.S. states and 1415 Latin American countries. The following tables summarize the geographic locations of our theatre circuit as of December 31, 2015.2018.

United States Theatres

 

  Total   Total 

 

Total

 

Total

 

State

  Theatres   Screens 

 

Theatres

 

Screens

 

Texas

   87     1,136  

 

86

 

 

1,136

 

California

   67     837  

 

67

 

 

855

 

Ohio

   29     365  

 

29

 

 

365

 

Utah

   16     209  

 

15

 

 

190

 

Nevada

   10     154  

 

9

 

 

140

 

Colorado

   9     136  

 

9

 

 

136

 

Illinois

 

9

 

 

126

 

Pennsylvania

   9     125  

 

9

 

 

125

 

Florida

 

6

 

 

110

 

Kentucky

   9     119  

 

8

 

 

109

 

Illinois

   8     118  

Florida

   6     110  

Arizona

 

7

 

 

104

 

Oregon

   6     90  

 

6

 

 

90

 

Arizona

   6     90  

North Carolina

 

7

 

 

83

 

Louisiana

   5     74  

 

6

 

 

83

 

Virginia

   5     70  

 

6

 

 

82

 

Oklahoma

   5     65  

 

5

 

 

65

 

Iowa

 

4

 

 

62

 

Washington

 

5

 

 

61

 

Connecticut

   4     58  

 

4

 

 

58

 

Washington

   4     55  

New Mexico

   4     54  

 

4

 

 

54

 

Indiana

   4     40  

Iowa

   3     50  

Michigan

   3     50  

 

3

 

 

46

 

Massachusetts

   3     46  

 

3

 

 

46

 

Arkansas

   3     44  

 

3

 

 

44

 

Mississippi

   3     41  

 

3

 

 

41

 

Maryland

 

2

 

 

39

 

Indiana

 

3

 

 

34

 

South Carolina

   3     34  

 

3

 

 

34

 

North Carolina

   3     31  

Maryland

   2     39  

New Jersey

   2     28  

 

2

 

 

28

 

Georgia

   2     27  

 

2

 

 

27

 

New York

   2     27  

South Dakota

   2     26  

 

2

 

 

26

 

Montana

   2     25  

 

2

 

 

25

 

Delaware

 

2

 

 

22

 

West Virginia

   2     22  

 

2

 

 

22

 

Delaware

   2     22  

Kansas

   1     20  

 

1

 

 

20

 

New York

 

1

 

 

17

 

Alaska

   1     16  

 

1

 

 

16

 

Missouri

   1     15  

 

1

 

 

15

 

Alabama

 

1

 

 

14

 

Tennessee

   1     14  

 

1

 

 

14

 

Wisconsin

   1     14  

 

1

 

 

14

 

Alabama

   1     14  

Minnesota

   1     8  

 

1

 

 

8

 

  

 

   

 

 

Total

   337     4,518  

 

341

 

 

4,586

 

  

 

   

 

 

7


International Theatres

 

Country

  Total
Theatres
   Total
Screens
 

 

Total Theatres

 

 

Total Screens

 

Brazil

   74     568  

 

 

84

 

 

 

623

 

Colombia

   29     151  

 

 

36

 

 

 

202

 

Argentina

   20     179  

 

 

22

 

 

 

190

 

Central America(1)

   17     124  

 

 

20

 

 

 

141

 

Chile

   16     114  

 

 

19

 

 

 

133

 

Peru

   12     84  

 

 

13

 

 

 

93

 

Ecuador

   7     45  

 

 

8

 

 

 

51

 

Bolivia

   1     13  

 

 

1

 

 

 

13

 

  

 

   

 

 

Paraguay

 

 

1

 

 

 

10

 

Curacao

 

 

1

 

 

 

6

 

Total

   176     1,278  

 

 

205

 

 

 

1,462

 

  

 

   

 

 

 

(1)

Includes Honduras, El Salvador, Nicaragua, Costa Rica, Panama Guatemala and Curacao.Guatemala.

We first entered Latin America when we opened a theatre in Chile in 1993. Since then, through our focused international growth strategy, we have developed one of the most geographically diverse theatre circuitcircuits in the region. We have balanced our risk through a diversified international portfolio, which includes theatres in thirteenfourteen of the fifteentwenty largest metropolitan areas in South America. We have established significant presence in Brazil and Argentina, where we are the largest exhibitor, with 568exhibitor. We also have significant market presence in Colombia, Peru and 179 screens, respectively, as of December 31, 2015.Chile.

We believe that certain markets within Latin America continue to be underserved as penetration of movie screens per capita in these markets is substantially lower than in the U.S. and European markets. We intend to continue to build and expand our presence in international markets, with emphasis on Latin America, and fund our expansion primarily with cash flow generated in those markets.from operations. We are able to mitigate cash flow exposure to currency fluctuations by transacting local operating expenses primarily in their respective local currencies. Our geographic diversity throughout LatinSouth and Central America has allowed us to maintain consistent local currency revenue growth,performance, notwithstanding currency and economic fluctuations that may affect any particular market.

Content and Film Licensing

We offer a variety of content at our theatres.  We monitor upcoming films and related eventsother content and work diligently 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 selectmany locations, we offer our exhibitor-branded premium large format, XD. We also offer a D-BOX format. The D-BOX format that features movingmotion seats and added sensory features in addition to the ultra-realistic images of 3-D technology.technology in select locations.

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.

guests. We have also establishedoffer 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 manya variety of genres of classic films that are generally exhibited during non-peak times.

During December 2013, we formed aOur 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 theprovides 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, includingschedules, which includes 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.

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Film Licensing

In the domestic marketplace, our corporate film department negotiates with film distributors to license films for each of our domestic theatres. The film distributors are responsible for determining film release dates and film marketing campaigns and the related expenditures. We are responsible for booking the films in 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 film bookings of other 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 the terms of exhibition. We are generally able to book films without regard to the film bookings of other exhibitors at approximately 93% of our domestic theatres. We face competition from other exhibitors and other forms of entertainment, as discussed underCompetition below, in both our free and competitive film licensing zones.

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. Film distributors are responsible for determining film release dates and film marketing campaigns and the related expenditures, while we are responsible for booking the films at each of our theatres at the optimal showtimes for our guests. In most instances, we are able to license each first-run, wide-release film without regard to the international marketplace, films are not allocated based onbookings of other exhibitors within that area. In certain limited situations, our theatres compete with other nearby theatres for film licensing zones, but played by competitivecontent from film distributors. We face competition for patrons from other exhibitors and other forms of entertainment, as discussed under Competition below, at all of our theatres simultaneously.in all markets. Our theatre personnel focus on providing excellent customer service,an extraordinary guest experience, and we provide a high-quality facility with the most up-to-date sound systems, comfortable seating and other amenities preferred by our patrons,guests, which we believe gives us a competitive advantage in markets where competing theatres play the same films.

In both our domestic and international locations, we pay film rental fees based on a film’s box office receipts at each of our theatres. Film rental rates are negotiated based on either a firm terms formula under which we pay a negotiated rate as determined prior to a film’s run; a sliding scale formula under which the rate is based on a standard rate matrix that is established prior to a film’s run; a firm terms formula, as determined prior to a film’s run, under which we pay a negotiated rate; or a rate that is negotiated after a film’s run.

Food and Beverage

Concession sales are our second largest revenue source, consistently representing approximately 33%35% of total revenues. Concession sales have a much higher margin than admissions sales. We have devoted considerable management effort to increasingexpanding concession sales by expandingenhancing our offerings and adapting to our customers’ changing preferences, as discussed below.

Concession Product Mix. Common concession products offered at all of our theatres may include various sizes and types of popcorn, soft drinks, coffees, juice blends,non-carbonated drinks, candy and quickly-prepared or pre-prepared food, such as hot dogs, pizza, pretzel bites, nachos and ice cream. Other varietiesThe food and flavors of candy, snacks and drinks are offered at theatresbeverage offerings vary based on consumer preferences in thata particular market. We have recently introduced some healthier snack and beverage options for our patrons,guests, which are available at some locations, added alcohol offerings in a growing number of theatres, and also offer a variety of alcoholic beverages in some locations.diverse ethnic foods based on market demographics.

Through our Movie Bistro, Cinemark Reserve and Cinemark Premier concepts,In select locations, we have expanded concession product offerings to include morea broader variety of 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 certainmany domestic and international theatres.

Our point of saleproprietary point-of-sale system allows usour category managers to monitor product sales and readily make changesadjustments to product mix on a theatre-by-theatre or market-by-market basis, when necessary, whichnecessary. This program flexibility also allows us to quickly take advantage ofefficiently activate and manage both national as well asor regional product launches and promotions.promotional initiatives to further grow food and beverage sales.  

Pricing.New products and promotions are introduced on a regular basis to increase concession purchasespurchase incidence by existing buyers as well as to attract new buyers. We offer specially-priced product combinations at many of our theatres. We periodicallyroutinely offer discounts to our patronsguests 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 and in all of our domestic theatres, we offer a loyalty benefit program that periodically offers food and beverage discounts. Our new Cinemark Movie Club membership program also allows our domestic guests to frequent patrons.sign-up for exclusive concessions discounts.

Staff Training.Employees are continually trained in proper sales techniques. Consumertechniques, food preparation and handling and maintaining concession product quality. Some of our product promotions usually include a motivational element that rewards theatre staff for exceptional sales of certain promotional items.

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Theatre Design.Our theatres are designed to optimize efficienciesthe guest purchase experience at the concession stands, which includeincludes multiple service stationsconcession counters throughout a theatre to facilitate serving patronsguests in an expedited manner. We strategically place large concession stands within theatres to heighten visibility, reduce the length of concession lines, and improve traffic flow around the concession stands. We incorporate self-serve candy cases and bottled drink coolers at our traditional crew-serve theatres to help provide convenience for our guests, drive purchase incidence and increase product availability for these two core categories. We also 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 cash register when they are ready. This design allows for more efficient service, enhanced choices, impulse purchases and superior visibility of concession items. In some of our international locations, we allow patronsguests to pre-order concession items, either online or at a kiosk, and pick them up in a dedicated line at the concession counter.

Cost Control.We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume discounts and also negotiate rebates.volume-based and promotional-based rebates with our larger suppliers. Concession supplies are generally distributed through a distribution network. The concession distributor delivers inventory to the theatres which placeafter receiving orders directly withfrom the vendors to replenish stock.theatres or through an online electronic ordering system.  We conduct a weeklyfrequent inventory counts of concession products at every theatre to ensure proper stock levels are maintained to appropriately serve our customers.guests.

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 provides advertising to our theatres through its branded “First LookNooviepre-featurepre-show entertainment program and also handles lobby promotions and displays 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 engagedour audience. We receive a monthly theatre access fee for participation in the NCM network and also earn screen advertising revenue on a per patron basis. As of December 31, 2015,2018, we had an approximate 19%25% ownership interest in NCM. See Note 4 to the consolidated financial statements for further discussion of our investment in NCM.

In our international markets, during 2011, our wholly-owned subsidiary Flix Media Publicidade E Entretenimento, Ltda., or Flix Media, began handling all ofhandles 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 exhibitorother exhibitors in Brazil through a revenue share agreement.agreements. In Argentina, we also have in-house personnel that work with local advertisers to arrange screen advertising in our Argentina theatres. We recently acquired analso operate advertising businesssubsidiaries that support our theatres in Chile, which we will also integrate withCentral America, Colombia, Paraguay, Bolivia, Ecuador and Curacao. In Chile, our Flix Media division.subsidiary also represents Cinepolis, making our subsidiary the local leader in cinema advertising.  In addition to screen advertising in our theatres, we intend to expand Flix Media’s services to include, among other things, alternative content, digital media and other synergistic media opportunities. In a few of 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.programming benefits. The terms of our international screen advertising contracts vary by country. In some of these locations,country, however, we generally 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. We will continue to expand Flix Media into our other international locations over the next few years. In addition to screen advertising in our theatres, we intend to expand Flix Media’s services to include, among other things, alternative content, online ticketing,

Marketing and loyalty initiatives.Promotions

Technology Innovations

The motion picture exhibition industry has undertaken certain technology initiatives over the past few years, as discussed below.

Digital Cinema Distribution Coalition

Through the joint venture DCDC with Regal, AMC, Warner Bros. Entertainment, Inc. and Universal 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. Delivery of content via satellite reduces film transportation costs for both distributors and exhibitors, as a portion of the costs 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 delivered to our 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 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

We generally market our theatres and special events, including new theatre grand openings, remodel openings and VIP events, using Internetemail, organic and paid digital advertising, and newspaper directory film schedules. Radioschedules, and radio and television advertising spots are also used to promote certain motion pictures and special events, such as theatre grand openings and VIP events.spots. We exhibit previews of coming attractions and current films as part of our on-screen pre-feature program. We offer patronsguests access to movie times, the ability to buy and print their tickets and reserve their seats in advance and purchase gift cards at our websitewww.cinemark.com and via our smart phone and tablet applications. Customers can subscribe to our weekly emails to receive information about current and upcoming films at their preferred Cinemark theatre(s), including details about upcoming Cinemark XD movies, advanced ticket sales, screenings, special events, concerts and live broadcasts; as well as contests, promotions, and coupons for concession savings. Email communications and push notifications are utilized to provide customers with the latest information or exclusive offers such as screenings, contests or promotions. We partner with film distributors on a regular basis to

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promote theirupcoming films through local, regional and national programs that are exclusive to our theatres. These programs may involve customer contests that include exclusive giveaways, cross-promotions with the media and other third parties and other means to increaseimpact patronage for a particular filmfilms showing at our theatres.

CineMode,We interact with guests every day on social media platforms, such as Facebook, on which we recently reached nine million followers, Twitter and Instagram.  Through social media, we provide relevant information, quick access to advanced ticketing information and upcoming movies and events, as well as to respond to guest feedback. Guests can also utilize social media to ask us questions regarding their local Cinemark theatre offerings, movie-related information or to provide suggestions.

We launched a subscription membership program for our domestic circuit in December 2017.  Cinemark Movie Club offers guests a monthly fixed-price 2D ticket, member-pricing for a companion ticket and concession and other transaction discounts.  Cinemark Movie Club is a function within the app we developed,unique option to reward our loyal guests and allows patrons the opportunityus to stay informed of our frequent guests’ preferences.

We offer a free domestic loyalty program to our guests, called Connections, which was launched in 2016. Connections allows our guests to earn points for different types of transactions as tracked through our Cinemark smart phone app.  Points can then be redeemed for tickets, concession items and discounts, as well as unique and limited edition experiential rewards while being courteous during a show. Our innovative technology was designedthat relate to address texting and other cell phone distractions, which is the number one complaint of movie-goers. While in CineMode, the phone’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 usedfilms currently playing at their next visit to Cinemark. CineMode connects us with our patrons and provides an opportunity for us to further expand our relationships with the studios and our vendors through promotions.theatres.

We also have loyalty programs in somemost of our international markets that either allow customers to pay a nominal fee for aan annual membership card that provides them with certain admissions and concession discounts.discounts or that allows guests to earn loyalty points for each purchase. Similar to the Connections program, our points-based international programs offer discounts on movie tickets and concessions. Our global loyalty programs put us in direct contact with our guests and provides additional opportunities for us to partner with the studios and our vendors through targeted promotions. 

Our domestic and international 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 businesses as an employee-incentive or rewards program. Our marketing departments also coordinate the use of our auditoriums, generally during off-peak times, for corporate meetings, private movie screenings, brand and product launches, education and training sessions or other private events, which contribute to our 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,guests, licensing films and developing new theatre sites. Our primary U.S. competitors include Regal AMC and Carmike Cinemas, Inc.AMC and our primary international competitors, which vary by country, include Cinépolis, Cine Colombia, CinePlanet, Kinoplex (GSR), and Araujo.

We are generally able to book films without regard to the film bookings of other exhibitors at approximately 93%many of our theatres. In competitive film licensing zones, the distributor allocates itscertain limited situations, distributors allocate movies to only one theatre in a market generally based on demographics, the conditions, capacity and grossing potential of each theatre, and the terms of exhibition. In all theatres, our success in attracting patrons dependsguests can depend on customer service quality, 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 for patrons from a number of other motion picture exhibition delivery systems,alternative film distribution channels, such as digital downloads, video on-demand, pay-per-view television, DVDs, SVOD, network and syndicated television. We also face competition from other forms of entertainment competing for the public’s leisure time and disposable income, such as family entertainment centers, concerts, theme parks and sporting events.

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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 summer months in the summer,U.S., extending from May to July, and during the holiday season, extending from early November through year-end. The timing of releases, however, has become less pronounced as distributors have begun releasing content more evenly throughout the year.  In our Latin American markets, while Hollywood content has similar release dates as in the U.S., the local holidays and seasons can vary. The unexpected emergence of a hit film during other periods can alterimpact this seasonality trend. The timing and quality of such film releases can have a significant impact on our results of operations, and the results of one quarterperiod are not necessarily indicative of results for the next quarterfollowing period or for the same period in the following year.

Corporate Operations

Our worldwide headquarters, referred to as the Cinemark Service Center, is located in Plano, Texas. Personnel at our corporate headquartersthe Cinemark Service Center provide oversight and support for our domestic and international theatres, 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, accounting, tax audit and information technology. Our U.S. operations are divided into nineteencomprised of twenty regions, each of which is headed by a region leader.regional vice president. We have eightnine regional offices in Latin America responsible for the local management of theatres in fourteenfifteen countries (Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala and Curacao are operatedmanaged out of one Central American regional office). Each regional office is headed by a general manager with additional personnel responsible for film licensing, marketing, human resources, information technology, operations and accounting.finance. We have divisional chief financial officers in Brazil and Argentina which are our two largest international markets.and a regional chief financial officer located in Chile that oversees Chile, Bolivia and Paraguay.

Employees

We have approximately 19,30020,000 employees in the U.S., approximately 19%21% of whom are full time employees and 81%79% of whom are part time employees. We have approximately 9,0009,500 employees in our international markets, approximately 37%78% of whom are full time employees and approximately 63%22% 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 tohas been influenced by 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 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, and regulations recently issued by the U.S. Food and Drug Administration that require nutrition labels for certain menu items. Our domestic and international 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, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao, and CuracaoParaguay, which are reflected in the consolidated financial statements. See Note 1817 to the consolidated financial statements for segment information and financial information by geographic area.

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Item 1A.Risk Factors

Item 1A. Risk Factors

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. PoorReduced volume of film releases, 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 timing of releases, however, has become less pronounced as distributors have begun releasing content more evenly throughout the year.  In our Latin American markets, while Hollywood content has similar release dates as in the U.S., the local holidays and seasons can vary. 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 sixseven major film distributors accounting for approximately 84.4%90% of U.S. box office revenues and 4648 of the top 50 grossing films during 2015.2018. Numerous antitrust cases and consent decrees resulting from the antitrust cases impact the distribution of films. Film distributors 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.

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 in many of our markets. We compete for both patrons and licensing of films. In markets where we do not face nearby competitive theatres, there is a risk of new theatres being built. The degree of competition for patrons is dependent upon such factors as location, theatre capacity, presentation 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. We also face competition from new concept theatres such as dine-in theatres and tavern style theatres that open in close proximity to our conventional theatres. 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 film distribution channels or 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, SVOD, network and syndicated television. Some of these distribution channels have seen growth in production in recent years. We also compete with other forms of entertainment, such as family entertainment centers, 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, competing forms of entertainment or improvements in technologies available at home could have an adverse effect on our business and results of operations.

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Our results of operations may be impacted by shrinking video and digital releasewindows.

Over the last decade, theThe 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, has decreased frombeen approximately six months to approximately three to four months.ninety days for the past several years. 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 occasionally offer consumers a premium video on-demand option for certain films shortly after the theatrical release. These release windows, which are determined by the studios, may 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 asduring a resultperiod of an economic downturn or political uncertainty, 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.attendance, which could adversely affect our results of operations. 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 176205 theatres with 1,2781,462 screens in fourteenfifteen countries in Latin America. Brazil represented approximately 10.2%9% of our consolidated 20152018 revenues. Governmental regulation of the motion picture industry in foreign markets differs from that in the United States.U.S. Changes in regulations affecting prices and 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 to the U.S., all of which could have an adverse effect on the results of our 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, 2015,2018, we had $1,814.6$1,809.3 million in long-term debt obligations, $227.7$259.5 million in capital lease obligations and $1,699.9$1,784.5 million in long-term operating lease obligations. Our substantial lease and debt obligations pose risk by:

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 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.

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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 may not be able to continue to generate cash flows at current levels, or guarantee that future borrowings will be available under our 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 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 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. 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 are rated by nationally recognized rating agencies. The rating scales and methodologies used to derive individual ratings may not be ablevary from agency to generate additional revenues or continue to realize value from our investment in NCM.

As of December 31, 2015, we had an ownership interest in NCM of approximately 19%. We receive a monthly theatre access fee under our Exhibitor Services Agreement with NCM and weagency. Credit ratings are entitled to receive mandatory quarterly distributions of excess cash from NCM. During the years ended December 31, 2014 and 2015, the Company received approximately $9.2 million and $11.3 million in other revenues from NCM, respectively, and $18.5 million and $18.1 million in cash distributions in excessissued by credit rating agencies based on evaluations of our investmentability 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 rating agencies represent the rating agency's evaluation of both qualitative and quantitative information for our company. The credit ratings that are issued are based on the rating agency’s judgment and experience in NCM, respectively. Cinema advertising isdetermining what information should be considered in giving a small componentrating 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 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. In-theatre advertising may not continueextent, could increase the cost 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.borrow funds.

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 implement the latestinvest in technological innovations, such as 3-D, D-BOXmotion seats 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 new theatre 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. Our expansion strategy may 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 may not be able to obtain such financing or ensure that such financing will be available to us on acceptable terms or at all.

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If we do not comply with the ADA and the safe harbor framework included in the consent order we entered into with the Department of Justice, or the DOJ, we could besubject 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, Cinemark 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 may be subject to increased labor and benefits costs.

In the U.S., we are subject to United States federal and state laws governing such matters as minimum wages, working conditions and overtime. 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 federal and state minimum wage rates increase, we may need to increase not only the wages of our minimum 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 requirements change, our results of operations could be adversely affected.

We are subject to impairment losses due to potential declines in the fair value of our assets.

We have a significant amount of long-lived assets. 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 and 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 result in impairments of goodwill and our intangible assets. As of December 31, 2015, we performed a qualitative analysis on our goodwill and tradename intangible assets and determined that it is not more likely than not that the fair values of such assets are below their respective carrying 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.

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 U.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.

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 U.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.

Legislative or regulatory initiatives related to global warming/climate change concerns may negatively impact our business.16


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 U.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 collect, use, store and maintain electronic information and data necessary to conduct our business, including confidential and proprietary information of the company, our customers, and our employees. Data maintained in electronic form isWe also rely on the availability of information technology systems to operate our business, including for communications, receiving and displaying movies, ticketing, guest services, payments, and other general operations. We rely on some of our vendors to store and process certain data and to manage, host, and/or provide some of our information technology systems. Because of the scope and complexity of our information technology systems, our reliance on vendors to provide, support and protect our systems and data, and the constantly evolving cyber-threat landscape, our information technology systems are subject to the risk of intrusion,disruption, failure, unauthorized access, cyber-terrorism, human error, misuse, tampering, theft, and theft. Whileother cyber-attacks. These or similar events, whether accidental or intentional, could result in theft, unauthorized access or disclosure, loss, fraudulent or unlawful use of customer, employee or company data, which could harm our reputation or result in a loss of business, as well as remedial and other costs, fines, investigations, enforcement actions or lawsuits. These or similar events could also lead to an interruption in the operation of our systems resulting in business impact, including loss of business. Those same scope, complexity, reliance, and changing cyber-threat landscape factors could also affect our ability to adapt to and comply with changing regulations and contractual obligations applicable to data security and privacy, which are increasingly demanding, both in the United States and in other jurisdictions where we operate.  In order to address these risks, we have adopted industry-accepted security measures and technology, operate a security program, and work continuously to protect the confidentialevaluate and proprietary information,improve our security posture. However, the development and maintenance of these systems isand programs are costly and require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. As such, we maythere can be unable to anticipate and implement adequate preventive measuresno assurance that these or similar events will not occur in time. This may adversely affectthe future or will not have an adverse effect on our business including exposure to government enforcement actions and private litigation, and our reputation with our customers and employees may be injured.results of operation. In addition to Company-specific cyber threats or attacks,events, our business and results of operations could also be impacted by breachescyber-related events affecting our peers and partners within the entertainment industry, as well as other retail companies. We maintain insurance designed to provide coverage for cyber risks related to what we believe to be adequate and collectible insurance in the event of the theft, loss, fraudulent or unlawful use of customer, employee or company data, but the foregoing events or future events could result in costs and business impacts which may not be covered or may be in excess of any available insurance that we may have procured. As a result, future events could have a material impact on our business and adversely affect our financial condition and results of operations.

Product recalls and associated costs could adversely affect our reputation and financial condition.

We are resellers of food and weWe may be found 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 cinemasWe 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

17


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.Unresolved Staff Comments

None.

Item 2.Properties

United StatesWe may not be able to generate additional revenues or continue to realize value from our investment in NCM.

As of December 31, 2015,2018, we owned 39,518,644 common units of NCM, which represented an ownership interest in NCM of approximately 25%. 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, 2016, 2017 and 2018, the Company received approximately $11.0 million, $11.3 million and $12.1 million in other revenues from NCM, respectively, $14.2 million, $17.4 million and $22.2 million in cash distributions recorded as a reduction of our investment in NCM, respectively, and $14.7 million $16.4 million, $15.4 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. 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.

Each of our common units in NCM is convertible into one share of NCM, Inc. common stock.  As of December 31, 2018, the estimated fair value of our investment in NCM was approximately $256.1 million based on NCM, Inc.’s stock price as of December 31, 2018 of $6.48 per share, which was less than our carrying value of $275.6 million.  We do not believe that the decline in NCM, Inc.’s stock price is other than temporary and therefore, we did not record an impairment of our investment in NCM during the year ended December 31, 2018.  The market value of NCM, Inc.’s stock price may continue to vary due to the performance of the business, industry trends, general and economic conditions and other factors.  If NCM, Inc.’s stock price continues to decline or stays at a level below our carrying value for an extended period of time, we may record an impairment in our investment.

We are subject to impairment losses due to potential declines in the fair value of our assets.

We have a significant amount of long-lived assets. 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 and 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 result in impairments of goodwill and our intangible assets.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

United States

As of December 31, 2018, in the U.S., we operated 295300 theatres with 3,9043,978 screens pursuant to leases and own the land and building for 4241 theatres with 614608 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, 2015,2018, approximately 8.1%8% of our theatre leases in the U.S., covering 2425 theatres with 177197 screens, have remaining terms, including optional renewal periods, of less than six years. Approximately 7.5%8% of our theatre leases in the U.S., covering 2225 theatres with 229326 screens, have remaining terms, including optional renewal periods, of between six and 15 years and approximately 84.4%84% of our theatre leases in the U.S., covering 249250 theatres with 3,4983,455 screens, have

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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 currently own an office building in Plano, Texas, which is our worldwide headquarters. We also lease office space in Frisco, Texas and McKinney, Texas for theatre support and maintenance personnel.

International

As of December 31, 2015,2018, internationally, we operated 176205 theatres with 1,2781,462 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 10 to 30 years. The leases generally provide for contingent rental based upon operating results with an annual minimum. As of December 31, 2015,2018, approximately 15%12% of our international theatre leases, covering 2624 theatres with 225208 screens, have remaining terms, including optional renewal periods, of less than six years. Approximately 47%48% of our international theatre leases, covering 8299 theatres and 613720 screens, have remaining terms, including optional renewal periods, of between six and 15 years and approximately 38%40% of our international theatre leases, covering 6882 theatres and 440534 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 seven regions in Latin America for our local management.

See Note 1716 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. Legal Proceedings

Item 3.Legal Proceedings

Joseph Amey, et al.Silken Brown v. Cinemark USA, Inc.,Case No. 3:13cv05669, In the United States District Court for the Northern District of California, San Francisco Division.Division. The case presents putative class action claims for damagespenalties and attorney’sattorney's fees arising from employeealleged violations of the California 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.statement law.  The claims areclaim is also asserted as a representative action under the California Private Attorney General Act (“PAGA”). We deny(PAGA) for penalties. The Court granted class certification. The company denies the claims, denydenies that class certification is appropriate, denies that the plaintiff has standing to assert the claims alleged and deny that a PAGA representative action is appropriate, and are vigorously defending against the claims.  We denyThe Company denies any violation of law; however, to avoid the cost and uncertainty associated with litigation the Company and the plaintiff entered into a Joint Stipulation of Class Action Settlement and Release of Claims (the “Settlement Agreement”) to fully and finally dismiss all claims that would be brought in the case.  The Settlement Agreement must be approved by the Court.  During the year ended December 31, 2018, the Company recorded a litigation reserve based on the proposed Settlement Agreement in loss on disposal of assets and other on the consolidated income statement.  

Flagship Theatres of Palm Desert, LLC d/b/a Cinemas Palme D’Or v. Century Theatres, Inc., and Cinemark USA, Inc.; Superior Court of the State of California, County of Los Angeles.  Plaintiff in this case alleges that the Company violated California antitrust and unfair competition laws by engaging in “circuit dealing” with various motion picture distributors and tortuously interfered with Plaintiff’s business relationships.  Plaintiff seeks compensatory damages, trebling of those damages under California law, punitive damages, injunctive relief, attorneys’ fees, costs and planinterest.  Plaintiff also alleges that the Company’s conduct ultimately resulted in closure of its theatre in June 2016.  The Company denied the allegations.  In 2008, the Company moved for summary judgment on Plaintiff’s claims, arguing primarily that clearances between the theatres at issue were lawful and that Plaintiff lacked proof sufficient to vigorously defend against allsupport certain technical elements of its antitrust claims.  The trial court granted that motion and dismissed Plaintiff’s claims.  Plaintiff appealed and, in 2011, the Court recently determinedof Appeal reversed, holding, among other things, that class certificationPlaintiff’s claims were not about the illegality of clearances but were focused, instead, on “circuit dealing.”  Having re-framed the claims in that manner, the Court of Appeal held that the trial court’s decision to limit discovery to the market where the theatres at issue operated was an error, as “circuit dealing” necessarily involves activities in different markets.  Upon return to the trial court, the parties engaged in additional, broadened discovery related to Plaintiff’s “circuit dealing” claim.  Thereafter, the Company moved again for summary judgment on all of Plaintiff’s claims.  That new motion for summary judgment was pending when, on or about April 11, 2014, the trial court granted the Company’s motion for terminating sanctions and entered a judgment dismissing the case with prejudice.  Plaintiff then appealed that second dismissal, seeking to have the judgment

19


reversed and the case remanded to the trial court.  The Court of Appeal issued a ruling on May 24, 2016, reversing the granting of terminating sanctions and instead imposed a lesser evidentiary and damages preclusion sanction.  The case returned to the trial court on October 6, 2016.  On May 10, 2018, after a five-week jury trial, the jury found no liability on one circuit dealing claim and awarded Plaintiff damages on the other claim, which are tripled for antitrust damage awards.  Plaintiff would also be entitled to certain court costs and to seek at least some portion of its attorney’s fees.  During the year ended December 31, 2018, the Company recorded a litigation reserve based on an estimate of the jury award, which is not appropriatereflected in loss on disposal of assets and determinedother on the consolidated income statement.  The trial court denied a motion for a judgment notwithstanding the verdict and a motion for a new trial. The Company intends to appeal the judgment.  Although the Company denies that a PAGA representative action is not appropriate. The plaintiff may appeal these rulings. We are unable toit engaged in any form of circuit dealing, it cannot predict the outcome of the litigationits pending motions or the range of potential loss.future appeals.

We received a Civil Investigative Demand or CID,(“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 haveit has 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.

20

Item 4.Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and Holder of Our Common Stock

There is no established public trading market for our common stock. As of December 31, 2015,2018, we had 1,500 shares of Class A common stock outstanding and 182,648 shares of Class B common stock outstanding, all of which were held by Cinemark Holdings, Inc.

Dividend Policy

During the years ended December 31, 20152016, 2017 and 2014,2018, we paid cash dividends of approximately $115.2$124.9 million, $134.5 million and $115.0$148.8 million, respectively, to our parent company, Cinemark Holdings, Inc. We also declared a noncash distribution to Cinemark Holdings, Inc. during the year ended December 31, 2015 of approximately $17.9 million. Our ability to pay dividends is limited by the terms of our senior notes indentures our senior subordinated notes indenture and our senior secured credit facility, which restrict our ability to pay dividends and the ability of certain of our subsidiaries to pay dividends. See Note 9 to the consolidated financial statements for further discussion of our debt agreements. Furthermore, certain of our foreign subsidiaries currently have a deficit in retained earnings which prevents them from declaring and paying dividends from those subsidiaries. The declaration of future dividends 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.

Item 6. Selected Financial Data

Item 6.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, 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.2018. 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.  We adopted ASC Topic 606, Revenue Recognition, effective January 1, 2018.  See Note 3 to the consolidated financial statements for a summary of the impact of adoption.

 

   Year Ended December 31, 
   2011   2012   2013  2014   2015 
   (Dollars in thousands) 

Statement of Income Data:

         

Revenues:

         

Admissions

  $1,471,627    $1,580,401    $1,706,145   $1,644,169    $1,765,519  

Concession

   696,754     771,405     845,168    845,376     936,970  

Other

   111,232     121,725     131,581    137,445     150,120  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Total revenues

   2,279,613     2,473,531     2,682,894    2,626,990     2,852,609  

Film rentals and advertising

   798,606     845,107     919,511    883,052     976,590  

Concession supplies

   112,122     123,471     135,715    131,985     144,270  

Salaries and wages

   226,475     247,468     269,353    273,880     301,099  

Facility lease expense

   276,278     281,615     307,851    317,096     319,761  

Utilities and other

   259,703     280,670     305,703    308,445     324,851  

General and administrative expenses

   125,428     146,442     163,134    148,588     154,052  

Depreciation and amortization

   154,449     147,675     163,970    175,656     189,206  

Impairment of long-lived assets

   7,033     3,031     3,794    6,647     8,801  

(Gain) loss on sale of assets and other

   8,792     12,168     (3,845  15,715     8,143  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Total cost of operations

  $1,968,886    $2,087,647    $2,265,186   $2,261,064    $2,426,773  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Operating income

  $310,727    $385,884    $417,708   $365,926    $425,836  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Interest expense

  $123,102    $123,665    $124,714   $113,698    $112,741  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Net income

  $133,953    $172,784    $151,921   $195,769    $220,391  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Net income attributable to Cinemark USA, Inc.

  $131,928    $170,313    $149,843   $194,380    $218,532  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

   Year Ended December 31, 
   2011  2012  2013  2014  2015 
   (Dollars in thousands) 

Other Financial Data:

      

Ratio of earnings to fixed charges(1)

   2.02  2.45  2.24  2.42  2.69

Cash flow provided by (used for):

      

Operating activities

  $390,884   $394,633   $309,362   $454,128   $455,225  

Investing activities

   (247,067  (234,311  (364,701  (253,339  (328,122

Financing activities

   (78,020  63,582    (75,346  (146,320  (150,509

Capital expenditures

   (184,819  (220,727  (259,670  (244,705  (331,726

 

 

Year Ended December 31,

 

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

Statement of Income Data:

 

(Dollars in thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

1,644,169

 

 

$

1,765,519

 

 

$

1,789,137

 

 

$

1,794,982

 

 

$

1,834,173

 

Concession

 

 

845,376

 

 

 

936,970

 

 

 

990,103

 

 

 

1,038,788

 

 

 

1,108,793

 

Other

 

 

137,445

 

 

 

150,120

 

 

 

139,525

 

 

 

157,777

 

 

 

278,769

 

Total revenues

 

 

2,626,990

 

 

 

2,852,609

 

 

 

2,918,765

 

 

 

2,991,547

 

 

 

3,221,735

 

Film rentals and advertising

 

 

856,388

 

 

 

945,640

 

 

 

962,655

 

 

 

966,510

 

 

 

999,755

 

Concession supplies

 

 

131,985

 

 

 

144,270

 

 

 

154,469

 

 

 

166,320

 

 

 

180,974

 

Salaries and wages

 

 

273,880

 

 

 

301,099

 

 

 

325,765

 

 

 

354,510

 

 

 

383,860

 

Facility lease expense

 

 

317,096

 

 

 

319,761

 

 

 

321,294

 

 

 

328,197

 

 

 

323,316

 

Utilities and other

 

 

335,109

 

 

 

355,801

 

 

 

355,926

 

 

 

355,041

 

 

 

448,070

 

General and administrative expenses

 

 

148,588

 

 

 

154,052

 

 

 

140,637

 

 

 

150,911

 

 

 

162,640

 

Depreciation and amortization

 

 

175,656

 

 

 

189,206

 

 

 

209,071

 

 

 

237,513

 

 

 

261,162

 

Impairment of long-lived assets

 

 

6,647

 

 

 

8,801

 

 

 

2,836

 

 

 

15,084

 

 

 

32,372

 

Loss on disposal of assets and other

 

 

15,715

 

 

 

8,143

 

 

 

20,459

 

 

 

22,812

 

 

 

38,702

 

Total cost of operations

 

$

2,261,064

 

 

$

2,426,773

 

 

$

2,493,112

 

 

$

2,596,898

 

 

$

2,830,851

 

Operating income

 

$

365,926

 

 

$

425,836

 

 

$

425,653

 

 

$

394,649

 

 

$

390,884

 

Interest expense

 

$

113,698

 

 

$

112,741

 

 

$

108,313

 

 

$

105,918

 

 

$

109,994

 

Net income

 

$

195,769

 

 

$

220,391

 

 

$

258,513

 

 

$

267,482

 

 

$

217,213

 

Net income attributable to Cinemark USA, Inc.

 

$

194,380

 

 

$

218,532

 

 

$

256,777

 

 

$

265,643

 

 

$

215,735

 


 

 

Year Ended December 31,

 

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

 

(Dollars in thousands)

 

Other Financial Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow provided by (used for):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

454,128

 

 

$

455,225

 

 

$

462,259

 

 

$

528,384

 

 

$

556,299

 

Investing activities

 

 

(253,339

)

 

 

(328,122

)

 

 

(327,769

)

 

 

(410,476

)

 

 

(451,370

)

Financing activities

 

 

(146,320

)

 

 

(150,509

)

 

 

(163,121

)

 

 

(157,429

)

 

 

(191,906

)

Capital expenditures

 

 

(244,705

)

 

 

(331,726

)

 

 

(326,908

)

 

 

(380,862

)

 

 

(346,073

)

 

   As of December 31, 
   2011   2012   2013   2014   2015 
   (Dollars in thousands) 

Balance Sheet Data:

          

Cash and cash equivalents

  $521,253    $742,095    $599,894    $638,841    $588,503  

Theatre properties and equipment, net

   1,238,850     1,304,958     1,427,190     1,450,812     1,505,069  

Total assets(2)

   3,495,522     3,822,000     4,107,480     4,133,116     4,127,632  

Total long-term debt and capital lease obligations, including current portion (2)

   1,686,662     1,873,769     2,012,508     1,791,578     1,781,335  

Equity

   1,025,293     1,096,212     1,104,281     1,136,723     1,113,251  

 

   Year Ended December 31, 
   2011   2012   2013   2014   2015 

Operating Data:

          

United States

          

Theatres operated (at period end)

   297     298     334     335     337  

Screens operated (at period end)

   3,878     3,916     4,457     4,499     4,518  

Total attendance (in 000s)

   158,486     163,639     177,156     173,864     179,601  

International

          

Theatres operated (at period end)

   159     167     148     160     176  

Screens operated (at period end)

   1,274     1,324     1,106     1,177     1,278  

Total attendance (in 000s)

   88,889     100,084     99,402     90,009     100,499  

Worldwide

          

Theatres operated (at period end)

   456     465     482     495     513  

Screens operated (at period end)

   5,152     5,240     5,563     5,676     5,796  

Total attendance (in 000s)

   247,375     263,723     276,558     263,873     280,100  

 

 

As of December 31,

 

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

 

(Dollars in thousands)

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

638,841

 

 

$

588,503

 

 

$

561,138

 

 

$

522,415

 

 

$

426,216

 

Theatre properties and equipment, net

 

 

1,450,812

 

 

 

1,505,069

 

 

 

1,704,536

 

 

 

1,828,054

 

 

 

1,833,133

 

Total assets

 

 

4,133,116

 

 

 

4,127,632

 

 

 

4,316,609

 

 

 

4,485,340

 

 

 

4,501,351

 

Total long-term debt, including current portion, net of unamortized debt issue costs

 

 

1,791,578

 

 

 

1,781,335

 

 

 

1,788,112

 

 

 

1,787,480

 

 

 

1,780,611

 

Equity

 

 

1,136,723

 

 

 

1,113,251

 

 

 

1,284,080

 

 

 

1,421,495

 

 

 

1,477,183

 

 

(1)For the purposes of calculating the ratio of earnings to fixed charges, earnings consist of income from continuing operations before taxes plus fixed charges excluding capitalized interest. Fixed charges consist of interest expense, capitalized interest, amortization of debt issue costs and that portion of rental expense which we believe to be representative of the interest factor.
(2)Effective December 31, 2015, the Company adopted Accounting Standards Update 2015-03Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which resulted in the presentation of debt issuance costs as a contra-account to the related debt instruments. The revised presentation was applied for all periods presented. See Note 2 to the consolidated financial statements for additional information.

 

 

Year Ended December 31,

 

Operating Data:

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatres operated (at period end)

 

 

335

 

 

 

337

 

 

 

339

 

 

 

339

 

 

 

341

 

Screens operated (at period end)

 

 

4,499

 

 

 

4,518

 

 

 

4,559

 

 

 

4,561

 

 

 

4,586

 

Total attendance (in 000s)

 

 

173,864

 

 

 

179,601

 

 

 

182,660

 

 

 

174,432

 

 

 

185,268

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatres operated (at period end)

 

 

160

 

 

 

176

 

 

 

187

 

 

 

194

 

 

 

205

 

Screens operated (at period end)

 

 

1,177

 

 

 

1,278

 

 

 

1,344

 

 

 

1,398

 

 

 

1,462

 

Total attendance (in 000s)

 

 

90,009

 

 

 

100,499

 

 

 

104,581

 

 

 

102,584

 

 

 

96,847

 

Worldwide

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatres operated (at period end)

 

 

495

 

 

 

513

 

 

 

526

 

 

 

533

 

 

 

546

 

Screens operated (at period end)

 

 

5,676

 

 

 

5,796

 

 

 

5,903

 

 

 

5,959

 

 

 

6,048

 

Total attendance (in 000s)

 

 

263,873

 

 

 

280,100

 

 

287,241

 

 

 

277,016

 

 

 

282,115

 

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
22


Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof 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, Argentina, Chile, Colombia, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Curacao. We operated theatres in Mexico until November 15, 2013.Paraguay. As of December 31, 2015,2018, we managed our business under two reportable operating segments – U.S. markets and international markets. See Note 1817 to the consolidated financial statements.

Revenues and Expenses

We generate revenues primarily from filmed entertainment box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as transactional fees, vendor marketing promotions, studio trailer placements, meeting rentals and electronic video games located in some of our theatres. Our relationshipNCM provides our domestic theatres with NCM has assisted usvarious forms of in expanding our offerings to domestic advertisers and broadening ancillary revenue sources such as digital video monitortheatre advertising. We also offer alternative entertainment, such as live and pre-recorded sports programs, concert events, the Metropolitan Opera, in-theatre gaming and other special events in our theatres through our recently formed joint venture, AC JV, LLC. Our Flix Media initiative has also allowed us to expand our screen advertising and alternative content within our international circuit and to other international exhibitors.

Films leading the box office during the year ended December 31, 20152018 includedBlack Panther, Avengers: Infinity War, Incredibles 2, Jurassic World: Fallen Kingdom, Aquaman, Deadpool 2, Dr. Seuss’ The Grinch, Mission Impossible – Fallout, Ant-Man and the Wasp, Solo: A Star Wars Story, Venom, A Quiet Place, Crazy Rich Asians, Halloween, Bumblebee, Ralph Breaks the Internet, Fantastic Beasts: The Crimes of Grindelwald, Mary Poppins Returns, A Star is Born, Bohemian Rhapsody and other films, as well as the carryover of The Greatest Showman, Jumanji: Welcome to the Jungle and Star Wars: The Force Awakens, Jurassic World,Avengers: Age of Ultron,Hunger Games: Mockingjay Part II, Furious 7, American Sniper, 50 Shades of Grey,Inside Out,Minions,Spectre andMission: Impossible 5,among other films. Last Jedi.

Films scheduled for release during 20162019 include sequels such asAvengers: Endgame, Star Wars: Episode IX, The Lion King, Frozen 2, Toy Story 4, Aladdin, Captain 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 asMarvel, It 2, Spider-Man: Far From Home,The Secret Life Ofof Pets,Zootopia,Alice Through The Looking Glass, andSing; 2, Joker, Dumbo and spin-off films such asRogue One: A Star Wars Storyand the Harry Potter spin-offFantastic Beasts And Where To Find Them, Godzilla 2 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 atrelated to campaigns for new and renovated theatres, loyalty and membership programs and brand advertising that vary depending on the theatre level as daily movie directories placed in newspapers represent the largest componenttiming 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.such campaigns.

Concession supplies expense is variable in nature and fluctuates with our concession revenues. We purchase concession supplies to replace units sold.revenues and product mix. 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 revenueperformance 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 and finance leases and the number of fee-ownedowned theatres.

23


Utilities and other costs include both fixed and variable costs and primarily includesconsist of utilities, expenses for projection and sound equipment maintenance and monitoring, property taxes, janitorial costs, repairs, and maintenance and security services.

General and administrative expenses are primarily fixed in nature and consist of the costs to support the overall management of the Company, including salaries and wages, incentive compensation and benefit costs for our corporate office personnel, facility expenses for our corporate offices, consulting fees, legal fees, audit fees, supplies and other costs that are not specifically associated with the operations of our theatres.

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

RevenuesOur patrons often have the option to purchase movie tickets well in advance of a movie showtime or right before the movie showtime, or at any point in between those two timeframes depending on seat availability.  We recognize such admissions revenues when the showtime for a purchased movie ticket has passed.  Concession revenues are recognized when admissions and concession sales are receivedmade at the box office.registers.  Other revenues primarily consist of screen advertising.advertising and other revenue streams, such as transactional fees, vendor marketing promotions, studio trailer placements, meeting rentals and electronic video games located in some of our theatres. 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 ofsell gift cards and other advanced sale-type certificatesdiscount ticket vouchers, the proceeds from which are recorded as current liabilities.  Revenues for gift cards and discount ticket vouchers are recognized when they are redeemed for movie tickets or concession items.  We offer a subscription program in the U.S. whereby patrons can pay a monthly fee to receive a monthly credit for use towards a future movie ticket purchase.  We record the monthly subscription program fees as current liabilities and record admissions revenues as the credits are redeemed for movie tickets.  We also have loyalty programs in many of our locations that either have a prepaid annual membership fee or award points to customers as purchases are made.  For those loyalty programs that have an annual membership fee, we recognize admissions or concession revenue when a holder redeems the card or certificate. We recognize unredeemed gift cards andfee collected as other advanced sale-type certificates as revenue only after such a periodrevenues over the term of time indicates,the membership.  For those loyalty programs that award points to customers based on historical experience,their purchases, we record a portion of the likelihood of redemption is remote, andoriginal transaction proceeds as liabilities based on applicable lawsthe number of reward points issued to the customer and regulations. recognize revenues when the customer redeems such points.

In evaluatingMay 2014, the likelihoodFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC Topic 606”), which requires an entity to recognize the amount of redemption,revenue to which it expects to be entitled for the transfer of promised goods or services to customers.  ASC Topic 606 replaces most existing revenue recognition guidance in U.S. generally accepted accounting principles.  In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers.  We adopted ASC Topic 606 effective January 1, 2018 under the modified retrospective method.

24


Changes to the way in which we considerrecognize revenue resulted in the period outstanding, the level and frequencyfollowing impacts to our consolidated statements of activity, and the period of inactivity.income:

a)  

Recording of incremental other revenue and interest expense related to the significant financing component of our Exhibitor Services Agreement (“ESA”) with NCM, LLC (“NCM”).  See further discussion at Note 3 to the consolidated financial statements.

b)

Deferral of a portion of admissions and concession revenues for transactions that include the issuance of loyalty points to customers. To determine the amount of revenues to defer upon issuance of points to customers under our points-based loyalty programs, we estimated the values of the rewards expected to be redeemed by our customers for those points.  The estimates are based on the rewards that have historically been offered under the loyalty programs, which we believe is representative of the rewards to be offered in the future.

c)

Increase in other revenues and an increase in utilities and other costs due to the presentation of transactional fees on a gross versus net basis.

d)

Increase in other revenues due to the change in amortization methodology for deferred revenue – NCM that is now amortized on a straight-line basis and effective for the entire term of the ESA.  The deferred revenue – NCM is related to our ESA and Common Unit Adjustment agreement with NCM, under which our performance obligation is to provide NCM with exclusive access to its domestic theatres for purposes of in-theatre advertising over the term of the ESA.  Such exclusivity, and therefore the satisfaction of our performance obligation, is provided to NCM evenly over time.  As a result of the change in amortization method, we recorded a cumulative effect of accounting change adjustment of $40,526, net of taxes, in retained earnings on January 1, 2018.  See Notes 3 and 4 to the consolidated financial statements.

Film rental costs are accrued based on the applicable box office receipts and either firm terms or a sliding scale formula, which are generally established prior to the opening of the film, or estimates of the final 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 percentage of box office receipts, which reflects either an 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. 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.

25


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 also perform a full quantitative impairment evaluation on an annual basis. We assess many factors including the following to determine whether to impair individual theatre assets:

actual theatre level cash flows;

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;

the impact of recent theatre remodels or other substantial improvements;

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 individuala 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 the exercise of available renewal periods for leased properties and the lesser of 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. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluations performed during 2016, 2017 and 2018.  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 2013, 2014 and 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 we 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 its nineteentwenty regions in the U.S. and seven of its international countries internationally (Honduras,with Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala are considered one reporting unit)unit (the Company does not have goodwill recorded for all of its international locations). Under ASC Topic 350, Goodwill, Intangibles and Other (“ASC Topic 350”), we may perform a qualitative impairment assessment or a quantitative impairment assessment of our goodwill.  

Goodwill impairment was evaluated using a two-step approach during 2013 and 2014, requiring the CompanyA quantitative analysis requires us to computeestimate the fair value of aeach reporting unit and compare it with its carrying value. If the carrying value of the reporting unit exceeds its estimated fair value, goodwill would be written down such that the carrying value would equal estimated fair value. Fair value is determined based on a second step ismultiple of cash flows, which was eight times for the evaluations performed to measure the potential goodwill impairment.during 2017 and 2018.  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 eight times for the evaluations performed during 2013 and 2014. As of December 31, 2014, the estimated fair value of our goodwill exceeded their carrying values 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”). TheA qualitative assessment included

26


includes consideration of historical and expected future industry performance, our estimated future performance of the Company, current industry trading multiples and other economic factors. Based on thefactors, and a review of current carrying values compared to estimated fair values as determined during our most recent quantitative assessment.  

We performed a qualitative assessment for all reporting units for the year ended December 31, 2016.  We performed a quantitative goodwill impairment analysis for all reporting units during the year ended December 31, 2017.  For the year ended December 31, 2018, we determined that it was not more likely than not thatperformed a quantitative goodwill assessment for three new domestic reporting units and a qualitative assessment for all other reporting units.  As of December 31, 2018, the estimated fair value of theour goodwill for each 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%, with the exception of one reporting unit, whose fair value exceeded its carrying value by approximately 9%.  We did not record any goodwill impairment charges as a result of the assessments performed during the years ended December 31, 2016, 2017 and 2018.

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. During 2013 and 2014,Under ASC Topic 350, we can elect to perform a qualitative or quantitative impairment assessment for our tradename intangible assets.  A quantitative tradename impairment assessment includes comparing the carrying values of tradename assets to an estimated the fair value of our tradenamesvalue. Fair values are estimated 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, 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. TheA qualitative assessment included consideration ofconsiders our historical and forecasted revenues and changes in estimated royalty rates, and a comparison of current carrying values to estimated fair values from our most recent quantitative assessment.

During the year ended December 31, 2016, we performed a quantitative tradename impairment assessment for eachour tradename in Ecuador and performed a qualitative tradename impairment analysis for all other tradename intangible asset. Based onassets.  During the year ended December 31, 2017, we performed quantitative tradename impairment evaluations for all tradename assets.  During the year ended December 31, 2018, we performed a qualitative assessmenttradename impairment analysis.  As a result of the analysis performed the Company determined that it was not more likely than not that the fair values ofduring each year, no impairment charges were recorded related to tradename intangible assets were less than their carrying values.for the years ended December 31, 2016, 2017 and 2018.  

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.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act made changes to the U.S. tax code, which included (1) reduced the U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign

27


subsidiaries,  (3) a one-time transition tax on certain undistributed earnings of foreign subsidiaries, and (4) created new taxes on certain foreign-sourced earnings.  As of December 31, 2018, the amounts recorded for the Tax Act are final for the 2017 transition tax, the re-measurement of deferred taxes, and our reassessment of valuation allowances.  

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 NCMwe entered into an Exhibitor Services Agreement (“ESA”), with NCM pursuant to which NCM provides advertising, promotion and event services to the Company’sour theatres. On February 13, 2007, National CineMedia, Inc., or NCM 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 Companywe amended itsour operating agreement and the Exhibitor Services Agreement, or ESA, with NCM and received proceeds related to the modification of the ESA and the Company’sour 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 Companyus 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.revenue. 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’sNCM'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’sinvestor'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 of affiliates and distributions received related to its Tranche 2 Investment are recorded as a reduction of its investment basis.

Impact of Recent Accounting Developments

The Compensation CommitteeImpact of Cinemark Holdings, Inc.’s boardNew Revenue Recognition Standard

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC Topic 606”), which requires an entity to recognize the amount of directors approved the Amended and Restated Employment Agreement of Mark Zoradi,revenue to which it expects to be effectiveentitled for the transfer of promised goods or services to customers.  ASC Topic 606 replaces most existing revenue recognition guidance in U.S. generally accepted accounting principles.  In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers.  

28


Impact of New Lease Accounting Standard

In February 19, 2016, (the “Amended Agreement”the FASB issued ASU 2016-02, Leases (Topic 842), (“ASU 2016-02”). The Amended Agreement amends Section 3.2(c) by providing thatpurpose of ASU 2016-02 is to provide financial statement users a better understanding of the Equity Awards (as definedamount, timing, and uncertainty of cash flows arising from leases. The adoption of ASU 2016-02 will result in the Amended Agreement) shall be at least 200%recognition of Mr. Zoradi’s base salarya right-of-use asset and providinga lease liability for most operating leases.  New disclosure requirements include qualitative and quantitative information about the amounts recorded in the financial statements related to leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. ASU 2016-02 requires a modified retrospective transition by means of a cumulative-effect adjustment to retained earnings as of the earliest period presented with the option to elect certain practical expedients. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”). In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). ASU 2018-11 provides an additional amount for personal expenses. The amendments conformtransition method to adopt ASU 2016-02.  Under this new transition method, an entity initially applies ASU 2016-02 at the Amended Agreementadoption date and recognizes a cumulative-effect adjustment to the termsopening balance of Mr. Zoradi’s employment offerretained earnings in August 2015.

the period of adoption.  This additional transition method changes only when an entity is required to initially apply the transition requirements outlined in ASU 2016-02; it does not change how those requirements are applied.  We used the transition method outlined in ASU 2018-11 upon adoption.  

We adopted ASC Topic 842 and the related amendments in ASU 2016-02 and ASU 2018-11 (collectively referred to herein as “the New Leasing Standard”) effective January 1, 2019.  We are finalizing our evaluation of the impact of the New Leasing Standard on our consolidated financial statements, and expect the most significant impacts to be as follows:

1.

We will recognize liabilities representing the present value of the remaining future minimum lease payments for all of its operating leases as of January 1, 2019.  We estimate these liabilities will be between $1.4 billion and $1.7 billion.

2.

We will recognize right of use assets for all of our operating leases equal to the liabilities calculated in (1) above, adjusted for the balances of long-term prepaid rent, favorable lease intangible assets, deferred lease expense, unfavorable lease liabilities and deferred lease incentive liabilities as of January 1, 2019.  

3.

We have theatre leases in which we were involved in construction that failed sale-leaseback accounting at the end of the construction period.  These leases, which were accounted for as capital leases, will be derecognized upon adoption of the New Leasing Standard and evaluated to determine classification upon adoption.  Some of these leases will be classified as operating leases upon adoption and, beginning in 2019, lease payments for these leases will be recorded as facility lease expense on the consolidated income statement.  Previously, as capital leases, lease payments were classified as interest expense and reductions of the capital lease obligations.

4.

For the capital leases derecognized as discussed in (3) above, we will write-off the net book value of the capital lease asset and capital lease liability, with the difference between those amounts resulting in an adjustment to beginning retained earnings as of January 1, 2019.


29


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. 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 date of the acquisition. During November 2013, we sold our Mexico theatres, which included 31 theatres and 290 screens.

 

 

Year Ended December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

Operating data (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

1,789.2

 

 

$

1,795.0

 

 

$

1,834.2

 

Concession

 

 

990.1

 

 

 

1,038.8

 

 

 

1,108.8

 

Other

 

 

139.5

 

 

 

157.8

 

 

 

278.8

 

Total revenues

 

$

2,918.8

 

 

$

2,991.6

 

 

$

3,221.8

 

Cost of operations

 

 

 

 

 

 

 

 

 

 

 

 

Film rentals and advertising

 

 

962.7

 

 

 

966.5

 

 

 

999.8

 

Concession supplies

 

 

154.5

 

 

 

166.3

 

 

 

181.0

 

Salaries and wages

 

 

325.8

 

 

 

354.5

 

 

 

383.9

 

Facility lease expense

 

 

321.3

 

 

 

328.2

 

 

 

323.3

 

Utilities and other

 

 

355.9

 

 

 

355.0

 

 

 

448.0

 

General and administrative expenses

 

 

140.6

 

 

 

151.0

 

 

 

162.6

 

Depreciation and amortization

 

 

209.1

 

 

 

237.5

 

 

 

261.2

 

Impairment of long-lived assets

 

 

2.8

 

 

 

15.1

 

 

 

32.4

 

Loss on disposal of assets and other

 

 

20.4

 

 

 

22.8

 

 

 

38.7

 

Total cost of operations

 

 

2,493.1

 

 

 

2,596.9

 

 

 

2,830.9

 

Operating income

 

$

425.7

 

 

$

394.7

 

 

$

390.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating data as a percentage of total revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

61.3

%

 

 

60.0

%

 

 

56.9

%

Concession

 

 

33.9

%

 

 

34.7

%

 

 

34.4

%

Other

 

 

4.8

%

 

 

5.3

%

 

 

8.7

%

Total revenues

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Cost of operations (1)

 

 

 

 

 

 

 

 

 

 

 

 

Film rentals and advertising

 

 

53.8

%

 

 

53.8

%

 

 

54.5

%

Concession supplies

 

 

15.6

%

 

 

16.0

%

 

 

16.3

%

Salaries and wages

 

 

11.2

%

 

 

11.8

%

 

 

11.9

%

Facility lease expense

 

 

11.0

%

 

 

11.0

%

 

 

10.0

%

Utilities and other

 

 

12.2

%

 

 

11.9

%

 

 

13.9

%

General and administrative expenses

 

 

4.8

%

 

 

5.0

%

 

 

5.0

%

Depreciation and amortization

 

 

7.2

%

 

 

7.9

%

 

 

8.1

%

Impairment of long-lived assets

 

 

0.1

%

 

 

0.5

%

 

 

1.0

%

Loss on disposal of assets and other

 

 

0.7

%

 

 

0.8

%

 

 

1.2

%

Total cost of operations

 

 

85.4

%

 

 

86.8

%

 

 

87.9

%

Operating income

 

 

14.6

%

 

 

13.2

%

 

 

12.1

%

Average screen count (month end average)

 

 

5,856

 

 

 

5,925

 

 

 

5,997

 

Average operating screen count (month end average)

 

 

5,767

 

 

 

5,777

 

 

 

5,925

 

Revenues per average screen (dollars)

 

$

498,423

 

 

$

504,902

 

 

$

537,224

 

 

   Year Ended December 31, 
   2013  2014  2015 

Operating data (in millions):

    

Revenues

    

Admissions

  $1,706.1   $1,644.2   $1,765.5  

Concession

   845.2    845.4    937.0  

Other

   131.6    137.4    150.1  
  

 

 

  

 

 

  

 

 

 

Total revenues

   2,682.9    2,627.0    2,852.6  

Cost of operations

    

Film rentals and advertising

   919.5    883.1    976.6  

Concession supplies

   135.7    132.0    144.3  

Salaries and wages

   269.3    273.9    301.1  

Facility lease expense

   307.9    317.1    319.7  

Utilities and other

   305.7    308.4    324.9  

General and administrative expenses

   163.2    148.6    154.1  

Depreciation and amortization

   164.0    175.7    189.2  

Impairment of long-lived assets

   3.8    6.6    8.8  

(Gain) loss on sale of assets and other

   (3.9  15.7    8.1  
  

 

 

  

 

 

  

 

 

 

Total cost of operations

   2,265.2    2,261.1    2,426.8  
  

 

 

  

 

 

  

 

 

 

Operating income

  $417.7   $365.9   $425.8  
  

 

 

  

 

 

  

 

 

 

Operating data as a percentage of total revenues:

    

Revenues

    

Admissions

   63.6  62.6  61.9

Concession

   31.5  32.2  32.8

Other

   4.9  5.2  5.3
  

 

 

  

 

 

  

 

 

 

Total revenues

   100.0  100.0  100.0
  

 

 

  

 

 

  

 

 

 

Cost of operations(1)

    

Film rentals and advertising

   53.9  53.7  55.3

Concession supplies

   16.1  15.6  15.4

Salaries and wages

   10.0  10.4  10.6

Facility lease expense

   11.5  12.1  11.2

Utilities and other

   11.4  11.7  11.4

General and administrative expenses

   6.1  5.7  5.4

Depreciation and amortization

   6.1  6.7  6.6

Impairment of long-lived assets

   0.1  0.3  0.3

(Gain) loss on sale of assets and other

   (0.1%)   0.6  0.3

Total cost of operations

   84.4  86.1  85.1

Operating income

   15.6  13.9  14.9
  

 

 

  

 

 

  

 

 

 

Average screen count (month end average)

   5,548    5,613    5,725  
  

 

 

  

 

 

  

 

 

 

Revenues per average screen (dollars)

  $483,579   $468,019   $498,272  
  

 

 

  

 

 

  

 

 

 

(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.

30


Comparison of Years Ended December 31, 20152018 and December 31, 20142017

Revenues.Total revenues increased $225.6$230.2 million to $2,852.6$3,221.8 million for 20152018 from $2,627.0$2,991.6 million for 2014,2017, representing an 8.6%a 7.7% 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 
   Year Ended  Year Ended  Year Ended 
   December 31,  December 31,  December 31, 
           %          %          % 
   2015   2014   Change  2015   2014   Change  2015   2014   Change 

Admissions revenues(1)

  $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)

  $709.7    $635.6     11.7 $227.3    $209.8     8.3 $937.0    $845.4     10.8

Other revenues(1)(2)

  $76.2    $66.0     15.5 $73.9    $71.4     3.5 $150.1    $137.4     9.2

Total revenues(1)(2)

  $2,123.9    $1,922.4     10.5 $728.7    $704.6     3.4 $2,852.6    $2,627.0     8.6

Attendance(1)

   179.6     173.9     3.3  100.5     90.0     11.7  280.1     263.9     6.1

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Constant Currency (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

2017

 

 

% Change

 

 

2018

 

 

2017

 

 

% Change

 

 

2018

 

 

% Change

 

 

2018

 

 

2017

 

 

% Change

 

Admissions revenues (1)

 

$

1,461.2

 

 

$

1,356.9

 

 

 

7.7

%

 

$

373.0

 

 

$

438.1

 

 

 

(14.9

)%

 

$

426.7

 

 

 

(2.6

)%

 

$

1,834.2

 

 

$

1,795.0

 

 

 

2.2

%

Concession revenues (1)

 

$

892.4

 

 

$

790.1

 

 

 

12.9

%

 

$

216.4

 

 

$

248.7

 

 

 

(13.0

)%

 

$

243.8

 

 

 

(2.0

)%

 

$

1,108.8

 

 

$

1,038.8

 

 

 

6.7

%

Other revenues (1)(2)

 

$

185.4

 

 

$

75.1

 

 

 

146.9

%

 

$

93.4

 

 

$

82.7

 

 

 

12.9

%

 

$

111.7

 

 

 

35.1

%

 

$

278.8

 

 

$

157.8

 

 

 

76.7

%

Total revenues (1)(2)

 

$

2,539.0

 

 

$

2,222.1

 

 

 

14.3

%

 

$

682.8

 

 

$

769.5

 

 

 

(11.3

)%

 

$

782.2

 

 

 

1.7

%

 

$

3,221.8

 

 

$

2,991.6

 

 

 

7.7

%

Attendance (1)

 

 

185.3

 

 

 

174.4

 

 

 

6.3

%

 

 

96.8

 

 

 

102.6

 

 

 

(5.7

)%

 

 

 

 

 

 

 

 

 

 

282.1

 

 

 

277.0

 

 

 

1.8

%

Average ticket price (1)

 

$

7.89

 

 

$

7.78

 

 

 

1.4

%

 

$

3.85

 

 

$

4.27

 

 

 

(9.8

)%

 

$

4.41

 

 

 

3.3

%

 

$

6.50

 

 

$

6.48

 

 

 

0.3

%

Concession revenues per patron (1)

 

$

4.82

 

 

$

4.53

 

 

 

6.4

%

 

$

2.24

 

 

$

2.42

 

 

 

(7.4

)%

 

$

2.52

 

 

 

4.1

%

 

$

3.93

 

 

$

3.75

 

 

 

4.8

%

 

(1)

Amounts

Revenue and attendance amounts in millions. Average ticket price is calculated as admissions revenues divided by attendance. Concession revenues per patron is calculated as concession revenues divided by attendance.

(2)

U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 1817 of our consolidated financial statements.

(3)

U.S.The $117.2 million increase

Constant currency revenue amounts, which are non-GAAP measurements, were calculated using the average exchange rates for the corresponding months for 2017. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in admissions revenues was primarily attributable to a 3.3% increaseeffect at different points in attendance and a 6.1% increasetime. Significant changes in average ticket price, which increasedforeign exchange rates from $7.02 for 2014 to $7.45 for 2015. The increase in attendance was dueone period to the solid slatenext can result in meaningful variations in reported results.   We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of films released during 2015 and new theatres. The increase in average ticket price was primarily due to price increases and ticket type mix. The $74.1 million increase in concession revenues was primarily attributable tobusiness performance without the 3.3% increase in attendance and an 8.2% increase in concession revenues per patron, which increased from $3.65 for 2014 to $3.95 for 2015. The increase in concession revenues per patron was primarily due to incremental sales and price increases. Other revenues increased $10.2 million primarily due to increases in screen advertising revenues.

International.The $4.1 million increase in admissions revenues was primarily attributable to an 11.7% increase in attendance, partially offset by a 9.6% decrease in average ticket price, which declined from $4.70 for 2014 to $4.25 for 2015. The $ 17.5 million increase in concession revenues was primarily attributable to the 11.7% increase in attendance, partially offset by a 3.0% decrease in concession revenues per patron from $2.33 for 2014 to $2.26 for 2015. The increase in attendance was due to the solid slate of films released during 2015 and new theatres. The decrease in average ticket price and concession revenues per patron was primarily due to the unfavorable impact of foreign currency exchange rates in certain countries in which we operate, partially offset by price increases.fluctuations.

Cost of Operations. The table below summarizes certain of our theatre operating costs by reportable operating segment (in millions)U.S.

   U.S. Operating
Segment
   International
Operating Segment
   Consolidated 
   Year Ended
December 31,
   Year Ended
December 31,
   Year Ended
December 31,
 
   2015   2014   2015   2014   2015   2014 

Film rentals and advertising

  $768.2    $681.1    $208.4    $202.0    $976.6    $883.1  

Concession supplies

   95.4     86.4     48.9     45.6     144.3     132.0  

Salaries and wages

   226.9     202.8     74.2     71.1     301.1     273.9  

Facility lease expense

   239.4     235.2     80.3     81.9     319.7     317.1  

Utilities and other

   228.0     217.2     96.9     91.2     324.9     308.4  

U.S. Film rentals and advertising costs were $768.2 million, or 57.4% of admissionsAdmissions revenues for 2015 compared to $681.1 million, or 55.8% of admissions revenues, for 2014. The increase in the film rentals and advertising rate was primarily due to the higher concentration of blockbuster films leading to stronger box office performance during the 2015 period and increased film presentation costs. The 2015 period included such blockbuster releases asStar Wars: The Force Awakens, Jurassic World, The Avengers: Age of Ultron, Furious 7, American Sniper, Inside Out andMinions, which grossed in excess of $900 million, $650 million, $450 million, $350 million, $350 million, $350 million and $325 million, respectively. Concession supplies expense was $95.4 million, or 13.4% of concession revenues, for 2015 compared to $86.4 million, or 13.6% of concession revenues, for 2014.

Salaries and wages increased to $226.9$104.3 million for 2015 from $202.8 million for 2014 primarily due to a 6.3% increase in attendance and a 1.4% increase in average ticket price. Concession revenues increased staffing levels to support the increased attendance, new theatres and increases in minimum wages. Facility lease expense increased to $239.4$102.3 million for 2015 from $235.2 million for 2014 primarily due to new theatresthe 6.3% increase in attendance and increased percentage rent expensea 6.4% increase in concession revenues per patron. The increase in attendance was due to increased revenues. Utilities and other costs increased to $228.0 million for 2015 from $217.2 million for 2014a record-breaking slate of films during 2018 as well as the favorable impact of Luxury Lounger conversions. Preliminary 2018 estimates indicate U.S. industry box office revenues set an all-time record of $11.9 billion.  The increase in average ticket price was primarily due to new theatresstrategic price increases and increasesthe impact of Luxury Lounger conversions. The increase in property taxes, janitorial costs and repairs and maintenance expenses.

International. Film rentals and advertising costs were $208.4 million, or 48.7% of admissions revenues, for 2015 compared to $202.0 million, or 47.7% of admissions revenues, for 2014. The increase in the film rentals and advertising rate was due to the higher concentration of blockbuster films and higher box office performance during 2015. Concession supplies expense was $48.9 million, or 21.5% of concession revenues, for 2015 compared to $45.6 million, or 21.7% of concession revenues, for 2014.

Salaries and wages increased to $74.2 million for 2015 from $71.1 million for 2014concession revenues per patron was primarily due to new theatres,strategic price increases, incremental sales and continued expansion of concession offerings.  Other revenues increased staffing levels to support the increased attendance, limited flexibility in scheduling staff caused by shifting government regulations and increased local currency wage rates. Facility lease expense decreased to $80.3$110.3 million for 2015 from $81.9 for 2014. Utilities and other costs increased to $96.9 million for 2015 from $91.2 million for 2014primarily due to increasesthe impact of changes in repairsrevenue recognition as discussed in Note 3 to our consolidated financial statements.

International. Admissions revenues decreased $65.1 million as reported primarily due to a 9.8% decrease in average ticket price and maintenance expenses, utility expensesa 5.7% decrease in attendance.  Admissions revenues decreased $11.4 million in constant currency. Concession revenues decreased $32.3 million as reported primarily due to a 7.4% decrease in concession revenues per patron and new theatres. Allthe 5.7% decrease in attendance.  Concession revenues decreased $4.9 million in constant currency. The decline in attendance was driven by weaker consumer appeal of the above-mentioned theatre operating costs were also impacted byinternational film slate during 2018 compared to 2017.  Average ticket price and concession revenues per patron decreased, as reported, primarily due to the impact of changes in foreign currency exchangesexchange rates in certain countries in which we operate.

General and Administrative Expenses.General and administrative expenses  Other revenues increased to $154.1 million for 2015 from $148.6 million for 2014. The increase was primarily due to increasesthe impact of changes in salaries and incentive compensation expense and share based awards compensation expense,revenue recognition as discussed in Note 3 to our consolidated financial statements, partially offset by the impact of changes in foreign currency exchange rates in certain countries in which we operate.operate.

31


Cost of Operations. The table below summarizes certain of our theatre operating costs by reportable operating segment (in millions) for the years ended December 31, 2017 and 2018.

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

Constant

Currency

2018 (1)

 

 

2018

 

 

2017

 

Film rentals and advertising

 

$

822.6

 

 

$

756.4

 

 

$

177.2

 

 

$

210.1

 

 

$

202.6

 

 

$

999.8

 

 

$

966.5

 

Concession supplies

 

 

134.6

 

 

 

112.8

 

 

 

46.4

 

 

 

53.5

 

 

 

52.2

 

 

 

181.0

 

 

 

166.3

 

Salaries and wages

 

 

303.7

 

 

 

265.8

 

 

 

80.2

 

 

 

88.7

 

 

 

94.1

 

 

 

383.9

 

 

 

354.5

 

Facility lease expense

 

 

245.1

 

 

 

241.0

 

 

 

78.2

 

 

 

87.2

 

 

 

87.3

 

 

 

323.3

 

 

 

328.2

 

Utilities and other

 

 

327.0

 

 

 

241.6

 

 

 

121.0

 

 

 

113.4

 

 

 

140.6

 

 

 

448.0

 

 

 

355.0

 

(1)

Constant currency expense amounts, which are non-GAAP measurements, were calculated using the average exchange rates for the corresponding months for 2017. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time. Significant changes in foreign exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance without the impact of foreign currency fluctuations.

U.S.Film rentals and advertising costs were $822.6 million, or 56.3% of admissions revenues, for 2018 compared to $756.4 million, or 55.7% of admissions revenues, for 2017. The increase in the film rentals and advertising rate was primarily due to the record-breaking box office and the relative contribution of blockbuster films to overall box office during the 2018 period. The 2018 period included such blockbuster releases as Black Panther, Avengers: Infinity War, Incredibles 2 and Jurassic World: Fallen Kingdom, which grossed in excess of $700 million, $650 million, $600 million and $400 million, respectively, in 2018. Concession supplies expense was $134.6 million, or 15.1% of concession revenues, for 2018 compared to $112.8 million, or 14.3% of concession revenues, for 2017. The increase in the concessions supplies rate was primarily due to expanded concession offerings.

Salaries and wages increased to $303.7 million for 2018 from $265.8 million for 2017 primarily due to increased staffing levels to support the increased attendance and expanded concession offerings, staffing at new and recently remodeled theatres and increases in minimum and other wage rates. Facility lease expense increased to $245.1 million for 2018 from $241.0 million for 2017 due to percentage rent due to revenue growth. Utilities and other costs increased to $327.0 million for 2018 from $241.6 million for 2017.  The increase was primarily due to the presentation of transactional fees on a gross basis versus net basis (see Note 3 to our consolidated financial statements for further discussion).  

International.Film rentals and advertising costs were $177.2 million ($202.6 million in constant currency), or 47.5% of admissions revenues, for 2018 compared to $210.1 million, or 48.0% of admissions revenues, for 2017. The decrease in the film rentals and advertising rate was primarily due to higher advertising costs during 2017.  Concession supplies expense was $46.4 million ($52.2 million in constant currency), or 21.4% of concession revenues, for 2018 compared to $53.5 million, or 21.5% of concession revenues, for 2017.

Salaries and wages decreased to $80.2 million (increased to $94.1 million in constant currency) for 2018 from $88.7 million for 2017. The as reported decrease was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate, partially offset by increased local currency wages that were primarily driven by inflation, new theatres and limited flexibility in scheduling staff caused by shifting government regulations.  Facility lease expense decreased to $78.2 million (increased to $87.3 million in constant currency) for 2018 from $87.2 million for 2017. The as reported decrease was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate and lower percentage rent due to the decline in revenues, partially offset by an increase in base rent due to new theatres. Utilities and other costs increased to $121.0 million ($140.6 million in constant currency) for 2018 from $113.4 million for 2017. The as reported increase was primarily due to the presentation of transactional fees on a gross basis versus net basis (see Note 3 to our consolidated financial statements for further discussion).    

32


General and Administrative Expenses. General and administrative expenses increased to $162.6 million for 2018 from $151.0 million for 2017. The increase was primarily due to increased headcount to support strategic initiatives, increased benefits costs and professional fees, partially offset by the impact of changes in foreign currency exchange rates in certain countries in which we operate.

Depreciation and Amortization. Depreciation and amortization expense was $189.2$261.2 million for 20152018 compared to $175.7$237.5 million for 2014.2017. The increase was primarily due to depreciation expense related to theatre remodels, including Luxury Lounger conversions, and new theatres and remodels and other improvements of existing theatres.

Impairment of Long-Lived Assets.We recorded asset impairment charges on assets held and used of $8.8$32.4 million for 20152018 compared to $6.6$15.1 million for 2014.2017. Impairment charges for 20152018 consisted of theatre properties in nine of our U.S. regions, Brazil, Colombia, Panama and Peru. Impairment charges for 2017 consisted of theatre properties in eleven of our U.S. regions, Colombia, Brazil, Guatemala and Curacao. 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 1 and 7 to our consolidated financial statements.

Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of $38.7 million during 2018 compared to $22.8 million during 2017. The loss recorded during 2018 was primarily due to the retirement of assets related to theatre remodels, including Luxury Lounger conversions, and the accrual of reserves for outstanding litigation (see Note 16 to the consolidated financial statements).  The loss recorded during 2017 included the retirement of assets due to theatre remodels and closures and the write-off of a favorable lease intangible asset due to the amendment of a theatre lease, partially offset by gains related to the sale of excess land parcels and a gain on a landlord buyout of a theatre lease.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, were $110.0 million for 2018 compared to $105.9 million for 2017. The increase was primarily due to an increase in the variable rate at which our term loan accrued interest during 2018.  See Note 9 to our consolidated financial statements for discussion of our long-term debt and our interest rate swap agreements.

Foreign Currency Exchange Gain (Loss). We recorded a foreign currency exchange loss of $11.7 million during 2018 and a foreign currency exchange gain of $0.9 million during 2017 primarily related to intercompany transactions and changes in exchange rates from original transaction dates until cash settlement. See Notes 1 and 11 to our consolidated financial statements for discussion of foreign currency translation.

Loss on Debt Amendments and Refinancing. We recorded a loss of $1.5 million during 2018 related to amendments to our senior secured credit facility that included a reduction in the interest rate at which our term loan accrues interest and to reduce the amount of real property required to be mortgaged to secure the loans. We recorded a loss of $0.5 million during 2017 related to amendments to our senior secured credit facility that included a reduction in the interest rates applicable to the term loan and revolving credit line, revisions to certain definitions within the agreement, and an extension of the maturity of the revolving credit line. See Note 9 to our consolidated financial statements for discussion of our long-term debt.

Distributions from NCM. We recorded distributions received from NCM of $15.4 million during 2018 and $16.4 million during 2017, which were in excess of the carrying value of our Tranche 1 Investment. See Note 4 to our consolidated financial statements.

Interest expense – NCM.  We recorded non-cash interest expense of $19.7 million during 2018 related to the significant financing component associated with revenues collected in advance under certain of our agreements with NCM.  See Note 3 to our consolidated financial statements for further discussion of ASC Topic 606.  

Equity in Income of Affiliates. We recorded equity in income of affiliates of $39.2 million during 2018 and $36.0 million during 2017. See Notes 4 and 5 to our consolidated financial statements for information about our equity investments.

33


Income Taxes. Income tax expense of $96.0 million was recorded for 2018 compared to $80.3 million recorded for 2017. The effective tax rate for 2018 was 30.7% and included a net additional charge, as a result of the Tax Act and its recently issued guidance, of $19.2 million, all non-cash.  The effective tax rate for 2017 was 23.1%, which included the impact of a one-time benefit of $44.9 million related to the enactment of the Tax Act.  See Note 15 to our consolidated financial statements for further information on our income tax expense and tax reform.

Comparison of Years Ended December 31, 2017 and December 31, 2016

Revenues. Total revenues increased $72.8 million to $2,991.6 million for 2017 from $2,918.8 million for 2016, representing a 2.5% 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Constant Currency (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

% Change

 

 

2017

 

 

2016

 

 

% Change

 

 

2017

 

 

% Change

 

 

2017

 

 

2016

 

 

% Change

 

Admissions revenues (1)

 

$

1,356.9

 

 

$

1,379.0

 

 

 

(1.6

)%

 

$

438.1

 

 

$

410.2

 

 

 

6.8

%

 

$

426.7

 

 

 

4.0

%

 

$

1,795.0

 

 

$

1,789.2

 

 

 

0.3

%

Concession revenues (1)

 

$

790.1

 

 

$

764.6

 

 

 

3.3

%

 

$

248.7

 

 

$

225.5

 

 

 

10.3

%

 

$

243.4

 

 

 

7.9

%

 

$

1,038.8

 

 

$

990.1

 

 

 

4.9

%

Other revenues (1)(2)

 

$

75.1

 

 

$

73.6

 

 

 

2.0

%

 

$

82.7

 

 

$

65.9

 

 

 

25.5

%

 

$

81.5

 

 

 

23.7

%

 

$

157.8

 

 

$

139.5

 

 

 

13.1

%

Total revenues (1)(2)

 

$

2,222.1

 

 

$

2,217.2

 

 

 

0.2

%

 

$

769.5

 

 

$

701.6

 

 

 

9.7

%

 

$

751.6

 

 

 

7.1

%

 

$

2,991.6

 

 

$

2,918.8

 

 

 

2.5

%

Attendance (1)

 

 

174.4

 

 

 

182.6

 

 

 

(4.5

)%

 

 

102.6

 

 

 

104.6

 

 

 

(1.9

)%

 

 

 

 

 

 

 

 

 

 

277.0

 

 

 

287.2

 

 

 

(3.6

)%

Average ticket price (1)

 

$

7.78

 

 

$

7.55

 

 

 

3.0

%

 

$

4.27

 

 

$

3.92

 

 

 

8.9

%

 

$

4.16

 

 

 

6.1

%

 

$

6.48

 

 

$

6.23

 

 

 

4.0

%

Concession revenues per patron (1)

 

$

4.53

 

 

$

4.19

 

 

 

8.1

%

 

$

2.42

 

 

$

2.16

 

 

 

12.0

%

 

$

2.37

 

 

 

9.7

%

 

$

3.75

 

 

$

3.45

 

 

 

8.7

%

(1)

Revenue and attendance amounts in millions. Average ticket price is calculated as admissions revenues divided by attendance. Concession revenues per patron is calculated as concession revenues divided by attendance.

(2)

U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 17 of our consolidated financial statements.

(3)

Constant currency revenue amounts, which are non-GAAP measurements, were calculated using the average exchange rates for the corresponding months for 2016. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time. Significant changes in foreign exchange rates from one period to the next can result in meaningful variations in reported results.   We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance without the impact of foreign currency fluctuations.

U.S. Admissions revenues decreased $22.1 million primarily due to a 4.5% decrease in attendance, partially offset by a 3.0% increase in average ticket price. Concession revenues increased $25.5 million primarily due to an 8.1% increase in concession revenues per patron, partially offset by the 4.5% decrease in attendance. The decrease in attendance was due to a slate of films in 2017 that had weaker consumer appeal compared to 2016, partially offset by the favorable impact of Luxury Lounger conversions and new theatres. The increase in average ticket price was primarily due to price increases. The increase in concession revenues per patron was primarily due to incremental sales, expanded offerings, price increases and new theatres.  

International. Admissions revenues increased $27.9 million as reported ($16.5 million in constant currency), primarily due to an 8.9% increase in average ticket price, partially offset by a 1.9% decrease in attendance. Concession revenues increased $23.2 million as reported ($17.9 million in constant currency), primarily due to a 12.0% increase in concession revenues per patron, partially offset by the 1.9% decrease in attendance.  The decrease in attendance was due to a slate of films in 2017 that had weaker consumer appeal compared to 2016, partially offset by the impact of new theatres. Average ticket price and concession revenues per patron increased primarily due to price increases, which were predominantly driven by local inflation. Other revenues increased primarily due to increased promotional income and incremental screen advertising revenues generated by an expansion of our Flix Media services to affiliates in various countries.

34


Cost of Operations. The table below summarizes certain of our theatre operating costs by reportable operating segment (in millions) for the years ended December 31, 2016 and 2017.

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Constant

Currency

2018 (1)

 

 

2017

 

 

2016

 

Film rentals and advertising

 

$

756.4

 

 

$

768.9

 

 

$

210.1

 

 

$

193.8

 

 

$

205.1

 

 

$

966.5

 

 

$

962.7

 

Concession supplies

 

 

112.8

 

 

 

107.3

 

 

 

53.5

 

 

 

47.2

 

 

 

52.3

 

 

 

166.3

 

 

 

154.5

 

Salaries and wages

 

 

265.8

 

 

 

248.2

 

 

 

88.7

 

 

 

77.6

 

 

 

88.2

 

 

 

354.5

 

 

 

325.8

 

Facility lease expense

 

 

241.0

 

 

 

240.7

 

 

 

87.2

 

 

 

80.6

 

 

 

84.6

 

 

 

328.2

 

 

 

321.3

 

Utilities and other

 

 

241.6

 

 

 

250.9

 

 

 

113.4

 

 

 

105.0

 

 

 

111.6

 

 

 

355.0

 

 

 

355.9

 

(1)

Constant currency expense amounts, which are non-GAAP measurements, were calculated using the average exchange rates for the corresponding months for 2016. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time. Significant changes in foreign exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance without the impact of foreign currency fluctuations.

U.S.Film rentals and advertising costs were $756.4 million, or 55.7% of admissions revenues, for 2017 compared to $768.9 million, or 55.8% of admissions revenues, for 2016. The decrease in the film rentals and advertising rate was primarily due to a higher concentration of blockbuster films during 2016. Concession supplies expense was $112.8 million, or 14.3% of concession revenues, for 2017 compared to $107.3 million, or 14.0% of concession revenues, for 2016. The increase in the concession supplies rate was primarily due to the impact of our expanded concession offerings.

Salaries and wages increased to $265.8 million for 2017 from $248.2 million for 2016 primarily due to incremental staffing at new and recently remodeled theatres, increases in minimum wages and increased staffing for food and beverage initiatives. Facility lease expense increased to $241.0 million for 2017 from $240.7 million for 2016 due to the impact of new theatres. Utilities and other costs decreased to $241.6 million for 2017 from $250.9 million for the 2016 period.  The decrease was primarily due to the change in classification of transactional fees and decreased equipment lease expenses for 3-D presentations.

International.Film rentals and advertising costs were $210.1 million ($205.1 million in constant currency), or 48.0% of admissions revenues, for 2017 compared to $193.8 million, or 47.2% of admissions revenues, for 2016. The increase in the film rentals and advertising rate was primarily due to higher advertising costs during 2017.  Concession supplies expense was $53.5 million ($52.3 million in constant currency), or 21.5% of concession revenues, for 2017 compared to $47.2 million, or 20.9% of concession revenues, for 2016. The increase in the concession supplies rate was primarily due to the mix of concession products sold.    

Salaries and wages increased to $88.7 million ($88.2 million in constant currency) for 2017 from $77.6 million for 2016. The as reported increase was due to increased local currency wage rates primarily due to inflation, new theatres and limited flexibility in scheduling staff caused by shifting government regulations.  Facility lease expense increased to $87.2 million ($84.6 million in constant currency) for 2017 from $80.6 million for 2016. The as reported increase was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate and new theatres. Utilities and other costs increased to $113.4 million ($111.6 million in constant currency) for 2017 from $105.0 million for 2016. The as reported increase was due to new theatres, increases in repairs and maintenance expenses and utility expenses and the impact of changes in foreign currency exchange rates in certain countries in which we operate.

General and Administrative Expenses. General and administrative expenses increased to $151.0 million for 2017 from $140.6 million for 2016. The increase was primarily due to increased salaries and wages partially due to inflation, professional fees and the impact of changes in foreign currency exchange rates in certain countries in which we operate.

Depreciation and Amortization. Depreciation and amortization expense was $237.5 million for 2017 compared to $209.1 million for 2016. The increase was primarily due to depreciation expense related to theatre remodels and new theatres.

35


Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $15.1 million for 2017 compared to $2.8 million for 2016. Impairment charges for 2017 consisted of theatre properties in the U.S., Colombia, Brazil, Guatemala and Curacao, impacting fifteen of our twenty-seven reporting units. Impairment charges for 2016 consisted of theatre properties in the U.S., Colombia and Ecuador, impacting fourteen of our twenty-seven reporting units. Impairment charges for 2014 consisted primarily of U.S. theatre properties, impacting twelve of our twenty-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 1 6 and 7 to our consolidated financial statements.

Loss on SaleDisposal of Assets and Other.We recorded a loss on saledisposal of assets and other of $8.1$22.8 million during 20152017 compared to $15.7$20.4 million during 2014.2016. The loss recorded during 20152017 included the retirement of assets due to theatre remodels and closures and the write-off of a favorable lease termination costs, contract termination costsintangible asset due to the amendment of a theatre lease, partially offset by gains related to the sale of excess land parcels and a gain on a landlord buyout of a theatre lease.  The loss recorded during 2016 included the retirement of assets due to theatre remodels and closures, partially offset by gains related to lease amendments that resulted in a reduction of certain capital lease liabilities,gain on the sale of anour investment in RealD stock (see Note 5 to our consolidated financial statements) and a Taiwan joint venture, andgain on 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 period, lease termination charges recorded for theatre closures and a charge for termination of a vendor contract.parcel.

Interest Expense.Interest costs incurred, including amortization of debt issue costs, were $112.7$105.9 million for 20152017 compared to $113.7$108.3 million for 2014. See Note 92016. The decrease was due to the redemption of our previously outstanding $200.0 million 7.375% senior subordinated notes (the “7.375% Senior Subordinated Notes”) funded by a $225.0 million add-on 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 related4.875% senior notes (the “4.875% Senior Notes), which occurred on March 21, 2016, as well as amendments to the continued decline of exchange rates in certain of the international countries in which we operate. See Notes 1 and 12 to our consolidated financial statements for discussion of foreign currency translation.

Loss on Amendment to Debt Agreement. We recorded a loss of $0.9 million in 2015 related to the amendment of our senior secured credit facility.facility completed during June and December of 2016 and June of 2017, which, in the aggregate, reduced the rate at which our term loan accrues interest by 100 basis points.  See Note 9 to our consolidated financial statements for discussion of our long-term debt.

Distributions from NCM.Foreign Currency Exchange Gain. We recorded distributions received from NCMa foreign currency exchange gain of $18.1$0.9 million during 20152017 and $18.5a foreign currency exchange gain of $6.5 million during 2014, which were2016 primarily related to intercompany transactions and changes in excess ofexchange rates from the carrying value of our Tranche 1 Investment. NCM did not distribute any excessoriginal transaction date until cash during the second quarter of 2015 due to expenses incurred as the result of the termination of a proposed merger. See Note 4 to our consolidated financial statements.

Equity in Income of Affiliates.We recorded equity in income of affiliates of $28.1 million during 2015 and $22.7 million during 2014.settlement. See Notes 41 and 511 to our consolidated financial statements for information about our equity investments.discussion of foreign currency translation.

Income Taxes.Income tax expense of $130.0 million was recorded for 2015 compared to $97.2 million recorded for 2014. The effective tax rate for 2015 was 37.1%. The effective tax rate for 2014 was 33.2%. The effective tax rate for 2014 reflects the impact of items related to our Mexican subsidiaries. See Note 16 to our consolidated financial statements.

Comparison of Years Ended December 31, 2014 and December 31, 2013

Revenues.Total revenues decreased $55.9 million to $2,627.0 million for 2014 from $2,682.9 million for 2013, representing a 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 
   Year Ended  Year Ended  Year Ended 
   December 31,  December 31,  December 31, 
           %          %          % 
   2014   2013   Change  2014   2013   Change  2014   2013   Change 

Admissions revenues(1)

  $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)

  $635.6    $609.3     4.3 $209.8    $235.9     (11.1%)  $845.4    $845.2     —  

Other revenues(1)(2)

  $66.0    $59.1     11.7 $71.4    $72.5     (1.5%)  $137.4    $131.6     4.4

Total revenues(1)(2)

  $1,922.4    $1,899.8     1.2 $704.6    $783.1     (10.0%)  $2,627.0    $2,682.9     (2.1%) 

Attendance(1)

   173.9     177.2     (1.9%)   90.0     99.4     (9.5%)   263.9     276.6     (4.6%) 

(3)Amounts in millions.
(4)U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 18 of our consolidated financial statements.

U.S.The decrease in admissions revenues was primarily attributable to a 1.9% decrease in attendance, partially offset by a 1.0% increase in average ticket price from $6.95 for 2013 to $7.02 for 2014. The increase in concession revenues was primarily attributable to a 6.1% increase in concession revenues per patron from $3.44 for 2013 to $3.65 for 2014. Our revenues and attendance include the 32 Rave theatres acquired beginning on May 29, 2013 (see Note 3 to the consolidated financial statements). The increase in average ticket price was primarily due to the pricing at acquired and new theatres. The increase in concession revenues per patron was primarily due to price increases and incremental sales. The increase in other revenues is partly due to a sales tax refund recorded during 2014.

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 9.5% decrease in attendance and a 1.7% decrease in concession revenues per patron from $2.37 for 2013 to $2.33 for 2014. The decrease in attendance was primarily due to the sale of our Mexico theatres on November 15, 2013. The decrease in average ticket price and concession revenues per patron was due to the unfavorable impact of exchange rates in certain countries in which we operate.

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 
   Year Ended
December 31,
   Year Ended
December 31,
   Year Ended
December 31,
 
   2014   2013   2014   2013   2014   2013 

Film rentals and advertising

  $681.1    $687.3    $202.0    $232.2    $883.1    $919.5  

Concession supplies

   86.4     83.7     45.6     52.0     132.0     135.7  

Salaries and wages

   202.8     192.5     71.1     76.8     273.9     269.3  

Facility lease expense

   235.2     215.5     81.9     92.4     317.1     307.9  

Utilities and other

   217.2     204.5     91.2     101.2     308.4     305.7  

U.S. Film rentals and advertising costs were $681.1 million, or 55.8% of admissions revenues, for 2014 compared to $687.3 million, or 55.8% of admissions revenues, for 2013. Concession supplies expense was $86.4 million, or 13.6% of concession revenues, for 2014 compared to $83.7 million, or 13.7% of concession revenues, for 2013.

Salaries and wages increased to $202.8 million for 2014 from $192.5 million for 2013. Facility lease expense increased to $235.2 million for 2014 from $215.5 million for 2013. Utilities and other costs increased to $217.2 million for 2014 from $204.5 million for 2013. 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 acquired on May 29, 2013 (see Note 3 to the consolidated financial statements).

International. Film rentals and advertising costs were $202.0 million, or 47.7% of admissions revenues, for 2014 compared to $232.2 million, or 48.9% of admissions revenues, for 2013. The decrease in the film rentals and advertising rate for the 2014 period was primarily due to increased virtual print fees that we earn from studios on films played in our international theatres. Concession supplies expense was $45.6 million, or 21.7% of concession revenues, for 2014 compared to $52.0 million, or 22.0% of concession revenues, for 2013.

Salaries and wages decreased to $71.1 million for 2014 from $76.8 million for 2013. Facility lease expense decreased to $81.9 million for 2014 from $92.4 for 2013. Utilities and other costs decreased to $91.2 million for 2014 from $101.2 million for 2013. All of the above-mentioned theatre operating costs were impacted by changes in exchange rates in certain countries in which we operate and the sale of our Mexico theatres during November 2013.

General and Administrative Expenses.General and administrative expenses decreased to $148.6 million for 2014 from $163.2 million for 2013. The reduction was primarily due to the impact of changes in exchange rates in certain countries in which we 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 was $175.7 million for 2014 compared to $164.0 million for 2013. The increase was primarily due to new theatres, including the 32 Rave theatres acquired on May 29, 2013, and remodels and other improvements of existing theatres, partially offset by the sale of our Mexico theatres during November 2013.

Impairment of Long-Lived Assets.We recorded asset impairment charges on assets held and used of $6.6 million for 2014 compared to $3.8 million for 2013. Impairment charges for 2014 consisted primarily of U.S. theatre properties, impacting twelve of our twenty-six reporting units. Impairment charges for 2013 were primarily related to U.S. and international theatre properties, impacting twelve of our twenty-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 1, 6 and 7 to our consolidated financial statements.

(Gain) Loss on Sale of AssetsDebt Amendments and Other.Refinancing. We recorded a loss on sale of assets and other of $15.7$0.5 million during 2014 compared2017 related to amendments to our senior secured credit facility that included a gainreduction in the interest rate at which our term loan accrues interest, revisions to certain definitions within the agreement, a reduction of $3.9the interest rates applicable to the revolving credit line and an extension of the maturity of the revolving credit line. We recorded a loss of $13.4 million during 2013. The loss recorded during the 2014 period was2016 primarily due to the retirement of certain theatre equipment that was replaced during the period, lease termination charges recorded for theatre closures and a charge for termination of a vendor contract. The gain recorded during 2013 included a gain of $3.5 million related to the saleearly redemption of our Mexico theatres and a gain of $2.3$200.0 million related to the sale of one theatre in Argentina, both of which were partially offset by the retirement of equipment replaced during the period.

Interest Expense.Interest costs incurred, including amortization of debt issue costs, were $113.7 million for 2014 compared to $124.7 million for 2013. The decrease was primarily due to the issuance of the 4.875%7.375% Senior Notes on May 24, 2013 that were used to pay off, on June 24, 2013, the previously issued 8.625% SeniorSubordinated Notes. See Note 9 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 approximately $72.3 million during 2013 as a result of the redemption of 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 approximately $8.0 million in unamortized bond discount, the write-off of $7.6 million in unamortized debt issue costs and the payment of $0.1 million of other fees. See Note 9 to our consolidated financial statements for further discussion of our long-term debt.

Distributions from NCM.We recorded distributions received from NCM of $18.5$16.4 million during 20142017 and $20.7$14.7 million during 2013,2016, which were in excess of the carrying value of our Tranche 1 Investment. See Note 4 to our consolidated financial statements.

Equity in Income of Affiliates.We recorded equity in income of affiliates of $22.7$36.0 million during 20142017 and $22.7$32.0 million during 2013.2016. See Notes 4 and 5 to our consolidated financial statements for information about our equity investments.

Income Taxes.Income tax expense of $97.2$80.3 million was recorded for 20142017 compared to $114.2$104.9 million recorded for 2013.2016. The effective tax rate for 20142017 was 33.2%.23.1%, which included the impact of a one-time benefit of $44.9 million related to the enactment of the Tax Act. See Note 15 to our consolidated financial statements.  The effective tax rate for 20132016 was 42.9%28.9%.  See Note 16 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, nearly all of our theatres provide the patron a choice of using a credit card or debit card or advanced-sale type certificates such as a gift card, in place of cash. Becausecard. Since our revenues are received in cash prior to the payment of related expenses, we have an operating “float” and historically have not

36


required traditional working capital financing. Cash provided by operating activities amounted to $309.4$462.3 million, $454.1$528.4 million and $455.2$556.3 million for the years ended December 31, 2013, 20142016, 2017 and 2015,2018, respectively. Cash provided byThe increase in cash flows from operating activities for the years ended December 31, 2017 and 2018 was lower in 2013 primarily due to the make-whole premiumincrease in revenues and the amount and timing of $56.6 million paid to redeem the 8.625% Senior Notes, which was included in net income.vendor payments for movies released during December of those years.

Investing Activities

Our investing activities have been principally related to the development, remodel and acquisition of theatres. New theatre openings, remodels and acquisitions historically have been financed with internally generated cash and by debt financing, including borrowings under our senior secured credit facility. Cash used for investing activities amounted to $364.7$327.8 million, $253.3$410.5 million and $328.1$451.4 million for the years ended December 31, 2013, 20142016, 2017 and 2015,2018, respectively. Cash used for investing activities for the year ended December 31, 2013 included the acquisition of theatres in the U.S. for approximately $259.2 million and proceeds of approximately $126.2 million from the sale of our theatres in Mexico. The increase in cash used for investing activities during 2015 is2017 was primarily due to increasedincreases in capital expenditures and acquisitions.  The increase in cash used for investing activities during 2018 was primarily due to the acquisition of NCM common units (see Note 4) for $78.4 million, partially offset by a decrease in capital expenditures.

Cash capitalCapital expenditures for the years ended December 31, 2013, 20142016, 2017 and 20152018 were as follows (in millions):

 

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  

Period

 

New

Theatres

 

 

Existing

Theatres (1)

 

 

Total

 

Year Ended December 31, 2016

 

$

89.8

 

 

$

237.1

 

 

$

326.9

 

Year Ended December 31, 2017

 

$

58.3

 

 

$

322.6

 

 

$

380.9

 

Year Ended December 31, 2018

 

$

80.7

 

 

$

265.4

 

 

$

346.1

 

 

(1)

(a)

The amountamounts for the yearyears ended December 31, 2015 includes2016, 2017 and 2018 include approximately $26.3$3.9, $9.4 million and $8.3 million, respectively, for the purchaseremodel of our corporate headquarters building in Plano, TX.building.

Capital expenditures for existing theatres in the table above includes the costs of remodeling certain of our existing properties to include Luxury Loungers and expanded concession offerings, which began during 2015.  During the years ended December 31, 2016, 2017 and 2018, we had an average of 89, 148 and 72 of our domestic screens, respectively, temporarily closed for such remodels.

Our U.S. theatre circuit consisted of 4,518341 theatres with 4,586 screens as of December 31, 2015.2018. We built ninethree new theatres and 9932 screens and closed seven theatresone theatre with 807 screens during the year ended December 31, 2015.2018.  At December 31, 2015,2018, we had signed commitments to open sevensix new theatres and 70 screens in domestic markets during 20162019 and open five new theatres with 5954 screens subsequent to 2016.2019. We estimate the remaining capital expenditures for the development of these 129124 domestic screens will be approximately $73$80 million.

Our international theatre circuit consisted of 1,278205 theatres with 1,462 screens as of December 31, 2015.2018. We built 13eight new theatres and 8349 screens, acquired three theatres with 19 screens and closed one screenfour screens during the year ended December 31, 2015.2018. At December 31, 2015,2018, we had signed commitments to open sixeight new theatres and 4559 screens in international markets during 20162019 and open two new theatres and 1729 screens subsequent to 2016.2019. We estimate the remaining capital expenditures for the development of these 6288 international screens will be approximately $39$52 million.

Actual expenditures for continued theatre development, remodels 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 senior secured credit facility, and proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.

37


Financing Activities

Cash used for financing activities was $75.3$163.1 million, $146.3$157.4 million and $150.5$191.9 million during the years ended December 31, 2013, 20142016, 2017 and 2015,2018, respectively. Cash used for financing activities for the year ended December 31, 2013 included proceeds from the issuanceprimarily consists of dividends paid to our parent company, Cinemark USA, Inc.’s 4.875% Senior Notes, partially offset by the redemption of Cinemark USA, Inc.’s 8.625% Senior Notes. See below for further information regarding these transactions.Holdings, Inc..

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, 20142017 and 20152018 (in millions):

 

  As of December 31, 

 

As of December 31,

 

  2014   2015 

 

2017

 

 

2018

 

Cinemark USA, Inc. term loan

  $686.0    $679.0  

 

$

659.5

 

 

$

652.9

 

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  

 

 

400.0

 

 

 

400.0

 

Cinemark USA, Inc. 4.875% senior notes due 2023

   530.0     530.0  

 

 

755.0

 

 

 

755.0

 

Other

   7.0     5.6  

 

 

2.8

 

 

 

1.4

 

  

 

   

 

 

Total long-term debt

  $1,823.0    $1,814.6  

 

$

1,817.3

 

 

$

1,809.3

 

Less current portion

   8.4     8.4  

 

 

7.1

 

 

 

8.0

 

  

 

   

 

 

Subtotal long-term debt, less current portion

  $1,814.6    $1,806.2  

 

$

1,810.2

 

 

$

1,801.3

 

Less: Debt issuance costs

   31.4     33.3  
  

 

   

 

 

Less: Debt discounts and debt issuance costs, net of accumulated amortization

 

 

29.8

 

 

 

28.7

 

Long-term debt, less current portion, net of debt issuance costs

  $1,783.2    $1,772.9  

 

$

1,780.4

 

 

$

1,772.6

 

  

 

   

 

 

As of December 31, 2015,2018, after giving effect to a letter of credit outstanding, we had $100.0$98.8 million in available borrowing capacity on our revolving credit line.

As of December 31, 2015,2018, 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 

 

Payments Due by Period

 

  (in millions) 

 

(in millions)

 

      Less Than           After 

 

 

 

 

 

Less Than

 

 

 

 

 

 

 

 

 

 

After

 

Contractual Obligations

  Total   One Year   1 - 3 Years   3 - 5 Years   5 Years 

 

Total

 

 

One Year

 

 

1 - 3 Years

 

 

3 - 5 Years

 

 

5 Years

 

Long-term debt(1)

  $1,814.6    $8.4    $16.8    $15.4    $1,774.0  

 

$

1,809.3

 

 

$

8.0

 

 

$

13.2

 

 

$

1,168.2

 

 

$

619.9

 

Scheduled interest payments on long-term debt(2)

  $557.8     84.3     167.7     166.5     139.3  

 

$

419.0

 

 

 

86.2

 

 

 

171.3

 

 

 

127.4

 

 

 

34.1

 

Operating lease obligations

  $1,699.9     248.5     446.7     343.2     661.5  

 

$

1,784.5

 

 

 

253.3

 

 

 

472.7

 

 

 

381.4

 

 

 

677.1

 

Capital lease obligations

  $227.7     18.8     40.0     45.8     123.1  

 

$

259.5

 

 

 

27.1

 

 

 

51.7

 

 

 

43.1

 

 

 

137.6

 

Scheduled interest payments on capital leases

  $96.1     16.4     27.7     20.0     32.0  

 

$

86.4

 

 

 

15.4

 

 

 

24.4

 

 

 

17.9

 

 

 

28.7

 

Purchase and other commitments(3)

  $157.5     117.5     37.6     2.2     0.2  

 

$

153.2

 

 

 

89.6

 

 

 

54.3

 

 

 

9.3

 

 

 

 

Current liability for uncertain tax positions(4)

  $9.2     9.2     —       —       —    

 

$

0.6

 

 

 

0.6

 

 

 

 

 

 

 

 

 

 

  

 

   

 

   

 

   

 

   

 

 

Total obligations

  $4,562.8    $503.1    $736.5    $593.1    $2,730.1  

 

$

4,512.5

 

 

$

480.2

 

 

$

787.6

 

 

$

1,747.3

 

 

$

1,497.4

 

  

 

   

 

   

 

   

 

   

 

 

 

(1)

Amounts are presented before adjusting for debt issuance costs.

(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, 2015.2018. The average interest rates in effect on our fixed rate and variable rate debt are 5.3%were 4.8% and 3.4%4.3%, respectively, as of December 31, 2015.2018.

(3)

Includes estimated capital expenditures associated with the construction of new theatres to which we were committed as of December 31, 2015,2018, obligations under employment agreements and minimum contractual purchase commitments.

(4)

The contractual obligations table excludes the long-term portion of our liability for uncertain tax positions of $7.9$13.4 million because we cannot make a reliable estimate of the timing of the related cash payments.

38


Off-Balance Sheet Arrangements

Other than the operating leases and purchase and other commitments disclosed in the tables above, we do not have any other off-balance sheet arrangements.

Senior Secured Credit Facility

Cinemark USA, Inc. has a senior secured credit facility that includes a seven year $700.0 million term loan and a five year $100.0 million revolving credit line or the Senior Secured Credit Facility. (the “Credit Agreement”).  

On May 8, 2015, 16, 2016, Cinemark USA, Inc. made a pre-payment of $13.5 million on its term loan using the net proceeds received from the sale of shares of RealD (see Note 5 to our consolidated financial statements).  We did not incur any fees as a result of the pre-payment.

Cinemark USA, Inc. amended its Credit Agreement during 2016, 2017 and 2018 as follows:

 

 

 

 

Debt Issue

 

 

Loss on Debt

 

Effective Date

 

Nature of Amendment

 

Costs Paid (1)

 

 

Amendment (2)

 

June 13, 2016

 

Reduced term loan interest rate by 0.25%

 

$

0.8

 

 

$

0.2

 

December 15, 2016

 

Reduced term loan interest rate by 0.50%

 

$

2.4

 

 

$

0.2

 

June 16, 2017

 

Reduced term loan interest rate by 0.25%; modified certain definitions and other provisions in the Credit Agreement

 

$

0.5

 

 

$

0.2

 

November 28, 2017

 

Extended maturity of revolving credit line to December 2022; reduced the interest rate applicable to borrowings under the credit line

 

$

0.3

 

 

$

0.3

 

March 29, 2018

 

Extended maturity of term loan to March 2025; reduced term loan interest rate by 0.25%; reduced real property mortgage requirements

 

$

5.0

 

 

$

1.5

 

(1)

Reflected as a reduction of long term debt on the consolidated balance sheet.  

(2)

Reflected as a loss on debt amendments and refinancing on the consolidated statement of income for the year in which the amendments were effective.  

Under the Senior Securedamended Credit Facility to extend the maturity of the term loan from December 2019 to May 2022. QuarterlyAgreement, quarterly principal payments in the amount of $1.75$1.6 million are due on the term loan through MarchDecember 31, 2022,2024, with the remaininga final principal payment of $635.3$613.4 million due on May 8, 2022. The maturity date forMarch 29, 2025.

Subsequent to the revolving credit line, which is December 2017, did not change.

InterestMarch 29, 2018 amendment noted above, interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the highergreater of (1) the prime lendingUS “Prime Rate” as quoted in The Wall Street Journal or if no such rate as set forth on the British Banking Association Telerate page 5, oris quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate from time to time plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin of 2.0%0.75% per annum, or (B) a “eurodollar rate”Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 3.0%1.75% per annum. Interest on the revolving credit line accrues, at Cinemark USA, Inc.’sour option, at: (A) a base rate equal to the highergreater of (1) the prime lendingUS “Prime Rate” as quoted in The Wall Street Journal or if no such rate as set forth on the British Banking Association Telerate page 5 andis quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate from time to time plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin that ranges from 0.50% to 1.25% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 1.00%1.50% to 1.75% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 2.00% to 2.75%2.25% per annum. The margin of the revolving credit line is determined by the consolidated net senior secured leverage ratio as defined in the Credit Agreement.

At December 31, 2018, there was $652.9 million outstanding under the term loan. Cinemark USA, Inc. had $98.8 million in available borrowing capacity on the revolving credit agreement.line, after giving effect to a letter of credit outstanding as of December 31, 2018. The average interest rate on outstanding term loan borrowings under the Credit Agreement at December 31, 2018 was approximately 4.4% per annum.

39


Cinemark USA, Inc.’s obligations under the Senior Secured Credit FacilityAgreement 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 Senior Secured Credit FacilityAgreement 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.’sour 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 andor 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 determineddefined in accordance with the Senior Secured Credit Facility.Agreement, not to exceed 5.0 to 1.  As of December 31, 2018, Cinemark USA, Inc.’s actual ratio was 2.9 to 1.

The dividend restriction contained in the Senior Secured Credit FacilityAgreement 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 Senior Secured Credit Facility;Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Senior Secured Credit Facility,Agreement, and (c) certain other defined amounts. As of December 31, 2015,2018, Cinemark USA, Inc. could have distributed up to approximately $1,905.1$2,918.1 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms

We have three interest rate swap agreements that are used to hedge a portion of the Senior Secured Credit Facility, subject to its available cash and other borrowing restrictions outlined ininterest rate risk associated with the agreement.

At December 31, 2015, there was $679.0 millionvariable interest rates on the term loan 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 averageCredit Agreement. See Note 9 of our consolidation financial statements for discussion of interest rate on outstanding term loan borrowings under the Senior Secured Credit Facilityswaps.  See also discussion of interest rate risk at December 31, 2015 was approximately 3.6% per annum.Item 7A. Quantitative and Qualitative Disclosures About Market Risk.  

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%(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.Notes”). Interest on the 4.875% Senior Notes is payable on June 1 and December 1 of each year, beginning December 1, 2013.year. The 4.875% Senior Notes mature on June 1, 2023.

On March 21, 2016, Cinemark USA, Inc. issued an additional $225.0 million aggregate principal amount of the 4.875% Senior Notes, at 99.0% of the principal amount plus accrued and unpaid interest from December 1, 2015.  Proceeds, after payment of fees, were used to finance the redemption of Cinemark, USA, Inc.’s previously outstanding $200.0 million 7.375% senior subordinated notes due 2021 (the “7.375% Senior Subordinated Notes”), as discussed below. These additional notes have identical terms, other than the issue date, the issue price and the first interest payment date, and constitute part of the same series as Cinemark USA, Inc.’s existing 4.875% Senior Notes.  The aggregate principal amount of $755.0 million of 4.875% Senior Notes mature on June 1, 2023.  The Company incurred debt issue costs of approximately $3.7 million in connection with the issuance of the additional notes, which, along with the discount of $2.3 million, are reflected as a reduction of long term debt, net of accumulated amortization, on the consolidated balance sheet as of December 31, 2018.

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.Credit Agreement. 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.

40


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, 2015,2018, Cinemark USA, Inc. could have distributed up to approximately $2,079.7$2,980.6 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, 20152018 was approximately 7.7 6.3to 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 or the 5.125%(the “5.125% Senior Notes. A portion of the proceeds were used to refinance a portion of the former senior secured credit facility and to fund the purchase price for the Rave Acquisition (see Note 3 to the consolidated financial statements)Notes”). Interest on the 5.125% Senior Notes is payable on June 15 and December 15 of each year, beginning June 15, 2013.year. The 5.125% Senior Notes mature on December 15, 2022.

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 senior secured credit facility.Credit Agreement. 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 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, 2015,2018, Cinemark USA, Inc. could have distributed up to approximately $2,084.0$2,985.8 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, 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, 20152018 was approximately 7.76.3 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 5.125% Senior Notes.

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, or the Senior Subordinated 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 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 Senior Secured Credit Facility, its 5.125% Senior Notes and 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, 2015, Cinemark USA, Inc. could have distributed up to approximately $2,072.8 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the Senior Subordinated Notes, subject to its available cash and other borrowing restrictions outlined in the 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 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 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 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. 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, or the 8.625% Senior Notes, with an original issue discount of $11.5 million, resulting in proceeds of approximately $458.5 million. On June 24, 2013, Cinemark USA, Inc. redeemed its 8.625% Senior Notes at 112.035% of the principal amount, inclusive of a make-whole premium, plus accrued and unpaid interest, utilizing the proceeds from the issuance of the 4.875% Senior Notes discussed above.

Covenant Compliance

As of December 31, 2015,2018, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.

41


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’sagency'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 current credit ratings.

Category

Moody’sStandard and Poor’s

Cinemark USA, Inc. Senior Secured Credit Facility

Ba1BBB-

Cinemark USA, Inc. 4.875% Senior Notes

B2BB

Cinemark USA, Inc. 5.125% Senior Notes

B2BB

Cinemark USA, Inc. 7.375% Senior Subordinated Notes

B3B+

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:

BBB - An 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, or 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 commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

New Accounting Pronouncements

In January 2015, the Financial Accounting Standards Board (“FASB”)See Note 2 to our consolidated financial statements for a discussion of recently issued Accounting Standards Update 2015-01,Income Statement – Extraordinaryaccounting pronouncements 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 notheir impact on our consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update 2015-02,Consolidation (Topic 810): Amendments to the Consolidation Analysis, (“ASU 2015-02”). ASU 2015-02 affects reporting entities that are required to evaluate 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 comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU 2015-02 is effective for fiscal years beginning after December 15, 2015. Early adoption is 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 2014-09, 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 summer months in the summer,U.S., extending from May to July, and during the holiday season, extending from early November through year-end. The timing of releases, however, has become less pronounced as distributors have begun releasing content more evenly throughout the year.  In our Latin American markets, while Hollywood content has similar release dates as in the U.S., the local holidays and seasons can vary. 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. Quantitative and Qualitative Disclosures About Market Risk

Item 7A.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, 2015,2018, there was an aggregate of approximately $579.0$202.9 million of variable rate debt outstanding under these facilities, which excludes $100.0 million of Cinemark USA, Inc.’s term loan debt that is hedged withafter giving effect to the Company’s interest rate swap agreementagreements discussed below. Based on the interest rates in effect on the variable rate debt outstanding at December 31, 2015,2018, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $5.8$2.0 million.

Our interest rate swap agreement qualifies for cash flow hedge accounting. The fair value of the interest rate swap is recorded on our consolidated balance sheet as an asset or liability with the effective portion of the interest rate 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 agreement as of December 31, 2015:

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, 2015:2018:

 

   Expected Maturity for the Twelve-Month Periods Ending December 31,     
   (in millions)     
   2016   2017   2018   2019   2020   Thereafter   Total   Fair Value   Average
Interest
Rate
 

Fixed rate(1)

  $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     544.0     579.0     576.8     3.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total debt(2)

  $8.4    $8.4    $8.4    $8.4    $7.0    $1,774.0    $1,814.6    $1,806.3    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

Expected Maturity for the Twelve-Month Periods Ending December 31,

 

 

Average

 

 

 

(in millions)

 

 

Interest

 

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

Thereafter

 

 

Total

 

 

Fair Value

 

 

Rate

 

Fixed rate

 

$

1.4

 

 

$

 

 

$

 

 

$

400.0

 

 

$

755.0

 

 

$

450.0

 

 

$

1,606.4

 

 

$

1,574.7

 

 

 

4.8

%

Variable rate

 

 

6.6

 

 

 

6.6

 

 

 

6.6

 

 

 

6.6

 

 

 

6.6

 

 

 

169.9

 

 

 

202.9

 

 

 

199.4

 

 

 

4.3

%

Total debt (1)

 

$

8.0

 

 

$

6.6

 

 

$

6.6

 

 

$

406.6

 

 

$

761.6

 

 

$

619.9

 

 

$

1,809.3

 

 

$

1,774.1

 

 

 

 

 

 

(1)

Includes $100.0 million of the Cinemark USA, Inc. term loan, which represents the debt currently hedged with the Company’s interest rate swap agreement.

(2)

Amounts are presented before adjusting for debt issuance costs.

Interest Rate Swap Agreements


All of our current interest rate swap agreements qualify for cash flow hedge accounting.  The fair values of the interest rate swaps are recorded on our consolidated balance sheet as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss.  See Note 9 to the consolidated financial statements for further discussion of the interest rate swap agreements.

Below is a summary of our interest rate swap agreements as of December 31, 2018:

Notional

Amount

Effective Date

Pay Rate

Receive Rate

Expiration Date

$175.0 million

December 31, 2018

2.751%

1-Month LIBOR

December 31, 2022

$137.5 million

December 31, 2018

2.765%

1-Month LIBOR

December 31, 2022

$137.5 million

December 31, 2018

2.746%

1-Month LIBOR

December 31, 2022

$450.0 million

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 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. U.S. GAAP requires 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.subsidiary, which could impact future results of operations as reported. 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, 2015,2018, 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 $30$46.0 million and would decrease the aggregate net income of our international subsidiaries for the yearsyear ended December 31, 2013, 2014 and 20152018 by approximately $7 million, $8 million and $7$5.9 million, respectively.

We deemed Argentina to be highly inflationary beginning July 1, 2018.  A highly inflationary economy is defined as an economy with a cumulative inflation rate of approximately 100 percent or more over a three-year period. If a country’s economy is classified as highly inflationary, the financial statements of the foreign entity operating in that country must be remeasured to the functional currency of the reporting entity.  The financial statements of the Company’s Argentina subsidiaries has been remeasured in U.S. dollars in accordance with ASC Topic 830, Foreign Currency Matters, effective beginning July 1, 2018.

Item 8.Financial Statements and Supplementary Data

Item 8. 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. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.


Item 9A.Controls and Procedures
43


Item 9A. Controls and Procedures

Evaluation of the Effectiveness of Disclosure Controls and Procedures

As of December 31, 2015,2018, 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, 2015,2018, 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, 20152018 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, 20152018 based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, inInternal Control—Integrated Framework (2013). As a result of this assessment, management concluded that, as of December 31, 2015,2018, 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"Controls and Procedures”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. Financial Statements and Supplementary Data.

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. Other Information

Item 9B.Other Information

None.

44


PART III

Item 10. Directors, Executive Officers and Corporate Governance

Item 10.Directors, Executive Officers and Corporate Governance

Incorporated by reference to Cinemark Holdings, Inc.’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 26, 201623, 2019 and to be filed with the SEC within 120 days after December 31, 2015.2018

Item 11. Executive Compensation

Item 11.Executive Compensation

Incorporated by reference to Cinemark Holdings, Inc.’s proxy statement for its annual stockholders meeting (under the heading “Executive Compensation”) to be held on May 26, 201623, 2019 and to be filed with the SEC within 120 days after December 31, 2015.2018.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated by reference to Cinemark Holdings, Inc.’s proxy statement for its annual stockholders meeting (under the headings “Security Ownership of Certain Beneficial Owners and Management”) to be held on May 26, 201623, 2019 and to be filed with the SEC within 120 days after December 31, 2015.2018.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 13.Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference to Cinemark Holdings, Inc.’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 26, 201623, 2019 and to be filed with the SEC within 120 days after December 31, 2015.2018.

Item 14. Principal Accounting Fees and Services

Item 14.Principal Accounting Fees and Services

Incorporated by reference to Cinemark Holdings, Inc.’s proxy statement for its annual stockholders meeting (under the heading “Board Committees – Audit Committee – Fees Paid to Independent Registered Public Accounting Firm”Firm) to be held on May 26, 201623, 2019 and to be filed with the SEC within 120 days after December 31, 2015.2018.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) Documents Filed as Part of this Report

 

Item 15.Exhibits, Financial Statement Schedules

1.

(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-146 are filed as a part of this report.

(b) Exhibits

(b)Exhibits

See the accompanying Index beginning on page E-1.46.

(c) Financial Statement Schedules

(c)Financial Statement Schedules

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.

45


SIGNATURESEXHIBIT INDEX

Number

Exhibit Title

3.1

Amended and Restated Articles of Incorporation of the Company dated June 3, 1992 (incorporated by reference to Exhibit 3.1 to Cinemark USA, Inc.’s Registration Statement on Form S-4, File No. 333-162105, filed on September 24, 2009).

3.2

Amended and Restated Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.4(a) to Cinemark USA, Inc.’s Registration Statement on Form S-4, File No. 333-162105, filed on September 24, 2009).

4.2(a)

Indenture, dated as of June 3, 2011, between Cinemark USA, Inc. and Wells Fargo Bank, N.A. governing the 7.375% 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).

4.2(b)

Form of 7.375% senior subordinated notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit 4.2(a) above) (incorporated by reference to Exhibit 4.1 to the Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed on July 6, 2011).

4.3(a)

Indenture, dated as of December 18, 2012, between Cinemark USA, Inc. and Wells Fargo Bank, N.A. governing the 5.125% 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).

4.3(b)

Form of 5.125% senior notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit 4.3(a) above) (incorporated by reference to Exhibit 4.1 to the Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed on December 20, 2012).

4.4(a)

Indenture, dated as of May 24, 2013, between Cinemark USA, Inc. and Well Fargo Bank, N.A. governing the 4.875% Senior Notes issued thereunder (incorporated by reference to Exhibit 4.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401 filed May 28, 2013).

4.4(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 4.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed May 28, 2013).

4.5

First Supplemental Indenture, dated as of March 21, 2016, among Cinemark USA, Inc., the Guarantors named therein and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed on March 21, 2016).

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). (P)

10.1(b)

First Amendment to Management Agreement of Laredo Theatre, Ltd., effective as of December 10, 2003, between CNMK Texas Properties, Ltd. 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 of Laredo Theatres, Ltd., effective as of December 10, 2008, between CNMK Texas Properties, L.L.C. 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. (incorporated by reference to Exhibit 10.1(d) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 24, 2016).

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). (P)

10.3(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).

10.3(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 USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed on May 14, 2015).

46


10.3(c)

Third Amendment to the Amended and Restated Credit Agreement, dated as of June 13, 2016, among Cinemark Holdings, Inc., Cinemark USA, Inc., the several banks and other financial institutions party thereto, Barclays Bank PLC, as administrative agent, and the other agents party thereto (incorporated by reference to Exhibit 10.1 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed on June 17, 2016).

10.3(d)

Fourth Amendment to the Amended and Restated Credit Agreement, dated as of December 15, 2016, among Cinemark Holdings, Inc., Cinemark USA, Inc., the several banks and other financial institutions party thereto, Barclays Bank PLC, as administrative agent, and the other agents party thereto (incorporated by reference to Exhibit 10.1 to Cinemark USA, Inc.’s Current Report on Form 8-K, File No. 033-47040, filed on December 20, 2016).

10.3(e)

Fifth Amendment to the Amended and Restated Credit Agreement, dated as of June 16, 2017, among Cinemark Holdings, Inc., Cinemark USA, Inc., the several banks and other financial institutions party thereto, Barclays Bank PLC, as administrative agent, and the other agents party thereto (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed on June 20, 2017).

10.3(f)

Sixth Amendment to the Amended and Restated Credit Agreement, dated as of November 28, 2017, among Cinemark Holdings, Inc., Cinemark USA, Inc., the several banks and other financial institutions party thereto, Barclays Bank PLC, as administrative agent, and the other agents party thereto (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 4, 2017).

10.3(g)

Seventh Amendment to the Amended and Restated Credit Agreement, dated as of March 29, 2018, among Cinemark Holdings, Inc., Cinemark USA, Inc., the several banks and other financial institutions party thereto, Barclays Bank PLC, as administrative agent, and the other agents party thereto (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed on April 4, 2018).

10.3(h)

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. 033-47040, filed by Cinemark USA, Inc. on October 12, 2006).

10.3(i)

Reaffirmation agreement, dated as of December 18, 2012, between Cinemark Holdings, Inc., Cinemark USA, Inc. and each subsidiary guarantor party thereto (incorporated by reference to Exhibit 10.4(c) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 28, 2013).

+10.5(a)

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).

+10.5(b)

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).

+10.5(c)

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).

+10.5(d)

Employment agreement, dated as of June 16, 2008, between Cinemark Holdings, Inc. and Michael Cavalier (incorporated by reference to Exhibit 10.4 to Cinemark Holdings, Inc.’s Quarterly Report on Form 10-Q, File No. 001-33401, filed August 8, 2008).

+10.5(e)

Employment Agreement, dated as of February 15, 2010, between Cinemark Holdings, Inc. and Valmir Fernandes (incorporated by reference to Exhibit 10.5(u) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed March 10, 2010).

+10.5(f)

Amended and Restated Employment Agreement, dated as of February 19, 2016, between Cinemark Holdings, Inc. and Mark Zoradi (incorporated by reference to Exhibit 10.6(l) Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No.  001-33401, filed February 24, 2016).

+10.5(g)

First Amendment to the Amended and Restated Employment Agreement, dated as of February 20, 2018, between Cinemark Holdings, Inc. and Mark Zoradi (incorporated by reference to Exhibit 10.l to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No.00133401, filed February 23, 2018).

10.6

Amended and Restated Exhibitor Services Agreement between National CineMedia, LLC and Cinemark USA, Inc., dated as of December 26, 2013(incorporated by reference to Exhibit 10.45 to Cinemark Holdings, Inc.’s Annual Report on Form 10-K , File No.  001-33401, filed February 28, 2014).

10.7

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).

10.15(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).

47


10.15(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).

10.15(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).

10.15(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).

10.15(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., as tenant, for Century Stadium 14, Sacramento, CA. (incorporated by reference to Exhibit 10.10(a) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.16(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).

10.16(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).

10.16(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).

10.16(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).

10.16(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., as tenant, for Century Laguna 16, Elk Grove, CA. (incorporated by reference to Exhibit 10.10(b) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.16(f)

Fifth Amendment, dated as of January 29, 2018, 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, CA. (incorporated by reference to Exhibit 10.5 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.17(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).

10.17(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 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).

10.17(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 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).

10.17(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 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).

10.17(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., as tenant, for Century 14, Folsom, CA. (incorporated by reference to Exhibit 10.10(c) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

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10.17(f)

Fifth Amendment, dated as of January 29, 2018 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, CA. (incorporated by reference to Exhibit 10.4 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.18(a)

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).

10.18(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 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).

10.18(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 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).

10.18(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 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).

10.18(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 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).

10.18(f)

Fifth Amendment to Indenture of Lease, dated as of October 5, 2012 by and between Syufy Enterprises, L.P. as landlord and Century Theatres, Inc., as tenant, for Cinedome 12, Henderson, NV (incorporated by reference to Exhibit 10.13(f) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 27, 2015).

10.18(g)

Sixth Amendment to Indenture of Lease, dated as of January 29, 2018 by and between Syufy Enterprises, L.P. as landlord and Century Theatres, Inc., as tenant, for Cinedome 12, Henderson, NV. (incorporated by reference to Exhibit 10.3 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.19(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 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).

10.19(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 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).

10.19(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 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).

10.19(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 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).

10.19(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., as tenant, for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.17(e) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007).

10.19(f)

Fifth Amendment, dated as of May 1, 2014, to Indenture of Lease, by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.14(f) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 27, 2015).

10.19(g)

Sixth Amendment, dated as of July 28, 2015, to Indenture of Lease by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.14(g) of Cinemark Holdings, Inc. Annual Report on Form 10-K, File No. 001-33401, filed February 23, 2018).

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10.19(h)

Seventh Amendment, dated as of January 29, 2018, to Indenture of Lease by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant for Century 8, North Hollywood, CA. (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.20(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 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).

10.20(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 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).

10.20(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 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).

10.20(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 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).

10.20(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., as tenant, for Century Cinema 16, Mountain View, CA. (incorporated by reference to Exhibit 10.10(d) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.20(f)

Fifth Amendment, dated as of January 29, 2018, 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, CA. (incorporated by reference to Exhibit 10.2 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.21(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 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).

10.21(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 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).

10.21(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 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).

10.21(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 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).

10.21(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., 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).

10.22(a)

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).

10.22(b)

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).

10.22(c)

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).

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10.22(d)

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, CA. (incorporated by reference to Exhibit 10.10(j) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.23(a)

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).

10.23(b)

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).

10.23(c)

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).

10.23(d)

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, NV. (incorporated by reference to Exhibit 10.10(i) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.24(a)

Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P.(succeeded by Stadium Promenade LLC), as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, CA (incorporated by reference to Exhibit 10.27(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007).

10.24(b)

First Amendment, dated as of April 15, 2005, to Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P.(succeeded by Stadium Promenade LLC), as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, (incorporated by reference to Exhibit 10.27(b) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007).

10.24(c)

Second Amendment, dated as of September 29, 2005, to Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P.(succeeded by Stadium Promenade LLC), as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, (incorporated by reference to Exhibit 10.27(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007).

10.24(d)

Third Amendment, dated as of August 5, 2006, to Lease Agreement, dated as of October 1, 1996, by and between Stadium Promenade LLC, as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, CA. (incorporated by reference to Exhibit 10.10(h) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.24(e)

Fourth Amendment, dated as of August 15, 2014, to Lease Agreement, dated as of October 1, 1996, by and between Stadium Promenade LLC, as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, CA (incorporated by reference to Exhibit 10.19(e) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 23, 2018).

10.24(f)

Fifth Amendment, dated as of August 3, 2015, to Lease Agreement, dated as of October 1, 1996, by and between Stadium Promenade LLC, as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, CA (incorporated by reference to Exhibit 10.19(f) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 23, 2018).

10.25(a)

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 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).

10.25(b)

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).

10.25(c)

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).

10.25(d)

Third Amendment, dated as of August 7, 2006, 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 10.10(g) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

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10.25(e)

Fourth Amendment, dated as of January 29, 2018, 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 10.7 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.26(a)

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).

10.26(b)

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).

10.26(c)

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).

10.26(d)

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, CA. (incorporated by reference to Exhibit 10.10(e) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.26(e)

Fourth Amendment, dated as of January 29, 2018, 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 10.6 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.27(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 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).

10.27(b)

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).

10.27(c)

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).

10.27d)

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).

10.27(e)

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).

10.27(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).

10.27(g)

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).

10.28(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).

10.28(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 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).

52


10.28(c)

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).

10.28(d)

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. , as tenant, for Northridge 14, Salinas, CA. (incorporated by reference to Exhibit 10.10(m) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.28(e)

Fourth Amendment, dated as of August 4, 2017, 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 10.23(e) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 23, 2018).

10.28(f)

Fifth Amendment, dated as of January 29, 2018, 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 10.10 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.29(a)

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).

10.29(b)

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).

10.29(c)

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).

10.29(d)

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).

10.29(e)

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).

10.29(f)

Fifth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between SYUT Properties, Inc. (succeeded by Syufy Properties, Inc.), as landlord and Century Theatres of Utah, Inc. (succeeded by Century Theatres, Inc.), as tenant, for Century 16, Salt Lake City, UT. (incorporated by reference to Exhibit 10.10(l) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.30(a)

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).

10.30(b)

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).

10.30(c)

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).

10.30(d)

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).

10.30(e)

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, CA. (incorporated by reference to Exhibit 10.10(k) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

53


10.31(a)

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).

10.31(b)

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).

10.31(c)

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).

10.31(d)

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, NV. (incorporated by reference to Exhibit 10.10(f) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.31(e)

Fourth Amendment, dated as of August 8, 2017, 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 10.26(e) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 23, 2018)

10.31(f)

Fifth Amendment, dated as of January 29, 2018, 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 10.8 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.32(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 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).

10.32(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 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).

10.32(c)

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).

10.32(d)

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).

10.32(e)

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).

10.32(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. (succeeded by Century Theatres, Inc.), as tenant, for Century 16, Sacramento, CA (incorporated by reference to Exhibit 10.10(n) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).

10.32(g)

Sixth Amendment, dated as of January 29, 2018, 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 10.11 to Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed January 29, 2018).

10.33(a)

Lease Agreement, dated as of May 26, 2015, by and between Sy Arden Way LLC, as landlord and Century Theatres, Inc., as tenant, for Howe ‘Bout Arden Center, Sacramento, CA (incorporated by reference to Exhibit 10.28(a) of Cinemark Holdings, Inc. Annual Report on Form 10-K, File No. 001-33401, filed February 23, 2018).

10.33(b)

Letter Agreement, dated as of February 8, 2016, to Lease Agreement, dated as of May 26, 2015, by and between Sy Arden Way LLC, as landlord and Century Theatres, Inc., as tenant, for Howe ‘Bout Arden Center, Sacramento, CA (incorporated by reference to Exhibit 10.28(b) of Cinemark Holdings, Inc. Annual Report on Form 10-K, File No. 001-33401, filed February 23, 2018).

10.35

Aircraft Time Sharing Agreement, dated as of September 2, 2009, between Copper Beach Capital, LLC and Cinemark USA, Inc. (incorporated by reference to Exhibit 10.1 of Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed September 8, 2009).

54


10.36

Limited Liability Company Agreement of FE Concepts, LLC dated as of April 20, 2018 (incorporated by reference to Exhibit 10.1 of Cinemark Holdings, Inc.’s Quarterly Report on Form 10-Q, File No. 001-33401, filed August 8, 2018).

10.37

Management Services Agreement by and between FE Concepts, LLC and Cinema Operations, L.L.C. dated as of April 20, 2018 (incorporated by reference to Exhibit 10.2 of Cinemark Holdings, Inc.’s Quarterly Report on Form 10-Q, File No. 001-33401, filed August 8, 2018).

10.38

Theatre Services Agreement by and between FE Concepts, LLC and CNMK Texas Properties, LLC dated as of April 20, 2018 (incorporated by reference to Exhibit 10.3 of Cinemark Holdings, Inc.’s Quarterly Report on Form 10-Q, File No. 001-33401, filed August 8, 2018).

*21

Subsidiaries of Cinemark USA, Inc.

*31.1

Certification of Mark Zoradi, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2

Certification of Sean Gamble, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*32.1

Certification of Mark Zoradi, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2

Certification of Sean Gamble, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

*101

The following financial information from Cinemark USA, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 4, 2019, formatted in XBRL includes: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements tagged as detailed text.

*

Filed herewith.

+

Any management contract, compensatory plan or arrangement.

(P)

Paper filing

55


SIGNATURES

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: March 4, 20162019

CINEMARK USA, INC.INC

BY:

BY:

/s/ Mark Zoradi

Mark Zoradi

Chief Executive Officer

BY:

BY:

/s/ Sean Gamble

Sean Gamble

Chief Financial Officer and

Principal Accounting Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby severally constitutes and appoints Mark Zoradi and Sean 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

March 4 2016, 2019

Lee Roy Mitchell

/s/ Mark Zoradi

Mark Zoradi

Chief Executive Officer and Director

March 4, 2019

Mark Zoradi

(principal executive officer)

March 4, 2016

/s/ Sean Gamble

Chief Financial Officer

March 4, 2019

Sean Gamble

Chief Financial Officer (principal

(principal financial and accounting officer)

March 4, 2016

56


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

 


REPORT OF INDEPENDENT REGISTEREDREGISTERED PUBLIC ACCOUNTING FIRM

To the stockholder and the Board of Directors of

Cinemark USA, Inc.

Plano, TexasOpinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cinemark USA, Inc. and subsidiaries (the “Company”"Company"), a wholly-ownedwholly owned subsidiary of Cinemark Holdings, Inc., as of December 31, 20142017 and 2015, and2018, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2015. 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. OurAs part of our audits, included considerationwe are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. 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 USA, Inc. and subsidiaries as of December 31, 2014 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Dallas, Texas

March 4, 2016

2019

We have served as the Company’s auditor since 1988.


PART IV - FINANCIAL INFORMATION

Item 15.  Financial Statement

CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)in thousands, except share and per share data)

 

 

December 31,

 

 

December 31,

 

  December 31,
2014
 December 31,
2015
 

 

2017

 

 

2018

 

Assets

   

 

 

 

 

 

 

 

 

Current assets

   

 

 

 

 

 

 

 

 

Cash and cash equivalents

  $638,841   $588,503  

 

$

522,415

 

 

 

426,216

 

Inventories

   13,419   15,954  

 

 

17,507

 

 

 

19,319

 

Accounts receivable

   47,917   74,287  

 

 

89,248

 

 

 

95,076

 

Current income tax receivable

   19,350   22,877  

 

 

11,730

 

 

 

3,288

 

Current deferred tax asset

   10,518    —    

Prepaid expenses and other

   10,882   13,494  

 

 

16,536

 

 

 

15,114

 

Accounts receivable from parent

   12,638   1,171  

 

 

14,581

 

 

 

19,530

 

  

 

  

 

 

Total current assets

   753,565   716,286  

 

 

672,017

 

 

 

578,543

 

Theatre properties and equipment

   

 

 

 

 

 

 

 

 

Land

   95,699   95,479  

 

 

104,207

 

 

 

103,739

 

Buildings

   416,680   453,034  

 

 

490,394

 

 

 

522,355

 

Property under capital lease

   313,277   336,666  

 

 

430,764

 

 

 

387,480

 

Theatre furniture and equipment

   878,453   929,180  

 

 

1,199,702

 

 

 

1,239,122

 

Leasehold interests and improvements

   844,983   873,032  

 

 

1,103,522

 

 

 

1,151,454

 

  

 

  

 

 

Total

   2,549,092   2,687,391  

 

 

3,328,589

 

 

 

3,404,150

 

Less accumulated depreciation and amortization

   1,098,280   1,182,322  
  

 

  

 

 

Less: accumulated depreciation and amortization

 

 

1,500,535

 

 

 

1,571,017

 

Theatre properties and equipment, net

   1,450,812   1,505,069  

 

 

1,828,054

 

 

 

1,833,133

 

Other assets

   

 

 

 

 

 

 

 

 

Goodwill

   1,277,383   1,247,548  

 

 

1,284,079

 

 

 

1,276,324

 

Intangible assets - net

   348,024   339,644  

 

 

336,761

 

 

 

330,910

 

Investment in NCM

   178,939   183,755  

 

 

200,550

 

 

 

275,592

 

Investments in and advances to affiliates

   77,658   94,973  

 

 

120,045

 

 

 

156,766

 

Long-term deferred tax asset

   164   2,114  

 

 

4,067

 

 

 

9,028

 

Deferred charges and other assets - net (see Note 2)

   46,571   38,243  
  

 

  

 

 

Deferred charges and other assets - net

 

 

39,767

 

 

 

41,055

 

Total other assets

   1,928,739   1,906,277  

 

 

1,985,269

 

 

 

2,089,675

 

  

 

  

 

 

Total assets

  $4,133,116   $4,127,632  

 

$

4,485,340

 

 

$

4,501,351

 

  

 

  

 

 

Liabilities and equity

   

 

 

 

 

 

 

 

 

Current liabilities

   

 

 

 

 

 

 

 

 

Current portion of long-term debt

  $8,423   $8,405  

 

$

7,099

 

 

$

7,984

 

Current portion of capital lease obligations

   16,494   18,780  

 

 

25,511

 

 

 

27,065

 

Current income tax payable

   6,396   7,332  

 

 

5,509

 

 

 

12,179

 

Current deferred tax liability

   75    —    

Current liability for uncertain tax positions

   7,283   9,155  

 

 

11,873

 

 

 

573

 

Accounts payable

   119,170   108,844  

 

 

109,984

 

 

 

104,615

 

Accrued film rentals

   86,250   97,172  

 

 

106,738

 

 

 

95,754

 

Accrued payroll

   37,457   45,811  

 

 

50,349

 

 

 

46,500

 

Accrued property taxes

   29,925   31,719  

 

 

31,353

 

 

 

31,154

 

Accrued other current liabilities

   102,410   111,951  

 

 

119,870

 

 

 

148,229

 

  

 

  

 

 

Total current liabilities

   413,883   439,169  

 

 

468,286

 

 

 

474,053

 

Long-term liabilities

   

 

 

 

 

 

 

 

 

Long-term debt, less current portion (see Note 2)

   1,783,155   1,772,930  

Long-term debt, less current portion

 

 

1,780,381

 

 

 

1,772,627

 

Capital lease obligations, less current portion

   201,978   208,952  

 

 

251,151

 

 

 

232,467

 

Long-term deferred tax liability

   140,973   139,905  

 

 

121,787

 

 

 

155,626

 

Long-term liability for uncertain tax positions

   8,410   7,853  

 

 

8,358

 

 

 

13,380

 

Deferred lease expenses

   46,003   43,333  

 

 

40,929

 

 

 

39,235

 

Deferred revenue - NCM

   335,219   342,134  

 

 

351,706

 

 

 

287,349

 

Other long-term liabilities

   66,772   60,105  

 

 

41,247

 

 

 

49,431

 

  

 

  

 

 

Total long-term liabilities

   2,582,510   2,575,212  

 

 

2,595,559

 

 

 

2,550,115

 

Commitments and contingencies (see Note 17)

   

Commitments and contingencies (see Note 16)

 

 

 

 

 

 

 

 

Equity

   

 

 

 

 

 

 

 

 

Cinemark USA, Inc.’s stockholder’s equity:

   

Class A common stock, $0.01 par value: 10,000,000 shares authorized, 1,500 shares issued and outstanding

   —      —    

Class B common stock, no par value: 1,000,000 shares authorized, 239,893 shares issued and 182,648 shares outstanding

   49,543   49,543  

Cinemark USA, Inc.'s stockholder's equity:

 

 

 

 

 

 

 

 

Class A common stock, $0.01 par value: 10,000,000 shares authorized,

 

 

 

 

 

 

 

 

1,500 shares issued and outstanding

 

 

 

 

 

 

Class B common stock, no par value: 1,000,000 shares authorized,

 

 

 

 

 

 

 

 

239,893 shares issued and 182,648 shares outstanding

 

 

49,543

 

 

 

49,543

 

Treasury stock, 57,245 Class B shares at cost

   (24,233 (24,233

 

 

(24,233

)

 

 

(24,233

)

Additional paid-in-capital

   1,221,179   1,238,473  

 

 

1,264,505

 

 

 

1,277,921

 

Retained earnings

   24,677   110,049  

 

 

373,069

 

 

 

480,580

 

Accumulated other comprehensive loss

   (144,772 (271,686

 

 

(253,282

)

 

 

(319,007

)

  

 

  

 

 

Total Cinemark USA, Inc.’s stockholder’s equity

   1,126,394   1,102,146  

Total Cinemark USA, Inc.'s stockholder's equity

 

 

1,409,602

 

 

 

1,464,804

 

Noncontrolling interests

   10,329   11,105  

 

 

11,893

 

 

 

12,379

 

  

 

  

 

 

Total equity

   1,136,723   1,113,251  

 

 

1,421,495

 

 

 

1,477,183

 

  

 

  

 

 

Total liabilities and equity

  $4,133,116   $4,127,632  

 

$

4,485,340

 

 

$

4,501,351

 

  

 

  

 

 

The accompanying notes are an integral part of the consolidated financial statements.


CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2013, 20142016, 2017 AND 20152018

(Inin thousands)

 

   2013  2014  2015 

Revenues

    

Admissions

  $1,706,145   $1,644,169   $1,765,519  

Concession

   845,168    845,376    936,970  

Other

   131,581    137,445    150,120  
  

 

 

  

 

 

  

 

 

 

Total revenues

   2,682,894    2,626,990    2,852,609  

Cost of operations

    

Film rentals and advertising

   919,511    883,052    976,590  

Concession supplies

   135,715    131,985    144,270  

Salaries and wages

   269,353    273,880    301,099  

Facility lease expense

   307,851    317,096    319,761  

Utilities and other

   305,703    308,445    324,851  

General and administrative expenses

   163,134    148,588    154,052  

Depreciation and amortization

   163,970    175,656    189,206  

Impairment of long-lived assets

   3,794    6,647    8,801  

(Gain) loss on sale of assets and other

   (3,845  15,715    8,143  
  

 

 

  

 

 

  

 

 

 

Total cost of operations

   2,265,186    2,261,064    2,426,773  
  

 

 

  

 

 

  

 

 

 

Operating income

   417,708    365,926    425,836  

Other income (expense)

    

Interest expense

   (124,714  (113,698  (112,741

Interest income

   3,622    5,599    8,708  

Foreign currency exchange loss

   (1,616  (6,192  (16,793

Loss on amendment to debt agreement

   —      —      (925

Loss on early retirement of debt

   (72,302  —      —    

Distributions from NCM

   20,701    18,541    18,140  

Equity in income of affiliates

   22,682    22,743    28,126  
  

 

 

  

 

 

  

 

 

 

Total other expense

   (151,627  (73,007  (75,485
  

 

 

  

 

 

  

 

 

 

Income before income taxes

   266,081    292,919    350,351  

Income taxes

   114,160    97,150    129,960  
  

 

 

  

 

 

  

 

 

 

Net income

   151,921    195,769    220,391  

Less: Net income attributable to noncontrolling interests

   2,078    1,389    1,859  
  

 

 

  

 

 

  

 

 

 

Net income attributable to Cinemark USA, Inc.

  $149,843   $194,380   $218,532  
  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015

(In thousands)

 

 

2016

 

 

2017

 

 

2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

1,789,137

 

 

$

1,794,982

 

 

$

1,834,173

 

Concession

 

 

990,103

 

 

 

1,038,788

 

 

 

1,108,793

 

Other

 

 

139,525

 

 

 

157,777

 

 

 

278,769

 

Total revenues

 

 

2,918,765

 

 

 

2,991,547

 

 

 

3,221,735

 

Cost of operations

 

 

 

 

 

 

 

 

 

 

 

 

Film rentals and advertising

 

 

962,655

 

 

 

966,510

��

 

 

999,755

 

Concession supplies

 

 

154,469

 

 

 

166,320

 

 

 

180,974

 

Salaries and wages

 

 

325,765

 

 

 

354,510

 

 

 

383,860

 

Facility lease expense

 

 

321,294

 

 

 

328,197

 

 

 

323,316

 

Utilities and other

 

 

355,926

 

 

 

355,041

 

 

 

448,070

 

General and administrative expenses

 

 

140,637

 

 

 

150,911

 

 

 

162,640

 

Depreciation and amortization

 

 

209,071

 

 

 

237,513

 

 

 

261,162

 

Impairment of long-lived assets

 

 

2,836

 

 

 

15,084

 

 

 

32,372

 

Loss on disposal of assets and other

 

 

20,459

 

 

 

22,812

 

 

 

38,702

 

Total cost of operations

 

 

2,493,112

 

 

 

2,596,898

 

 

 

2,830,851

 

Operating income

 

 

425,653

 

 

 

394,649

 

 

 

390,884

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(108,313

)

 

 

(105,918

)

 

 

(109,994

)

Loss on debt amendments and refinancing

 

 

(13,445

)

 

 

(521

)

 

 

(1,484

)

Interest income

 

 

6,396

 

 

 

6,243

 

 

 

10,592

 

Foreign currency exchange gain (loss)

 

 

6,455

 

 

 

893

 

 

 

(11,660

)

Distributions from NCM

 

 

14,656

 

 

 

16,407

 

 

 

15,389

 

Interest expense - NCM

 

 

 

 

 

 

 

 

(19,724

)

Equity in income of affiliates

 

 

31,962

 

 

 

35,985

 

 

 

39,242

 

Total other expense

 

 

(62,289

)

 

 

(46,911

)

 

 

(77,639

)

Income before income taxes

 

 

363,364

 

 

 

347,738

 

 

 

313,245

 

Income taxes

 

 

104,851

 

 

 

80,256

 

 

 

96,032

 

Net income

 

$

258,513

 

 

$

267,482

 

 

$

217,213

 

Less:  Net income attributable to noncontrolling interests

 

 

1,736

 

 

 

1,839

 

 

 

1,478

 

Net income attributable to Cinemark USA, Inc.

 

$

256,777

 

 

$

265,643

 

 

$

215,735

 

 

   2013  2014  2015 

Net income

  $151,921   $195,769   $220,391  

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

   (47,699  (68,997  (125,512
  

 

 

  

 

 

  

 

 

 

Total other comprehensive loss, net of tax

   (44,203  (62,968  (126,952
  

 

 

  

 

 

  

 

 

 

Total comprehensive income, net of tax

   107,718    132,801    93,439  

Comprehensive income attributable to noncontrolling interests

   (1,996  (1,374  (1,821
  

 

 

  

 

 

  

 

 

 

Comprehensive income attributable to Cinemark USA, Inc.

  $105,722   $131,427   $91,618  
  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015

(In thousands)

                             Total       
  Class A  Class B           Retained  Accumulated  Cinemark       
  Common Stock  Common Stock  Treasury Stock  Additional  Earnings  Other  USA, Inc.’s       
  Shares     Shares     Shares     Paid-in-  (Accumulated  Comprehensive  Stockholder’s  Noncontrolling  Total 
  Issued  Amount  Issued  Amount  Acquired  Amount  Capital  Deficit)  Loss  Equity  Interests  Equity 

Balance at January 1, 2013

  2   $—      240   $49,543    (57 $(24,233 $1,192,106   $(94,425 $(37,698 $1,085,293   $10,919   $1,096,212  

Share based awards compensation expense

  —      —      —      —      —      —      16,046    —      —      16,046    —      16,046  

Tax benefit related to stock option exercises and share based award vestings

  —      —      —      —      —      —      2,964    —      —      2,964    —      2,964  

Purchase of noncontrolling interests’ share of Brazilian subsidiary

  —      —      —      —      —      —      (4,618  —      —      (4,618  (1,003  (5,621

Dividends paid to parent

  —      —      —      —      —      —      —      (105,150  —      (105,150  —      (105,150

Noncash dividends to parent

  —      —      —      —      —      —      —      (4,971  —      (4,971  —      (4,971

Dividends paid to noncontrolling interests

  —      —      —      —      —      —      —      —      —      —      (2,917  (2,917

Net income

  —      —      —      —      —      —      —      149,843    —      149,843    2,078    151,921  

Other comprehensive loss

  —      —      —      —      —      —      —      —      (44,121  (44,121  (82  (44,203
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2013

  2   $—      240   $49,543    (57 $(24,233 $1,206,498   $(54,703 $(81,819 $1,095,286   $8,995   $1,104,281  

Share based awards compensation expense

  —      —      —      —      —      —      11,875    —      —      11,875    —      11,875  

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 parent

  —      —      —      —      —      —      —      (115,000  —      (115,000  —      (115,000

Noncash dividends to parent

         —       —      —      —    

Dividends paid to noncontrolling interests

  —      —      —      —      —      —      —      —      —      —      (386  (386

Net income

  —      —      —      —      —      —      —      194,380    —      194,380    1,389    195,769  

Other comprehensive loss

  —      —      —      —      —      —      —      —      (62,953  (62,953  (15  (62,968
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2014

  2   $—      240   $49,543    (57 $(24,233 $1,221,179   $24,677   $(144,772 $1,126,394   $10,329   $1,136,723  

Share based awards compensation expense

  —      —      —      —      —      —      14,873    —      —      14,873    —      14,873  

Tax benefit related to share based award vestings

  —      —      —      —      —      —      2,421    —      —      2,421    —      2,421  

Dividends paid to parent

  —      —      —      —      —      —      —      (115,225  —      (115,225  —      (115,225

Noncash dividends to parent

  —      —      —      —      —      —      —      (17,935  —      (17,935  —      (17,935

Dividends paid to noncontrolling interests

  —      —      —      —      —      —      —      —      —      —      (1,045  (1,045

Net income

  —      —      —      —      —      —      —      218,532    —      218,532    1,859    220,391  

Other comprehensive loss

  —      —      —      —      —      —      —      —      (126,914  (126,914  (38  (126,952
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2015

  2   $—      240   $49,543    (57 $(24,233 $1,238,473   $110,049   $(271,686 $1,102,146   $11,105   $1,113,251  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015

(In thousands)

   2013  2014  2015 

Operating activities

    

Net income

  $151,921   $195,769   $220,391  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

   160,071    173,138    186,898  

Amortization of intangible and other assets and favorable/unfavorable leases

   3,899    2,518    2,308  

Amortization of long-term prepaid rents

   2,625    1,542    2,361  

Amortization of debt issue costs

   5,476    5,245    5,151  

Amortization of deferred revenues, deferred lease incentives and other

   (11,712  (13,665  (17,163

Amortization of bond discount

   482    —      —    

Impairment of long-lived assets

   3,794    6,647    8,801  

Share based awards compensation expense

   16,046    11,875    14,873  

(Gain) loss on sale of assets and other

   (3,845  15,715    8,143  

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

   5,701    2,536    (1,806

Equity in income of affiliates

   (22,682  (22,743  (28,126

Deferred income tax expenses

   (37,790  526    11,095  

Interest paid on redemption of senior notes

   (8,054  —      —    

Distributions from equity investees

   13,658    19,172    19,027  

Changes in other assets and liabilities:

    

Inventories

   (1,539  400    (2,535

Accounts receivable

   (15,938  31,027    (28,069

Income tax receivable

   4,060    (18,681  (3,527

Prepaid expenses and other

   (3,557  4,066    (2,612

Deferred charges and other assets - net

   (17,624  19,713    8,126  

Accounts payable and accrued expenses

   48,126    33,674    43,859  

Income tax payable

   15,035    (15,685  936  

Liabilities for uncertain tax positions

   (14,345  (4,437  1,315  

Other long-term liabilities

   (134  5,776    5,779  
  

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

   309,362    454,128    455,225  

Investing activities

    

Additions to theatre properties and equipment

   (259,670  (244,705  (331,726

Proceeds from sale of theatre properties and equipment and other

   34,271    2,545    9,966  

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
  

 

 

  

 

 

  

 

 

 

Net cash used for investing activities

   (364,701  (253,339  (328,122

Financing activities

    

Dividends paid to parent

   (105,150  (115,000  (115,225

Payroll taxes paid as a result of restricted stock withholdings

   (3,464  (9,861  (4,770

Proceeds from issuance of notes

   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

   (9,328  —      (6,957

Payments on capital leases

   (12,015  (14,035  (16,513

Purchases of non-controlling interests

   (5,621  —      —    

Other

   44    2,422    1,376  
  

 

 

  

 

 

  

 

 

 

Net cash used for financing activities

   (75,346  (146,320  (150,509

Effect of exchange rates on cash and cash equivalents

   (11,516  (15,522  (26,932
  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

   (142,201  38,947    (50,338

Cash and cash equivalents:

    

Beginning of year

   742,095    599,894    638,841  
  

 

 

  

 

 

  

 

 

 

End of year

  $599,894   $638,841   $588,503  
  

 

 

  

 

 

  

 

 

 

Supplemental information (see Note 15)

The accompanying notes are an integral part of the consolidated financial statements.


CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018

(In thousands)

 

 

2016

 

 

2017

 

 

2018

 

Net income

 

$

258,513

 

 

$

267,482

 

 

$

217,213

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $138, $0 and $1,243, net of settlements

 

 

234

 

 

 

 

 

 

(3,851

)

Other comprehensive income (loss) in equity method investments

 

 

89

 

 

 

248

 

 

 

(139

)

Foreign currency translation adjustments

 

 

26,394

 

 

 

(4,966

)

 

 

(62,253

)

Total other comprehensive income (loss), net of tax

 

 

26,717

 

 

 

(4,718

)

 

 

(66,243

)

Total comprehensive income, net of tax

 

 

285,230

 

 

 

262,764

 

 

 

150,970

 

Comprehensive income attributable to noncontrolling interests

 

 

(1,769

)

 

 

(1,839

)

 

 

(1,478

)

Comprehensive income attributable to Cinemark USA, Inc.

 

$

283,461

 

 

$

260,925

 

 

$

149,492

 

The accompanying notes are an integral part of the consolidated financial statements.


CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

Class B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Cinemark

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional

 

 

 

 

 

 

Other

 

 

USA, Inc.'s

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

Shares

 

 

 

 

 

 

Shares

 

 

 

 

 

 

Paid-in-

 

 

Retained

 

 

Comprehensive

 

 

Stockholder's

 

 

Noncontrolling

 

 

Total

 

 

 

Issued

 

 

Amount

 

 

Issued

 

 

Amount

 

 

Acquired

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance at January 1, 2016

 

 

2

 

 

$

 

 

 

240

 

 

$

49,543

 

 

 

(57

)

 

$

(24,233

)

 

$

1,238,473

 

 

$

110,049

 

 

$

(271,686

)

 

$

1,102,146

 

 

$

11,105

 

 

$

1,113,251

 

Share based awards compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,413

 

 

 

 

 

 

 

 

 

12,413

 

 

 

 

 

 

12,413

 

Tax benefit related to share based award vestings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,856

 

 

 

 

 

 

 

 

 

1,856

 

 

 

 

 

 

1,856

 

Dividends paid to parent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(124,900

)

 

 

 

 

 

(124,900

)

 

 

 

 

 

(124,900

)

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

(1,309

)

 

 

(1,309

)

Buyout of noncontrolling interests' share of Chilean subsidiary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

 

 

 

(27

)

 

 

(423

)

 

 

(450

)

Gain realized on available-for-sale securities, net of taxes of $1,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,011

)

 

 

(2,011

)

 

 

-

 

 

 

(2,011

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

256,777

 

 

 

 

 

 

256,777

 

 

 

1,736

 

 

 

258,513

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,684

 

 

 

26,684

 

 

 

33

 

 

 

26,717

 

Balance at December 31, 2016

 

 

2

 

 

$

 

 

 

240

 

 

$

49,543

 

 

 

(57

)

 

$

(24,233

)

 

$

1,252,715

 

 

$

241,926

 

 

$

(247,013

)

 

$

1,272,938

 

 

$

11,142

 

 

$

1,284,080

 

Share based awards compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,825

 

 

 

 

 

 

 

 

 

11,825

 

 

 

 

 

 

11,825

 

Tax expense related to share based award vestings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35

)

 

 

 

 

 

 

 

 

(35

)

 

 

 

 

 

(35

)

Dividends paid to parent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(134,500

)

 

 

 

 

 

(134,500

)

 

 

 

 

 

(134,500

)

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,088

)

 

 

(1,088

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

265,643

 

 

 

 

 

 

265,643

 

 

 

1,839

 

 

 

267,482

 

Reclassification of cumulative translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,551

)

 

 

(1,551

)

 

 

 

 

 

(1,551

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,718

)

 

 

(4,718

)

 

 

 

 

 

(4,718

)

Balance at December 31, 2017

 

 

2

 

 

$

 

 

 

240

 

 

$

49,543

 

 

 

(57

)

 

$

(24,233

)

 

$

1,264,505

 

 

$

373,069

 

 

$

(253,282

)

 

$

1,409,602

 

 

$

11,893

 

 

$

1,421,495

 

Cumulative effect of change in accounting principle, net of taxes of $13,079 (see Note 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,526

 

 

 

 

 

 

40,526

 

 

 

 

 

 

40,526

 

Share based awards compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,416

 

 

 

 

 

 

 

 

 

13,416

 

 

 

 

 

 

13,416

 

Tax expense related to share based award vestings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to parent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(148,750

)

 

 

 

 

 

(148,750

)

 

 

 

 

 

(148,750

)

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(992

)

 

 

(992

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

215,735

 

 

 

 

 

 

215,735

 

 

 

1,478

 

 

 

217,213

 

Reclassification of cumulative translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

518

 

 

 

518

 

 

 

 

 

 

518

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(66,243

)

 

 

(66,243

)

 

 

 

 

 

(66,243

)

Balance at December 31, 2018

 

 

2

 

 

$

 

 

 

240

 

 

$

49,543

 

 

 

(57

)

 

$

(24,233

)

 

$

1,277,921

 

 

$

480,580

 

 

$

(319,007

)

 

$

1,464,804

 

 

$

12,379

 

 

$

1,477,183

 

The accompanying notes are an integral part of the consolidated financial statements.


CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018

(In thousands)

 

 

2016

 

 

2017

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

258,513

 

 

$

267,482

 

 

$

217,213

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

207,091

 

 

 

235,093

 

 

 

257,826

 

Amortization of intangible and other assets and favorable/unfavorable leases

 

 

1,980

 

 

 

2,420

 

 

 

3,336

 

Amortization of long-term prepaid rents

 

 

1,826

 

 

 

2,274

 

 

 

2,382

 

Amortization of debt issue costs

 

 

5,492

 

 

 

6,197

 

 

 

5,561

 

Amortization of deferred revenues, deferred lease incentives and other

 

 

(16,731

)

 

 

(16,211

)

 

 

(21,706

)

Impairment of long-lived assets

 

 

2,836

 

 

 

15,084

 

 

 

32,372

 

Share based awards compensation expense

 

 

12,413

 

 

 

11,825

 

 

 

13,416

 

Loss on disposal of assets and other

 

 

20,459

 

 

 

22,812

 

 

 

38,702

 

Loss on debt amendments and refinancing

 

 

13,445

 

 

 

521

 

 

 

1,484

 

Deferred lease expenses

 

 

(990

)

 

 

(1,268

)

 

 

(1,320

)

Reclassification of cumulative translation adjustments

 

 

 

 

 

(1,551

)

 

 

518

 

Equity in income of affiliates

 

 

(31,962

)

 

 

(35,985

)

 

 

(39,242

)

Deferred income tax expenses

 

 

(5,467

)

 

 

(15,015

)

 

 

23,187

 

Distributions from equity investees

 

 

21,916

 

 

 

25,973

 

 

 

30,143

 

Changes in assets and liabilities and other

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

 

(1,007

)

 

 

(541

)

 

 

(1,813

)

Accounts receivable

 

 

(2,781

)

 

 

(14,753

)

 

 

(6,620

)

Income tax receivable

 

 

15,510

 

 

 

(4,363

)

 

 

8,442

 

Prepaid expenses and other

 

 

(2,260

)

 

 

(782

)

 

 

1,422

 

Deferred charges and other assets - net

 

 

(1,619

)

 

 

(4,956

)

 

 

(6,303

)

Accounts payable and accrued expenses

 

 

(30,250

)

 

 

23,355

 

 

 

(11,272

)

Income tax payable

 

 

(2,261

)

 

 

438

 

 

 

6,670

 

Liabilities for uncertain tax positions

 

 

1,182

 

 

 

2,041

 

 

 

(10,066

)

Other long-term liabilities

 

 

(5,076

)

 

 

8,294

 

 

 

11,967

 

Net cash provided by operating activities

 

 

462,259

 

 

 

528,384

 

 

 

556,299

 

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Additions to theatre properties and equipment and other

 

 

(326,908

)

 

 

(380,862

)

 

 

(346,073

)

Proceeds from sale of theatre properties and equipment and other

 

 

3,570

 

 

 

15,098

 

 

 

3,920

 

Acquisitions of theatres in the U.S. and international markets, net of cash acquired

 

 

(15,300

)

 

 

(40,997

)

 

 

(11,289

)

Acquisition of screen advertising business

 

 

(1,450

)

 

 

 

 

 

 

Proceeds from sale of marketable securities

 

 

13,451

 

 

 

 

 

 

 

Acquisition of NCM common units

 

 

 

 

 

 

 

 

(78,393

)

Investment in joint ventures and other, net

 

 

(1,132

)

 

 

(3,715

)

 

 

(19,535

)

Net cash used for investing activities

 

 

(327,769

)

 

 

(410,476

)

 

 

(451,370

)

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to parent

 

 

(124,900

)

 

 

(134,500

)

 

 

(148,750

)

Payroll taxes paid as a result of restricted stock withholdings

 

 

(6,834

)

 

 

(2,943

)

 

 

(2,905

)

Proceeds from issuance of Senior Notes, net of discount

 

 

222,750

 

 

 

 

 

 

 

Retirement of Senior Subordinated Notes

 

 

(200,000

)

 

 

 

 

 

 

Repayments of long-term debt

 

 

(16,605

)

 

 

(5,671

)

 

 

(7,984

)

Payment of debt issue costs

 

 

(7,217

)

 

 

(1,146

)

 

 

(5,218

)

Fees paid related to debt amendments

 

 

(11,076

)

 

 

(521

)

 

 

(704

)

Payments on capital leases

 

 

(19,343

)

 

 

(21,725

)

 

 

(25,353

)

Proceeds from financing lease

 

 

 

 

 

10,200

 

 

 

 

Purchases of non-controlling interests

 

 

(450

)

 

 

 

 

 

 

Other

 

 

554

 

 

 

(1,123

)

 

 

(992

)

Net cash used for financing activities

 

 

(163,121

)

 

 

(157,429

)

 

 

(191,906

)

Effect of exchange rate changes on cash and cash equivalents

 

 

1,266

 

 

 

798

 

 

 

(9,222

)

Decrease in cash and cash equivalents

 

 

(27,365

)

 

 

(38,723

)

 

 

(96,199

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

588,503

 

 

 

561,138

 

 

 

522,415

 

End of period

 

$

561,138

 

 

$

522,415

 

 

$

426,216

 

Supplemental information (see Note 14)

The accompanying notes are an integral part of the consolidated financial statements.


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business— Cinemark USA, Inc. and subsidiaries (the “Company”), a wholly-owned subsidiary of Cinemark Holdings, Inc., operates in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curaçao and Curaçao. The Company operated theatres in Mexico until November 15, 2013 (see Note 3).Paraguay.

Principles of Consolidation— The consolidated financial statements include the accounts of Cinemark USA, Inc., its subsidiaries and its affiliates.subsidiaries. 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 affiliatesequity method investees 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 wereare primarily in money market funds, certificates of deposit or other similar funds.

Accounts Receivable –Accounts receivable, which are recorded at net realizable value, consistsconsist primarily of receivables related to screen advertising, receivables related to discounted tickets and gift cards sold third party to retail locations, receivables from landlords related to theatre construction and remodels, 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 leaseand

finance leases (1)

Lesser of lease term or useful life

Theatre furniture and equipment

3 to 15 years

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 and finance lease assets as of December 31, 20142017 and 20152018 was $133,022$200,683 and $150,968,$177,733, 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 also performs a full quantitative impairment evaluation on an annual basis. The Company considers actual theatre level cash flows, 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, the impact of recent theatre remodels or other substantial improvements, available lease renewal options and other factors considered relevant in its assessment of impairment of individual theatre assets.assessment. Long-lived assets

F-8


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

are evaluated for impairment on an individuala 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 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 the exercise of available renewal periods or extensions, for leased properties and the lesser of twenty years or the building’s remaining useful life for fee-ownedowned 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 the 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 2013, 20142016, 2017 and 2015.2018. 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 7.

7 for further discussion.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Goodwill and Other Intangible Assets— The Company evaluates 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.  The Company evaluates goodwill for impairment at the reporting unit level and haswe 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 its nineteentwenty regions in the U.S. and seven of its international countries internationally (Honduras,with Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala are considered one reporting unit)unit (the Company does not have goodwill recorded for all of its international locations). Under ASC Topic 350, Goodwill, Intangibles and Other (“ASC Topic 350”), the Company may perform a qualitative impairment was evaluated usingassessment or a two-step approach during 2013 and 2014, requiringquantitative impairment assessment of our goodwill.  

A quantitative analysis requires the Company to computeestimate the fair value of aeach reporting unit and compare it with its carrying value. If the carrying value of the reporting unit exceeds its estimated fair value, goodwill would be written down such that the carrying value would equal estimated fair value. Fair value is determined based on a second step ismultiple of cash flows, which was eight times for the evaluations performed to measure the potential goodwill impairment.during 2017 and 2018.  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 eight times for the evaluations performed during 20132017 and 2014. As of December 31, 2014, the estimated fair value of the Company’s goodwill exceeded their carrying values by at least 10%.

For 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”). The2018.  A qualitative assessment includedincludes consideration of historical and expected future industry performance, estimated future performance of the Company, current industry trading multiples and other economic factors. Based on thefactors, and a review of current carrying values to estimated fair values as determined during our most recent quantitative assessment.  

We performed a qualitative assessment for all reporting units for the year ended December 31, 2016.  We performed a quantitative goodwill impairment analysis for all reporting units during the Company determined that it wasyear ended December 31, 2017.  For the year ended December 31, 2018, we performed a quantitative goodwill assessment for three new domestic reporting units and a qualitative assessment for all other reporting units.  We did not more likely than not that the fair valuerecord any goodwill impairment charges as a result of the reporting units were less than their carrying values. The Companyassessments performed during 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,years ended December 31, 2016, 2017 and exceeded its carrying value by more than 10%.2018.

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. During 2013 and 2014,Under ASC Topic 350, the Company can elect to perform a qualitative or quantitative impairment assessment for our tradename intangible assets.  A quantitative tradename impairment assessment includes comparing the carrying values of tradename assets to an estimated the fair value of its tradenamesvalue. Fair values are estimated 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.  AsA

F-9


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

qualitative assessment considers our historical and forecasted revenues and changes in estimated royalty rates, and a comparison of December 31, 2014, thecurrent carrying values to estimated fair value of the Company’s tradename intangible assets exceeded their carrying values by at least 10%. Forfrom our most recent quantitative assessment.

During the year ended December 31, 2015,2016, the Company performed a quantitative tradename impairment assessment for our tradename in Ecuador and performed a qualitative tradename impairment analysis for all other tradename intangible assets.  During the year ended December 31, 2017, the Company performed quantitative tradename impairment evaluations for all of its tradename assets.  During the year ended December 31, 2018, the Company performed a qualitative tradename intangible asset impairment assessment in accordance with ASU 2011-08. The qualitative assessment included considerationanalysis for all of its tradename assets.  As a result of the Company’s historical and forecasted revenues and estimated royalty rates foranalysis performed during 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 ofyear, no impairment charges were recorded related to tradename intangible assets were less than their carrying values.for the years ended December 31, 2016, 2017 and 2018.  

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 and definite-lived.  Definite-lived tradename assets have a remaining useful life of approximately two to eight years.

Vendor contracts

Straight-line method over the terms of the underlying contracts. The remaining termsterm of the underlying contracts range fromcontract is two to five years.

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 approximately threeone to twenty-oneeighteen years.  See Note 2 for discussion of the expected impact of new lease accounting pronouncements.

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 two to eleveneight years.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

Deferred Charges and Other Assets— Deferred charges and other assets consist of long-term prepaid rents, construction and other deposits, equipment to be placed in service, and other assets of a long-term nature. Long-term prepaid rents represent prepayments of rent on operating leases. These paymentsleases, which are recognized as facility lease expense over the period for which the rent was paid in advance as outlined in the lease agreements. The remaining amortization periods generally range from one to tenseventeen years.  See Note 2 for discussion of the expected impact of new lease accounting pronouncements.

Lease Accounting— The Company evaluates each lease for classification as either a capital lease or an operating lease. The Company records the lease as a capital lease at its 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. TheFor some newly built theatres, the landlord is typically responsible for constructing athe theatre using guidelines and specifications agreed to by the Company and assumes substantially all of the riskrisks of construction. For other theatres, the Company is responsible for managing construction of the theatre and the landlord contributes an agreed upon amount toward the costs of construction.  If the Company concludes that it has substantially all of the construction period risks, it records a construction asset and related liability forconsiders itself the amountowner of total project costs incurredthe property 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 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.lease if a new theatre, or over the remaining lease term if an existing theatre.  See Note 2 for discussion of the expected impact of new lease accounting pronouncements.

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CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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. These 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.  In addition, the Company records deferred revenues for sales of gift cards and discounted ticket vouchers, as well as for proceeds received from its monthly subscription program, annual membership fees for certain of its loyalty programs and for points issued to customers under other loyalty programs. See Note 3 for further discussion of revenue recognition and Note 4 for discussion of deferred revenue – NCM.

Self-Insurance Reserves — TheIn the U.S., the Company is self-insured for general liability claims subject to an annual cap. For the years ended December 31, 2013, 20142016, 2017 and 2015,2018, general liability claims were capped at $100, $250 $100 and $100$250, respectively, per occurrence respectively, with aggregate annual caps of approximately $2,600, $2,670$3,350, $3,900 and $2,900,$4,750, respectively. The Company is also self-insured for medical claims up to $125 per occurrence. TheFor its international locations, the Company is fully insured for general liability claims with little or no deductibles per occurrence.  In the U.S., the Company was fully insured for workers compensation claims.claims during the year ended December 31, 2016.  During 2017, the Company implemented a fully-funded deductible workers compensation insurance plan under which the Company is responsible for pre-funding claims and is responsible for claims up to $250 per occurrence, with an annual cap of $5,000 for the years ended December 31, 2017 and 2018.  The Company was also self-insured for domestic medical claims up to $150, $250 and $250 per occurrence for the years ended December 31, 2016, 2017 and 2018, respectively. As of December 31, 20142017 and 2015,2018, the Company’s insurance reserves were $7,675$8,252 and $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, 2014 and 2015, the Company’s liabilities for advanced sale-type certificates were approximately $63,209 and $68,158,$10,827, respectively, and are reflected in accrued other current liabilities on the consolidated balance sheets. The Company recognized unredeemed gift cards

Revenue and other advanced sale-type certificates as revenues in the amountExpense Recognition — See Note 3 for discussion of $10,684, $12,233 and $11,786 during the years ended December 31, 2013, 2014 and 2015, respectively.revenue recognition.  

Film rental costs are accrued based on the applicable box office receipts and either firm terms or a sliding scale formula, which are generally established prior to the opening of the film, or estimates of the final 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 percentage of box office receipts, which reflects either an 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 the time of settlement.

Loyalty Programs – The Company launched its domestic app-based loyalty program, Connections, in February 2016. Customers earn points for various transactions as tracked within the app. Points may be redeemed for movie tickets, concessions items, concession discounts and experiential rewards, each of which are offered for limited periods of time and at varying times during the year. For the years ended December 31, 2016 and 2017, the Company applied the incremental cost approach to accounting for the rewards earned, as it determined that time.the values of the rewards offered to the customer are insignificant to the original transactions required to earn such rewards. The Company also has loyalty programs in certain of its international markets, which generally consist of the customer paying a membership fee in exchange for discounts during the membership period.  Effective January 1, 2018, the Company adopted ASC Topic 606 and now accounts for its points-based loyalty programs by deferring a portion of the revenue associated with the transaction that earned such points.  See Note 3 for discussion of revenue recognition as it relates to the Company’s loyalty programs.  

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Accounting for Share Based Awards— The Company measures the cost of employee services received in exchange for an equity award based on the fair value of the award on the date of the grant. The grant date fair value is estimated using a market observed price. Such costs are recognized over the period during which an employee is required to provide service in exchange for the award (which is usually the vesting period). At the time of the grant, the Company also estimates the number of instrumentsawards that will ultimately be forfeited. See Note 1413 for discussion of the Company’s share based awards and related compensation expense.

F-11


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Income Taxes — The Company participates in the consolidated tax return of Cinemark Holdings, Inc. However, the Company’s provision for income taxes is computed on a stand-alone basis. 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 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, 2013, 20142016, 2017 and 2015,2018, the Company managed its business under two reportable operating segments, U.S. markets and international markets. See Note 18.17.

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 1211 for a summary of the translation adjustments recorded in accumulated other comprehensive loss for the years ended December 31, 2013, 20142016, 2017 and 2015.2018. 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 adjusted to fair value onSee Note 10 for a recurring basis (quarterly). With respect to its interest rate swap agreements, the Company uses the income approach to determine the fair valuediscussion 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’sour 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 yearsyear ended December 31, 2013, 2014 or 2015. See Note 10 for further discussion of the Company’s interest rate swap agreements and Note 11 for further2018.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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.

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 significantcertain 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.

F-12

2.NEW ACCOUNTING PRONOUNCEMENTS

In 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 2015-02,Consolidation (Topic 810): Amendments to the Consolidation Analysis, (“ASU 2015-02”). ASU 2015-02 affects reporting entities that are required to evaluate 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 comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU 2015-02 is effective for fiscal years beginning after December 15, 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


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

2.

NEW ACCOUNTING PRONOUNCEMENTS

Impact of New Revenue Recognition Standard

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update supersedes paragraph 350-40-25-16. Consequently, all software licenses within(“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC Topic 606”), which requires an entity to recognize the scopeamount of Subtopic 350-40revenue to which it expects to be entitled for the transfer of promised goods or services to customers.  ASC Topic 606 replaces most existing revenue recognition guidance in U.S. generally accepted accounting principles.  In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers.  The Company adopted ASC Topic 606 effective January 1, 2018.  See Note 3 for further discussion.  

Impact of New Lease Accounting Standard

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASC Topic 842”). The purpose of ASU 2016-02 is to provide financial statement users a better understanding of the amount, timing, and uncertainty of cash flows arising from leases. The adoption of ASC Topic 842 will be accountedresult in the recognition of a right-of-use asset and a lease liability for consistent with other licenses of intangible assets. ASU 2015-05most operating leases.  New disclosure requirements include qualitative and quantitative information about the amounts recorded in the financial statements related to leases. ASC Topic 842 is effective for fiscal years beginning after December 15, 2015. Early2018. ASC Topic 842 requires a modified retrospective transition by means of a cumulative-effect adjustment to retained earnings as of the earliest period presented with the option to elect certain practical expedients. ASC Topic 842 provides an additional transition method in which an entity initially applies ASC Topic 842 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.  This additional transition method changes only when an entity is permitted.required to initially apply the transition requirements outlined in ASC Topic 842; it does not change how those requirements are applied.  The Company has elected to early adopt ASU 2015-05, which had noused this transition method upon adoption.  

The Company adopted ASC Topic 842 effective January 1, 2019.  The Company is finalizing its evaluation of the impact of ASC Topic 842 on its consolidated financial statements.statements, and expects the most significant impacts to be as follows:

1.

The Company will recognize liabilities representing the present value of the remaining future minimum lease payments for all of its operating leases as of January 1, 2019.  The Company estimates these liabilities will be between $1,400,000 and $1,700,000.

2.

The Company will recognize right of use assets for all of its operating leases equal to the liabilities calculated in (1) above, adjusted for the balances of long-term prepaid rent, favorable lease intangible assets, deferred lease expense, unfavorable lease liabilities and deferred lease incentive liabilities as of January 1, 2019.  

3.

The Company has theatre leases for which it was involved in construction that failed sale-leaseback accounting at the end of the construction period.  These leases, which were accounted for as capital leases, will be derecognized upon adoption of ASC Topic 842 and evaluated to determine classification upon adoption.  Some of these leases will be classified as operating leases upon adoption and, beginning in 2019, lease payments for these leases will be recorded as facility lease expense on the consolidated income statement.  Previously, as capital leases, lease payments were classified as interest expense and reductions of the capital lease obligations.

4.

For the capital leases derecognized as discussed in (3) above, the Company will write-off of the net book value of the capital lease asset and capital lease liability, with the difference between those amounts resulting in an adjustment to beginning retained earnings as of January 1, 2019.

Other Accounting Pronouncements

In July 2015,August 2016, the FASB issued Accounting Standards Update 2015-11,InventoryASU 2016-15, Statement of Cash Flows (Topic 330)230): SimplifyingClassification of Certain Cash Receipts and Cash Payments – a consensus of the Measurement of InventoryFASB Emerging Issues Task Force, (“ASU 2015-11”2016-15”). The purpose of 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 at2016-15 is to reduce the lower of costdiversity in practice regarding how certain cash receipts and net realizable value. Net realizable value is the estimated selling pricescash payments are presented and classified in the ordinary coursestatement 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.cash flows. ASU 2015-112016-15 is effective for fiscal years beginning after December 15, 2016.2017, including interim periods within that year. A retrospective transition method should be used in the application of the amendments within ASU 2016-15. 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 2014-09, as amended by ASU 2015-14, on its consolidated financial statements.F-13

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. 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.


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

3.ACQUISITIONS AND DISPOSITIONS

AcquisitionCompany adopted ASU 2016-15 in the first quarter of Rave Theatres

On May 29, 2013,2018.  Upon adoption, the Company acquired 32 theatres with 483 screensreclassified $11,076 and $521 of cash payments recorded in loss on debt amendments and refinancing from Rave Real Property Holdco, LLCoperating activities to financing activities for the years ended December 31, 2016 and certain of its subsidiaries, Rave Cinemas, LLC and RC Processing, LLC (collectively “Rave”)2017, respectively.  The amendments 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 expensesASU 2016-15 did not have any other material impact on the consolidated statementfinancial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope Modification Accounting, (“ASU 2017-09”). The amendments in ASU 2017-09 provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting as described in ASC Topic 718. The amendments should be applied on a prospective basis. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted. The Company adopted ASU 2017-09 during the first quarter of 2018.  The amendments in ASU 2017-09 did not have a material impact on the consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, (“ASU 2017-12”). The amendments in ASU 2017-12 improve the financial reporting of hedging relationships to better reflect the economic results of an entity’s risk management activities in its financial statements. Additionally, the amendments in ASU 2017-12 simplify certain steps of applying hedge accounting guidance. ASU 2017-12 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted. The Company adopted ASU 2017-12 effective January 1, 2018 and applied the related guidance when evaluating three new interest rate swap agreements entered into during 2018, which were designated as cash flow hedges by the Company (see Note 9).

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU 2018-13”).  The purpose of ASU 2018-13 is to improve the disclosures related to fair value measurements in the financial statements.  The improvements in ASU include the removal, modification and addition of certain disclosure requirements primarily related to Level 3 fair value measurements.  ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within that year.  The amendments in ASU 2018-13 should be applied prospectively.  The Company does not expect ASU 2018-13 to have a significant impact on the consolidated financial statements.

U.S. Tax Reform

On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act made changes to the U.S. tax code, which included (1) reduced U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries,  (3) a one-time transition tax on certain undistributed earnings of foreign subsidiaries, and (4) created new taxes on certain foreign-sourced earnings.  As of December 31, 2018, the amounts recorded 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  
  

 

 

 

Total

  $236,875  
  

 

 

 

The weighted average amortization periodTax Act are final for the intangible assets acquired was approximately 14 years2017 transition tax, the re-measurement of deferred taxes, and our reassessment of valuation allowances.  See further discussion at Note 15.

3.

REVENUE RECOGNITION

Revenue Recognition Policy

The Company’s patrons have the option to purchase movie tickets well in advance of a movie showtime or right before the movie showtime, or at any point in between those two timeframes depending on seat availability.  The Company recognizes such admissions revenues when the showtime for a purchased movie ticket has passed.  Concession revenues are recognized when sales are made at the registers.  Other revenues primarily consist of screen advertising and transactional fees. Screen advertising revenues are recognized over the period that the related advertising is delivered on-screen or in-theatre.  The Company sells gift cards and discount ticket vouchers, the proceeds from which are recorded as of the acquisition date.current liabilities.  Revenues for gift cards and discount ticket vouchers are recognized when they are redeemed for movie tickets or concession items.  The goodwill is fully deductible for tax purposes. The acquired theatres are reportedCompany offers a subscription program 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

  $275,657  

Acquisition of Other U.S. Theatres

whereby patrons can pay a monthly fee to receive a monthly credit for use towards a future movie ticket purchase.  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 plusrecords the assumption of certain liabilities. The transactions were accounted for by applying the acquisition method. The following table represents the aggregate fair values of identifiable assets acquiredmonthly subscription program fees as current liabilities and the liabilities assumed as of the acquisition date:

F-14

Theatre properties and equipment

  $17,524  

Goodwill

   17,409  

Capital lease liability

   (12,173

Deferred revenue

   (388
  

 

 

 

Total

  $22,372  
  

 

 

 

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.


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

Dispositionrecords admissions revenues as the credits are redeemed for movie tickets.  The Company also has loyalty programs in many of Mexico Subsidiaries

During February 2013,its locations that either have a prepaid annual membership fee or award points to customers as purchases are made.  For those loyalty programs that have an annual membership fee, the Company entered intorecognizes the fee collected as other revenues over the term of the membership.  For those loyalty programs that award points to customers based on their purchases, the Company records a stock purchase agreementportion of the original transaction proceeds as liabilities based on the number of reward points issued to customers and recognizes revenues when the customer redeems such points.  Screen advertising revenues are generally recognized over the period that the related advertising is delivered on-screen or in-theatre. Advances collected on long-term screen advertising, concession and other contracts are recorded as deferred revenues. In accordance with Grupo Cinemex, S.A. De C.V. pursuant tothe terms of the agreements, the advances collected on such contracts are recognized during the period in which the Company would sellsatisfies the related performance obligations, which may differ from the period in which the advances are collected. These advances are recognized on either a straight-line basis over the term of the contracts or as the Company has met its Mexican subsidiaries,performance obligations in accordance with the terms of the contracts.

See additional revenue recognition policy considerations, updated for the adoption of ASC Topic 606, below.  

Adoption of ASC Topic 606

The Company adopted ASC 606, Revenue from Contracts with Customers, effective January 1, 2018 under the modified retrospective method (cumulative-effect) and therefore, revenue amounts as presented on the consolidated statements of income have not been adjusted for prior periods presented. The Company applied the guidance in ASC 606 only to contracts that had not been completed as of January 1, 2018.

Changes to the way in which consistedthe Company recognizes revenue resulted in the following impacts to the consolidated statements of income:

a)  

Recording of incremental other revenue and interest expense related to the significant financing component of the Company’s Exhibitor Services Agreement (“ESA”) with NCM, LLC (“NCM”).  See further discussion below, including the estimated interest rates assumed in determining the amount of interest expense.  

b)

Deferral of a portion of admissions and concession revenues for transactions that include the issuance of loyalty points to customers. To determine the amount of revenues to defer upon issuance of points to customers under its points-based loyalty programs, the Company estimated the values of the rewards expected to be redeemed by its customers for those points.  The estimates are based on the rewards that have historically been offered under the loyalty programs, which the Company believes is representative of the rewards to be offered in the future.

c)

Increase in other revenues and an increase in utilities and other expenses due to the presentation of transactional fees on a gross versus net basis.

d)

Increase in other revenues due to the change in amortization methodology for deferred revenue – NCM that is now amortized on a straight-line basis and effective for the entire term of the ESA.  The deferred revenue – NCM is related to the Company’s ESA and Common Unit Adjustment agreement with NCM, under which the Company’s performance obligation is to provide NCM with exclusive access to its domestic theatres for purposes of in-theatre advertising over the term of the ESA.  Such exclusivity, and therefore the satisfaction of the Company’s performance obligation, is provided to NCM evenly over time.  As a result of the change in amortization method, the Company recorded a cumulative effect of accounting change adjustment of $40,526, net of taxes, in retained earnings on January 1, 2018 (see also Note 6).  

F-15


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The significant changes discussed above had the following impact on the Company’s statements of income and cash flows for the year ended December 31, theatres2018:

 

 

Without Adoption of ASC 606

 

 

Impact of Adoption of ASC 606

 

 

As Reported

 

Statement of income:

 

 

 

 

 

 

 

 

 

 

 

 

Admissions revenues

 

$

1,839,723

 

 

$

(5,550

)

 

$

1,834,173

 

Concession revenues

 

$

1,110,703

 

 

$

(1,910

)

 

$

1,108,793

 

Other revenues

 

$

161,743

 

 

$

117,026

 

 

$

278,769

 

Utilities and other expense

 

$

354,740

 

 

$

93,330

 

 

$

448,070

 

Interest expense - NCM

 

$

 

 

$

19,724

 

 

$

19,724

 

Statement of cash flows:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred revenues, deferred lease incentives and other

 

$

(17,602

)

 

$

(4,104

)

 

$

(21,706

)

Changes in other assets and liabilities - Other long-term liabilities

 

$

4,375

 

 

$

7,592

 

 

$

11,967

 

The impact of adoption of ASC 606 on the Company’s balance sheet as of December 31, 2018 was as follows:

 

 

Without Adoption of ASC 606

 

 

Impact of Adoption of ASC 606

 

 

As Reported

 

Balance sheet line items:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue - NCM (1)

 

$

345,058

 

 

$

(57,709

)

 

$

287,349

 

Long-term deferred tax liability

 

$

142,547

 

 

$

13,079

 

 

$

155,626

 

Other long-term liabilities

 

$

41,839

 

 

$

7,592

 

 

$

49,431

 

Retained earnings

 

$

440,054

 

 

$

40,526

 

 

$

480,580

 

(1)

Includes the cumulative effect of accounting change of $53,605 recorded on January 1, 2018 and the full year impact of the change in amortization method of $4,104 during the year ended December 31, 2018.

The Company applied the practical expedient to exclude sales and 290 screens. other similar taxes collected from customers from its transaction price for purposes of recording revenues.  As such, revenues are presented net of such taxes.

Disaggregation of Revenue

The transaction was subject to approvalfollowing table presents revenues for the year ended December 31, 2018, disaggregated based on major type of good or service and by reportable operating segment.

 

 

Twelve Months Ended

 

 

 

December 31, 2018

 

 

 

U.S.

 

 

International

 

 

 

 

 

 

 

Operating

 

 

Operating

 

 

 

 

 

Major Goods/Services

 

Segment (1)

 

 

Segment

 

 

Consolidated

 

Admissions revenues

 

$

1,461,151

 

 

$

373,022

 

 

$

1,834,173

 

Concession revenues

 

 

892,391

 

 

 

216,402

 

 

 

1,108,793

 

Screen advertising and promotional

   revenues

 

 

78,591

 

 

 

61,269

 

 

 

139,860

 

Other revenues

 

 

106,824

 

 

 

32,085

 

 

 

138,909

 

Total revenues

 

$

2,538,957

 

 

$

682,778

 

 

$

3,221,735

 

(1)

U.S. segment revenues include eliminations of intercompany transactions with the international operating segment.  See Note 17 for additional information on intercompany eliminations.

F-16


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The following table presents revenues for the Mexican Federal Competition Commission (the “Competition Commission”)year ended December 31, 2018, disaggregated based on timing of revenue recognition (as discussed above). During August 2013,

 

 

Twelve Months Ended

 

 

 

December 31, 2018

 

 

 

U.S.

 

 

International

 

 

 

 

 

 

 

Operating

 

 

Operating

 

 

 

 

 

 

 

Segment (1)

 

 

Segment

 

 

Consolidated

 

Goods and services transferred at a

   point in time

 

$

2,453,313

 

 

$

608,347

 

 

$

3,061,660

 

Goods and services transferred over

   time

 

 

85,644

 

 

 

74,431

 

 

 

160,075

 

Total

 

$

2,538,957

 

 

$

682,778

 

 

$

3,221,735

 

(1)

U.S. segment revenues include eliminations of intercompany transactions with the international operating segment.  See Note 17 for additional information on intercompany eliminations.

Deferred Revenues

The following table presents changes in the Competition Commission voted three to two to blockCompany’s deferred revenues for the year ended December 31, 2018.  

Deferred Revenues

 

Deferred

Revenue -

NCM

 

 

Other

Deferred

Revenues (1)

 

 

Total

 

Balance at January 1, 2018

 

$

351,706

 

 

$

86,498

 

 

$

438,204

 

Impact of adoption of ASC Topic 606

 

 

(53,605

)

 

 

 

 

 

(53,605

)

Amounts recognized as accounts receivable

 

 

 

 

 

6,921

 

 

 

6,921

 

Cash received from customers in advance

 

 

 

 

 

156,237

 

 

 

156,237

 

Common units received from NCM (see Note 6)

 

 

5,012

 

 

 

 

 

 

5,012

 

Revenue recognized during period

 

 

(15,764

)

 

 

(141,176

)

 

 

(156,940

)

Foreign currency translation adjustments

 

 

 

 

 

(2,405

)

 

 

(2,405

)

Balance at December 31, 2018

 

$

287,349

 

 

$

106,075

 

 

$

393,424

 

(1)

Includes liabilities associated with outstanding gift cards and SuperSavers, points or rebates outstanding under the Company’s loyalty and membership programs and revenues not yet recognized for screen advertising and other promotional activities. Classified as accounts payable and accrued expenses or other long-term liabilities on the consolidated balance sheet.

The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of December 31, 2018 and when the Company filed an appeal for the Competition Commissionexpects to reconsider the sale. During November 2013, the Competition Committee approved the sale and the transaction closed on November 15, 2013. The sales price, which was paid in Mexican pesos, wasrecognize this revenue.

 

 

Twelve Months Ended December 31,

 

 

 

 

 

 

 

 

 

Remaining Performance Obligations

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

Thereafter

 

 

Total

 

Deferred revenue - NCM

 

$

15,831

 

 

$

15,831

 

 

$

15,831

 

 

$

15,831

 

 

$

15,831

 

 

$

208,194

 

 

$

287,349

 

Deferred revenue - other

 

 

89,523

 

 

 

16,146

 

 

 

207

 

 

 

199

 

 

 

 

 

 

 

 

 

106,075

 

Total

 

$

105,354

 

 

$

31,977

 

 

$

16,038

 

 

$

16,030

 

 

$

15,831

 

 

$

208,194

 

 

$

393,424

 

Accounts receivable as of December 31, 2018 included approximately $126,167, based on the exchange rate at November 15, 2013.$48,117 of receivables related to contracts with customers.  The Company recordeddid not record any assets related to the costs to obtain or fulfill a pre-tax gain of approximately $3,521 on the salecontract with customers during the year ended December 31, 2013.2018.

Significant Financing Component

As discussed further in Note 4, in connection with the completion of the NCM, Inc. (“NCMI”) initial public offering, the Company amended and restated its ESA with NCM and received approximately $174,000 in cash consideration from NCM.  The proceeds were recorded as deferred revenue and are being amortized over the term of the modified ESA, or through February 2037.  In addition to the consideration received upon the ESA modification during 2007, the Company also receives consideration in the form of common units from NCM, at each annual common unit adjustment settlement, in exchange for exclusive access to the Company’s newly opened domestic

F-17


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

screens under the ESA.  See Note 4 for additional information regarding the common unit adjustment and related accounting.   Due to the significant length of time between receiving the consideration from NCM and fulfillment of the related performance obligation, the ESA includes an implied significant financing component, as per the guidance in ASC Topic 606.  

As a result of the significant financing component on deferred revenue - NCM, the Company recognized incremental screen advertising revenue and an offsetting interest expense of $19,724 during the year ended December 31, 2018. The interest expense was calculated using the Company’s incremental borrowing rates at the time when the cash and each tranche of common units were received from NCM, which ranged from 5.5% to 8.0%.

4.

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,(“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. revenue. 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 end of fiscal 2011, and the payment per digital screen, initially eight hundred dollars per digital screen per year, increases annually by 5%. For 2013, 20142016, 2017 and 2015,2018, the annual payment per digital screen was one thousand seventy-twotwo hundred forty-one dollars, one thousand onethree hundred twenty-fivethree dollars and one thousand onethree hundred eight-twosixty-eight 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 21 years.expires in February 2037.

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 NCMI IPO, the Company does not recognize undistributed equity in the earnings on its Tranche 1 Investment until NCM’sNCM's 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’sinvestor'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, whichwhom we refer to collectively as the Founding Members, annual adjustments are made annually 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, we follow the guidance in FASB ASC 323-10-35-29 (formerly EITF 02-18, “Accounting“Accounting for Subsequent Investments in an Investee after Suspension

F-18


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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. WeThe Company concluded that adding theatres to the construction or acquisition of new theatres thatCompany’s domestic circuit, which has led to the

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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 of affiliates on the consolidated statements of income 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 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.investment in NCM.

Below is a summary of common units received by the Company under the Common Unit Adjustment (“CUA”) Agreement during the years ended December 31, 2013, 20142016, 2017 and 2015:2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Event

 

Date Common Units Received

 

Number of Common Units Received

 

 

Fair Value of Common Units Received

 

2016 annual common unit adjustment

 

3/31/2016

 

 

753,598

 

 

$

11,111

 

2017 annual common unit adjustment

 

3/31/2017

 

 

1,487,218

 

 

$

18,363

 

2018 annual common unit adjustment

 

3/29/2018

 

 

908,042

 

 

$

5,012

 

 

Event

  Date
Common Units
Received
  Number
of Common Units
Received
   Fair Value
of Common Units
Received
 

2013 Annual common unit adjustment

  03/28/13   588,024    $8,869  

2013 Extraordinary common unit adjustment (as result of Rave Acquisition – see Note 3)

  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 is convertible into one share of 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 NCMI 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 records the additional common units it receives as part of its Tranche 2 Investment at estimated fair value with a corresponding adjustment to deferred revenue.  The deferred revenue is amortized over the remaining term of the ESA.

Acquisition of Common Units

On July 5, 2018, the Company acquired 10,738,740 common units of NCM from AMC for $78,393 in cash, or approximately $7.30 per common unit.  As a result of the acquisition of these shares, the Company’s ownership of NCM increased from approximately 18% to 25%.  The amount paid for the additional common units was recorded as an increase in the Company’s Tranche 2 investment in NCM.

As of December 31, 2015,2018, the Company owned a total of 25,631,04639,518,644 common units of NCM, which represented an approximate 19% interest. Each common unit is convertible into one shareinterest of NCMI common stock.approximately 25%. The estimated fair value of the Company’s investment in NCM was approximately $402,664 as of December 31, 2015, using$256,081 based on NCMI’s stock price as of December 31, 20152018 of $15.71$6.48 per share.share (Level 1 input as defined in FASB ASC Topic 820), which was less than the Company’s carrying value of $275,592. The Company does not believe that the decline in NCMI’s stock price is other than temporary and therefore, no impairment of the Company’s investment in NCM was recorded during the year ended December 31, 2018. The market value of NCMI’s stock price may continue to vary due to the performance of the business, industry trends, general and economic conditions and other factors.

F-19


CINEMARK USA, 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 for the periods indicated:indicated. See Note 3 for discussion of impact of new revenue recognition accounting pronouncements.

 

 

Investment in NCM

 

 

Deferred Revenue

 

 

Distributions from NCM

 

 

Equity

in Earnings

 

 

Other Revenue

 

 

Interest Expense

- NCM (3)

 

 

Cash Received (Paid)

 

  Investment
in NCM
 Deferred
Revenue
 Distributions
from NCM
 Equity in
Earnings
 Other
Revenue
 Other
Comprehensive
(Income) Loss
 Cash
Received
 

Balance as of January 1, 2013

  $78,123   $(241,305     

Receipt of common units due to annual common unit adjustment

   8,869   (8,869 $—     $—     $—     $—     $—    

Receipt of common units due to extraordinary common unit adjustment

   89,928   (89,928  —      —      —      —      —    

Revenues earned under ESA(1)

   —      —       (7,960  —     7,960  

Receipt of excess cash distributions

   (13,166  —     (19,374  —      —      —     32,540  

Receipt under tax receivable agreement

   (492  —     (1,327  —      —      —     1,819  

Equity in earnings(2)

   13,753    —      —     (11,578  —      —      —    

Equity in other comprehensive income

   1,838    —      —      —      —     (1,838  —    

Amortization of deferred revenue

   —     5,673    —      —     (5,673  —      —    
  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

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  
    

 

  

 

  

 

  

 

  

 

 

Balance as of January 1, 2016

 

$

183,755

 

 

$

(342,134

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receipt of common units due to annual common unit adjustment

   8,216   (8,216 $—     $—     $—     $—     $—    

 

 

11,111

 

 

 

(11,111

)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Revenues earned under ESA(1)

   —      —      —      —     (9,249  —     9,249  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,048

)

 

 

 

 

 

11,048

 

Receipt of excess cash distributions

   (12,574  —     (14,778  —      —      —     27,352  

 

 

(11,233

)

 

 

 

 

 

(11,483

)

 

 

 

 

 

 

 

 

 

 

 

22,716

 

Receipt under tax receivable agreement

   (2,594  —     (3,763  —      —      —     6,357  

 

 

(2,985

)

 

 

 

 

 

(3,173

)

 

 

 

 

 

 

 

 

 

 

 

6,158

 

Equity in earnings

   6,142    —      —     (6,142  —      —      —    

 

 

9,347

 

 

 

 

 

 

 

 

 

(9,347

)

 

 

 

 

 

 

 

 

 

Equity in other comprehensive income

   896    —      —      —      —     (896  —    

Amortization of deferred revenue

   —     7,426    —      —     (7,426  —      —    

 

 

 

 

 

9,317

 

 

 

 

 

 

 

 

 

(9,317

)

 

 

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance as of and for the period ended December 31, 2014

  $178,939   $(335,219 $(18,541 $(6,142 $(16,675 $(896) $42,958  
    

 

  

 

  

 

  

 

  

 

 

Balance as of and for the twelve months ended December 31, 2016

 

$

189,995

 

 

$

(343,928

)

 

$

(14,656

)

 

$

(9,347

)

 

$

(20,365

)

 

$

 

 

$

39,922

 

Receipt of common units due to annual common unit adjustment

   15,421   (15,421 $—     $—     $—     $—     $—    

 

 

18,363

 

 

 

(18,363

)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Revenues earned under ESA(1)

   —      —      —      —     (11,330  —     11,330  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,274

)

 

 

 

 

 

11,274

 

Receipt of excess cash distributions

   (14,072  —     (15,396  —      —      —     29,468  

 

 

(15,093

)

 

 

 

 

 

(14,158

)

 

 

 

 

 

 

 

 

 

 

 

29,251

 

Receipt under tax receivable agreement

   (2,308  —     (2,744  —      —      —     5,052  

 

 

(2,265

)

 

 

 

 

 

(2,249

)

 

 

 

 

 

 

 

 

 

 

 

4,514

 

Equity in earnings

   8,510    —      —     (8,510  —      —      —    

 

 

9,550

 

 

 

 

 

 

 

 

 

(9,550

)

 

 

 

 

 

 

 

 

 

Equity in other comprehensive loss

   (2,735  —      —      —      —     2,735    —    

Amortization of deferred revenue

   —     8,506    —      —     (8,506  —      —    

 

 

 

 

 

10,585

 

 

 

 

 

 

 

 

 

(10,585

)

 

 

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

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  
  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance as of and for the twelve months ended December 31, 2017

 

$

200,550

 

 

$

(351,706

)

 

$

(16,407

)

 

$

(9,550

)

 

$

(21,859

)

 

$

 

 

$

45,039

 

Impact of adoption of ASC Topic 606 (2)

 

 

 

 

 

53,605

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Receipt of common units due to annual common unit adjustment

 

 

5,012

 

 

 

(5,012

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of additional common units

 

 

78,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues earned under ESA (1)(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,867

)

 

 

19,724

 

 

 

12,143

 

Receipt of excess cash distributions

 

 

(19,786

)

 

 

 

 

 

(13,231

)

 

 

 

 

 

 

 

 

 

 

 

33,017

 

Receipt under tax receivable agreement

 

 

(2,419

)

 

 

 

 

 

(2,158

)

 

 

 

 

 

 

 

 

 

 

 

4,577

 

Equity in earnings

 

 

13,842

 

 

 

 

 

 

 

 

 

(13,842

)

 

 

 

 

 

 

 

 

 

Amortization of deferred revenue (2)

 

 

 

 

 

15,764

 

 

 

 

 

 

 

 

 

(15,764

)

 

 

 

 

 

 

Balance as of and for the twelve months ended December 31, 2018

 

$

275,592

 

 

$

(287,349

)

 

$

(15,389

)

 

$

(13,842

)

 

$

(47,631

)

 

$

19,724

 

 

$

49,737

 

 

(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 $11,958, $11,489$10,523, $11,110 and $9,819$11,965 for the years ended December 31, 2013, 20142016, 2017 and 2015,2018, respectively.

(2)

A portion

As a result of adoption of ASC Topic 606, the equity in earningsCompany determined that the deferred revenue associated with the ESA and CUA agreement should be amortized on a straight-line basis versus the units of revenue method followed prior to adoption.  The Company recorded for the year ended December 31, 2013 was recorded as a reduction in our investment basisthe deferred revenue balance and a cumulative effect of a change in a joint venture (AC JV, LLC) that the Company, along with Regal and AMC, recently formed with NCM.accounting principle in retained earnings.  See Note 5.3 for further discussion of the impact of the adoption of ASC Topic 606.

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.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

(3)

Reflects the impact of significant financing component related to amounts received in advance under the ESA and CUA agreement.  See Note 3.

The Company made payments to NCM of approximately $124$49, $102 and $50$74 during the years ended December 31, 20142016, 2017 and 2015,2018, 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 5, 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 (financial information for the year ended December 31, 2015 is not yet available):F-20

   Year Ended   Nine Months
Ended

October 1, 2015
 
   December 26, 2013   January 1, 2015   

Gross revenues

  $462,815    $393,994    $310,061  

Operating income

  $202,019    $159,624    $40,442  

Net income

  $162,870    $96,309    $38,519  

   As of
January 1, 2015
   As of
October 1, 2015
 

Total assets

  $681,107    $700,326  

Total liabilities

  $998,529    $1,030,243  

5.OTHER INVESTMENTS

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  
  

 

 

   

 

 

 

Total

  $77,658    $94,973  
  

 

 

   

 

 

 


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The tables below present summary financial information for NCM for the periods indicated:

 

 

 

Year Ended

 

 

Year Ended

 

 

Year Ended

 

 

 

December 29, 2016

 

 

December 28, 2017

 

 

December 27, 2018

 

Revenues

 

$

447,600

 

 

$

426,100

 

 

$

441,400

 

Operating income

 

$

173,000

 

 

$

153,900

 

 

$

154,300

 

Net income

 

$

109,300

 

 

$

101,900

 

 

$

98,400

 

 

 

As of

 

 

As of

 

 

 

December 28, 2017

 

 

December 27, 2018

 

Current assets

 

$

174,400

 

 

$

172,700

 

Noncurrent assets

 

$

758,300

 

 

$

726,800

 

Current liabilities

 

$

123,300

 

 

$

115,200

 

Noncurrent liabilities

 

$

925,400

 

 

$

924,900

 

Members' deficit

 

$

(116,000

)

 

$

(140,600

)

5.

OTHER INVESTMENTS

Below is a summary of activity for each of the Company’s other investments for the years ended December 31, 2013, 2014 and 2015:periods indicated:

 

   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  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2015

  $71,579  $12,900  $7,269   $2,562  $663  $94,973 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

DCIP

 

 

RealD

 

 

AC JV,

LLC

 

 

DCDC

 

 

FE Concepts

 

 

Other

 

 

Total

 

Balance at January 1, 2016

 

$

71,579

 

 

$

12,900

 

 

$

7,269

 

 

$

2,562

 

 

$

 

 

$

663

 

 

$

94,973

 

Cash contributions

 

 

717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

415

 

 

 

1,132

 

Equity in income

 

 

21,434

 

 

 

 

 

 

311

 

 

 

870

 

 

 

 

 

 

 

 

 

22,615

 

Equity in comprehensive income

 

 

89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

89

 

Sale of investment (1)

 

 

 

 

 

(12,900

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,900

)

Cash distributions received

 

 

(6,000

)

 

 

 

 

 

(1,600

)

 

 

(98

)

 

 

 

 

 

 

 

 

(7,698

)

Other (2)

 

 

 

 

 

 

 

 

 

 

 

(584

)

 

 

 

 

 

690

 

 

 

106

 

Balance at December 31, 2016

 

$

87,819

 

 

$

 

 

$

5,980

 

 

$

2,750

 

 

$

 

 

$

1,768

 

 

$

98,317

 

Cash contributions

 

 

1,112

 

 

 

 

 

 

 

 

 

 

 

 

104

 

 

 

2,499

 

 

 

3,715

 

Equity in income

 

 

22,900

 

 

 

 

 

 

2,336

 

 

 

1,199

 

 

 

 

 

 

 

 

 

26,435

 

Equity in comprehensive income

 

 

248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

248

 

Cash distributions received

 

 

(5,864

)

 

 

 

 

 

(2,400

)

 

 

(351

)

 

 

 

 

 

 

 

 

(8,615

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55

)

 

 

(55

)

Balance at December 31, 2017

 

$

106,215

 

 

$

 

 

$

5,916

 

 

$

3,598

 

 

$

104

 

 

$

4,212

 

 

$

120,045

 

Cash contributions

 

 

2,076

 

 

 

 

 

 

 

 

 

 

 

 

20,000

 

 

 

 

 

 

22,076

 

Equity in income (loss)

 

 

22,899

 

 

 

 

 

 

1,270

 

 

 

1,313

 

 

 

(82

)

 

 

 

 

 

25,400

 

Equity in comprehensive loss

 

 

(139

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(139

)

Cash distributions received

 

 

(5,799

)

 

 

 

 

 

(1,920

)

 

 

(219

)

 

 

 

 

 

 

 

 

(7,938

)

Other (2)

 

 

 

 

 

 

 

 

 

 

 

(2,437

)

 

 

(104

)

 

 

(137

)

 

 

(2,678

)

Balance at December 31, 2018

 

$

125,252

 

 

$

 

 

$

5,266

 

 

$

2,255

 

 

$

19,918

 

 

$

4,075

 

 

$

156,766

 

 

(1)

The Company sold its investment in a Taiwan joint venture for approximately $2,634, resulting in a gain

See further discussion of $1,251, which is included in (gain) loss onthe sale of assets and otherthe investment held by the Company under RealD, Inc. below.

(2)

Other activity for DCDC for the yearyears ended December 31, 2015.2016 and 2018 consisted of returns of capital originally contributed by the Company.

Digital Cinema Implementation Partners LLC (“DCIP”)

On February 12, 2007, the Company, AMC and Regal entered into a joint venture known as Digital Cinema Implementation Partners LLCDCIP 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 to DCIP, which DCIP then contributed to Kasima. 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.

As of December 31, 2015,2018, 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.

F-21


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

Below is summary financial information for DCIP as of and for the years ended December 31, 2013, 20142016, 2017 and 2015.2018:

 

 

Year ended December 31,

 

  Year ended December 31, 

 

2016

 

 

2017

 

 

2018

 

  2013   2014   2015 

Net operating revenue

  $182,659    $170,724    $171,203  

Revenues

 

$

178,836

 

 

$

177,382

 

 

$

172,534

 

Operating income

  $116,235    $101,956    $103,449  

 

$

107,919

 

 

$

106,687

 

 

$

102,236

 

Net income

  $48,959    $61,293    $79,255  

 

$

89,152

 

 

$

93,103

 

 

$

94,757

 

 

   As of 
   December 31, 2014   December 31, 2015 

Total assets

  $1,097,467    $1,004,292  

Total liabilities

  $845,319    $674,727  

 

 

As of

 

 

 

December 31, 2017

 

 

December 31, 2018

 

Current assets

 

$

56,296

 

 

$

57,907

 

Noncurrent assets

 

$

772,438

 

 

$

684,545

 

Current liabilities

 

$

59,153

 

 

$

67,408

 

Noncurrent liabilities

 

$

296,889

 

 

$

125,596

 

Members' equity

 

$

472,692

 

 

$

549,448

 

As a result of the Agreements, the Company installed digital projection systems to a majority of its first run U.S. theatres.

The digital projection systems are being leased from Kasima LLC (“Kasima”), which is an indirect subsidiary of DCIP and a related party to the Company, 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 annual rent of one thousand dollars per digital projection 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, 2015,2018, the Company had 3,7813,837 digital projection systems being leased under the master equipment lease agreement with Kasima. The Company had the following transactions with DCIP during the years ended December 31, 2013, 20142016, 2017 and 2015:2018:

 

  Year Ended December 31, 

 

Year Ended December 31,

 

  2013   2014   2015 

 

2016

 

 

2017

 

 

2018

 

Equipment lease payments

  $3,853    $4,012    $4,474  

 

$

5,217

 

 

$

5,743

 

 

$

4,862

 

Warranty reimbursements from DCIP

  $(1,893  $(3,169  $(4,329

 

$

(6,091

)

 

$

(8,511

)

 

$

(10,800

)

Management services fees

 

$

825

 

 

$

823

 

 

$

730

 

RealD, Inc. (“RealD”)

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 vested in a total of 1,222,780 RealD options. Upon vesting in these options, the Company recorded an investment in RealD and a deferred lease incentive liability using the estimated fair value of the RealD options at the time of vesting. 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 ownsowned 1,222,780 shares of RealD and accountsaccounted for its investment in RealD as a marketable security. The Company has determined that its RealD shares aresecurity, specifically an available-for-sale securitiessecurity, in accordance with ASC Topic 320-10-35-1, therefore unrealized holding gains and losses arewere reported as a component of accumulated other comprehensive loss until realized.

On March 22, 2016, an affiliate of Rizvi Traverse Management, LLC acquired RealD for $11.00 per share. As a result of the transaction, the Company sold its shares for approximately $13,451 and recognized a gain of $3,742, which included the recognition of a cumulative unrealized holding gain of $3,191 previously recorded in accumulated other comprehensive loss. The gain is reflected within loss on disposal of assets and other on the consolidated statement of income for the year ended December 31, 2015,2016. The Company used the estimated fair valueproceeds to make a pre-payment on its term loan in accordance with the terms of the Company’s investment in RealD was $12,900, which is based on the closing price of RealD’s common stock of $10.55 per share on December 31, 2015, and falls under Level 1 of the U.S. GAAP fair value hierarchy as defined by ASC Topic 820-10-35.its senior secured credit facility.

AC 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

F-22


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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 to AC of $9,273$10,871, $13,950 and $11,440$12,481 for the years ended December 31, 20142016, 2017 and 2015,2018, respectively, which are included in film rentals and advertising costs on the consolidated statements of income.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

  The Company accounts for its investment in AC under the equity method of accounting.

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% ownershipAC.  Each of the Class A Units of AC. Under a separate contribution agreement, the Founding Members each contributed cash of approximately $268 to ACand a six-year promissory note in the amount of $8,333 in exchange for 1%32% 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.AC.  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.payments. The remaining outstanding balance of the note payable from the Company to ACNCM as of December 31, 20152018 was $5,555.$1,389.

Digital Cinema Distribution Coalition

The Company is a party 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$939, $848 and $807$927 to DCDC during the years ended December 31, 20142016, 2017 and 20152018, respectively, related to content delivery services, provided by DCDC, which is included in film rentals and advertising costs on the consolidated statements of income.  The Company accounts for its investment in DCDC under the equity method of accounting.

FE Concepts, LLC

During April 2018, the Company, through its wholly-owned indirect subsidiary CNMK Texas Properties, LLC (“CNMK”), formed a joint venture, FE Concepts, LLC (“FE Concepts”) with AWSR Investments, LLC (“AWSR”), an entity owned by Lee Roy Mitchell and Tandy Mitchell.  FE Concepts will develop and operate a family entertainment center that offers bowling, gaming, movies and other amenities.  The Company and AWSR each invested approximately $20,000 and each have a 50% voting interest in FE Concepts.  The Company accounts for its investment in FE Concepts under the equity method of accounting.

6.

GOODWILL AND OTHER INTANGIBLE ASSETS — NET

The Company’s goodwill was as follows:

 

   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
  

 

 

   

 

 

   

 

 

 

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
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2015(1)

  $1,156,556    $90,992    $1,247,548  
  

 

 

   

 

 

   

 

 

 

 

 

U.S.

Operating

Segment

 

 

International

Operating

Segment

 

 

Total

 

Balance at December 31, 2016 (1)

 

$

1,164,163

 

 

$

98,800

 

 

$

1,262,963

 

Acquisitions of theatres (2)

 

 

9,878

 

 

 

13,211

 

 

 

23,089

 

Foreign currency translation adjustments

 

 

 

 

(1,973

)

 

 

(1,973

)

Balance at December 31, 2017 (1)

 

$

1,174,041

 

 

$

110,038

 

 

$

1,284,079

 

Acquisitions of theatres (3)

 

 

 

 

 

7,204

 

 

 

7,204

 

Foreign currency translation adjustments

 

 

 

 

 

(14,959

)

 

 

(14,959

)

Balance at December 31, 2018 (1)

 

$

1,174,041

 

 

$

102,283

 

 

$

1,276,324

 

 

(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.

(2)

Acquisition of theatres in the U.S. and international markets.

(3)

Amount represents preliminary purchase price allocation for theatres acquired in Brazil.

As of December 31, intangible assets-net, consisted of the following:F-23

   December 31,            December 31, 
   2013  Acquisitions   Amortization  Other(1)  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
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

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  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 


CINEMARK USA, 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:

 

 

Balance at

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

 

  December 31,           December 31, 

 

January 1,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

  2014   Amortization   Other(2)   2015 

 

2017

 

 

Additions (1)

 

 

Amortization

 

 

Other (2)

 

 

2017

 

Intangible assets with finite lives:

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

  $99,922    $—      $46    $99,968  

 

$

99,796

 

 

$

11,584

 

 

$

 

 

$

(5,485

)

 

$

105,895

 

Accumulated amortization

   (52,232   (5,716   (1,758   (59,706

 

 

(64,606

)

 

 

 

 

 

(5,563

)

 

 

1,300

 

 

 

(68,869

)

  

 

   

 

   

 

   

 

 

Total net intangible assets with finite lives

  $47,690    $(5,716  $(1,712  $40,262  

 

$

35,190

 

 

$

11,584

 

 

$

(5,563

)

 

$

(4,185

)

 

$

37,026

 

Intangible assets with indefinite lives:

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradename

   300,334     —      (952)   299,382  

 

 

299,709

 

 

 

 

 

 

 

 

 

26

 

 

 

299,735

 

  

 

   

 

   

 

   

 

 

Total intangible assets — net

  $348,024    $(5,716  $(2,664)  $339,644  

 

$

334,899

 

 

$

11,584

 

 

$

(5,563

)

 

$

(4,159

)

 

$

336,761

 

  

 

   

 

   

 

   

 

 

 

 

 

Balance at

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

 

 

 

January 1,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

2018

 

 

Additions (3)

 

 

Amortization

 

 

Other (2)

 

 

2018

 

Intangible assets with finite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

$

105,895

 

 

$

1,203

 

 

$

 

 

$

(1,842

)

 

$

105,256

 

Accumulated amortization

 

 

(68,869

)

 

 

 

 

 

(5,734

)

 

 

 

 

 

(74,603

)

Total net intangible assets with finite lives

 

$

37,026

 

 

$

1,203

 

 

$

(5,734

)

 

$

(1,842

)

 

$

30,653

 

Intangible assets with indefinite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradename and other

 

 

299,735

 

 

 

853

 

 

 

 

 

 

(331

)

 

 

300,257

 

Total intangible assets — net

 

$

336,761

 

 

$

2,056

 

 

$

(5,734

)

 

$

(2,173

)

 

$

330,910

 

(1)

Activity for 2014 primarily consists2017 represent fair values allocated to intangible assets acquired as part of $479 for impairmentacquisitions of a tradename intangible asset related to onetheatres in the U.S. theatre and international markets.

(2)

Amounts represent foreign currency translation adjustments.

(2)Activity for 2015 primarily consists ofadjustments and the write-off of certain lease intangibles for theatre closures and lease amendments.  

(3)

Amount for intangible assets with finite lives represents preliminary purchase price allocation for closed theatres the write-off of a vendor contract intangible asset, $992 for impairment of a favorable lease and foreign currency translation adjustments.acquired in Brazil. 

Estimated aggregate future amortization expense for intangible assets is as follows:follows(1):

 

For the year ended December 31, 2016

  $5,389  

For the year ended December 31, 2017

   4,857  

For the year ended December 31, 2018

   4,857  

For the year ended December 31, 2019

   3,977  

 

$

4,785

 

For the year ended December 31, 2020

   4,252  

 

 

5,053

 

For the year ended December 31, 2021

 

 

2,904

 

For the year ended December 31, 2022

 

 

2,812

 

For the year ended December 31, 2023

 

 

3,161

 

Thereafter

   16,930  

 

 

11,938

 

  

 

 

Total

  $40,262  

 

$

30,653

 

  

 

 

 

(1)  Represents amounts before the adoption of ASC Topic 842 – Leases.  See Note 2 for discussion of the expected impact of adoption.

7.

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 policy.

F-24


CINEMARK USA, INC.

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, 
   2013   2014   2015 

United States theatre properties

  $1,911    $6,168    $7,052  

International theatre properties

   1,175     —       757  
  

 

 

   

 

 

   

 

 

 

Subtotal

   3,086     6,168     7,809  

Intangible assets (see Note 6)

   708     479     992  
  

 

 

   

 

 

   

 

 

 

Impairment of long-lived assets

  $3,794    $6,647    $8,801  
  

 

 

   

 

 

   

 

 

 

 

 

Year Ended

 

 

 

December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

U.S. theatre properties

 

$

1,929

 

 

$

5,227

 

 

$

18,597

 

International theatre properties

 

 

907

 

 

 

9,857

 

 

 

13,775

 

Impairment of long-lived assets

 

$

2,836

 

 

$

15,084

 

 

$

32,372

 

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, 2015,2018, the estimated aggregate remaining fair value of the long-lived assets impaired during the year ended December 31, 20152018 was approximately $8,395.$16,295.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

8.

DEFERRED CHARGES AND OTHER ASSETS — NET

As of December 31, deferred charges and other assets — net consisted of the following:

 

 

December 31,

 

  December 31, 

 

2017

 

 

2018

 

  2014   2015 

Long-term prepaid rents

   7,296     4,278  

Long-term prepaid rents (1)

 

$

7,762

 

 

$

15,943

 

Construction and other deposits

   14,171     8,459  

 

 

12,167

 

 

 

8,183

 

Equipment to be placed in service

   14,124     15,388  

 

 

13,868

 

 

 

10,466

 

Other

   10,980     10,118  

 

 

5,970

 

 

 

6,463

 

  

 

   

 

 

Total

  $46,571    $38,243  

 

$

39,767

 

 

$

41,055

 

  

 

   

 

 

(1)  See Note 2 for discussion of the expected impact of the adoption of new lease accounting pronouncements.

9.

(1)See Note 2 for discussion of debt issuance costs reclassification upon adoption of ASU 2015-03.

LONG-TERM DEBT

9.LONG-TERM DEBT

As of December 31, long-term debt consisted of the following:

 

  December 31, 

 

December 31,

 

  2014   2015 

 

2017

 

 

2018

 

Cinemark USA, Inc. term loan

  $686,000    $679,000  

 

$

659,517

 

 

$

652,922

 

Cinemark USA, Inc. 5.125% senior notes due 2022

 

 

400,000

 

 

 

400,000

 

Cinemark USA, Inc. 4.875% senior notes due 2023

   530,000     530,000  

 

 

755,000

 

 

 

755,000

 

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  

 

 

2,778

 

 

 

1,389

 

  

 

   

 

 

Total long-term debt

   1,822,997     1,814,572  

 

 

1,817,295

 

 

 

1,809,311

 

Less current portion

   8,423     8,405  

 

 

7,099

 

 

 

7,984

 

Less debt issuance costs, net of accumulated amortization of $10,918 and $16,058, respectively(2)

   31,419     33,237  
  

 

   

 

 

Less debt issuance costs, net of accumulated amortization of $25,549 and $30,289, respectively

 

 

29,815

 

 

 

28,700

 

Long-term debt, less current portion

  $1,783,155    $1,772,930  

 

$

1,780,381

 

 

$

1,772,627

 

  

 

   

 

 

 

(1)

Primarily represents

Represents debt owed to NCM in relation to the recently-formed joint venture AC JV, LLC. See Note 5.

(2)See Note 2 for discussion of debt issuance costs reclassification upon adoption of ASU 2015-03.

F-25


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Senior Secured Credit Facility

Cinemark USA, Inc. has a senior secured credit facility that includes a seven year $700,000 term loan and a five year $100,000 revolving credit line (the “Senior Secured Credit Facility”“Credit Agreement”). On May 8, 2015,

Cinemark USA, Inc., our wholly-owned subsidiary, made the following amendments to its Credit Agreement as follows during 2016, 2017 and 2018:

 

 

 

 

Debt Issue

 

 

Loss on Debt

 

Effective Date

 

Nature of Amendment

 

Costs Paid (1)

 

 

Amendment (2)

 

June 13, 2016

 

Reduced term loan interest rate by 0.25%

 

$

783

 

 

$

249

 

December 15, 2016

 

Reduced term loan interest rate by 0.50%

 

$

2,446

 

 

$

161

 

June 16, 2017

 

Reduced term loan interest rate by 0.25%; modified certain definitions and other provisions in the Credit Agreement

 

$

521

 

 

$

190

 

November 28, 2017

 

Extended maturity of revolving credit line to December 2022; reduced the interest rate applicable to borrowings under the credit line

 

$

330

 

 

$

331

 

March 29, 2018

 

Extended maturity of term loan to March 2025; reduced term loan interest rate by 0.25%; reduced real property mortgage requirements

 

$

4,962

 

 

$

1,484

 

(1)

Reflected as a reduction of long term debt on the consolidated balance sheet.  

(2)

Reflected as a loss on debt amendments and refinancing on the consolidated statement of income for the year in which the amendments were effective.  

Under the amended its senior secured credit facility to extend the maturity of the $700,000 term loan from December 2019 to May 2022. QuarterlyCredit Agreement, quarterly principal payments in the amount of $1,750$1,649 are due on the term loan through MarchDecember 31, 2022,2024, with the remaininga final principal payment of $635,250$613,351 due on May 8, 2022. The Company incurred debt issue costs of approximately $6,875 in connection withMarch 29, 2025.

Subsequent to the amendment. In addition, the Company incurred approximately $925 in legal and other fees that are reflected as loss onMarch 29, 2018 amendment to debt agreement on the consolidated statement of income for the year ended December 31, 2015.

Interestnoted above, interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the highergreater of (1) the prime lendingUS “Prime Rate” as quoted in The Wall Street Journal or if no such rate as set forth on the British Banking Association Telerate page 5, oris quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate from time to time plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin of 2.0%0.75% per annum, or (B) a “eurodollar rate”Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 3.0%1.75% per annum. Interest on the revolving credit line accrues, at Cinemark USA, Inc.’sour option, at: (A) a base rate equal to the highergreater of (1) the prime lendingUS “Prime Rate” as quoted in The Wall Street Journal or if no such rate as set forth on the British Banking Association Telerate page 5 andis quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate from time to time plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin that ranges from 0.50% to 1.25% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 1.00%1.50% to 1.75% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 2.00% to 2.75%2.25% per annum. The margin of the revolving credit line is determined by the consolidated net senior secured leverage ratio as defined in the Credit Agreement.

At December 31, 2018, there was $652,922 outstanding under the term loan and no borrowings outstanding under the revolving credit agreement.line.  Cinemark USA, Inc. had no borrowings under the revolving credit line during the years ended December 31, 2017 or 2018.  After giving effect to a letter of credit outstanding as of December 31, 2018. Cinemark USA, Inc. had $98,846 in available borrowing capacity on the revolving credit line.  The average interest rate on outstanding term loan borrowings under the Credit Agreement at December 31, 2018 was approximately 4.4% per annum.

F-26


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Cinemark USA, Inc.’s obligations under the Senior Secured Credit FacilityAgreement 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

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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 Senior Secured Credit FacilityAgreement 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.’sour 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 andor repurchase stock; and make capital expenditures and investments. If Cinemark USA, Inc. has borrowings outstanding on the revolving credit line, it is required to satisfykeep a consolidated net senior secured leverage ratio, covenant as determineddefined in accordance with the Senior Secured Credit Facility.Agreement, not to exceed 5.0 to 1.  As of December 31, 2018, the Company’s actual ratio was 2.9 to 1.

The dividend restriction contained in the Senior Secured Credit FacilityAgreement 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 Senior Secured Credit Facility;Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Senior Secured Credit Facility,Agreement, and (c) certain other defined amounts. As of December 31, 2015,2018, Cinemark USA, Inc. could have distributed up to approximately $1,905,096$2,918,142 to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the Senior Secured Credit Facility, subject to its available cash and other borrowing restrictions outlined in the agreement.

At December 31, 2015, there was $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 Senior Secured Credit Facility at December 31, 2015 was approximately 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.year. The 4.875% Senior Notes mature on June 1, 2023.

On March 21, 2016, Cinemark USA, Inc. issued an additional $225,000 aggregate principal amount of the 4.875% Senior Notes, at 99.0% of the principal amount plus accrued and unpaid interest from December 1, 2015.  Proceeds, after payment of fees, were used to finance the redemption of Cinemark, USA, Inc.’s previously outstanding $200,000 7.375% senior subordinated notes due 2021 (the “7.375% Senior Subordinated Notes”), as discussed below. These additional notes have identical terms, other than the issue date, the issue price and the first interest payment date, and constitute part of the same series as Cinemark USA, Inc.’s existing 4.875% Senior Notes.  The aggregate principal amount of $755,000 of 4.875% Senior Notes mature on June 1, 2023.  The Company incurred debt issue costs of approximately $3,702 in connection with the issuance of the additional notes, which, along with the discount of $2,250, are reflected as a reduction of long term debt, net of accumulated amortization, on the consolidated balance sheets as of December 31, 2017 and 2018.

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.Credit Agreement. 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

F-27


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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, 2015,2018, Cinemark USA, Inc. could have distributed up to approximately $2,079,680 $2,980,550to 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

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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, 20152018 was approximately 7.7 6.3to 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.

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 (the “5.125% Senior Notes”). A portion of the proceeds were used to refinance a portion of the former senior secured credit facility and to fund the purchase price for the Rave Acquisition (see Note 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.year. The 5.125% Senior Notes mature on December 15, 2022.

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 senior secured credit facility.Credit Agreement. 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 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, 2015,2018, Cinemark USA, Inc. could have distributed up to approximately $2,083,985$2,985,833 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, 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, 20152018 was approximately 7.76.3 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 5.125% Senior Notes.

7.375%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 (the “Senior Subordinated Notes”). Interest on the

On March 21, 2016, Cinemark USA, Inc. redeemed its Senior Subordinated Notes is payable on June 15at a make-whole premium of approximately 104% plus accrued and December 15unpaid interest, utilizing the proceeds from the issuance of each year. The Senior Subordinated Notes mature on June 15, 2021.

The Senior Subordinated Notes are fully and unconditionally guaranteed on a joint and several senior subordinated unsecured basis by certain ofthe additional $225,000 Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to 4.875% Senior Notes discussed above. As a result of the redemption, the Company wrote-off approximately $2,369 in unamortized debt issue costs, paid a make-whole premium of $9,444 and paid other fees of $1,222, all of which are reflected in loss on debt amendments and refinancing during the year ended December 31, 2016.  

F-28


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

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 Senior Secured Credit Facility, its 5.125% Senior Notes and 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, 2015, Cinemark USA, Inc. could have distributed up to approximately $2,072,800 to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the Senior Subordinated Notes, subject to its available cash and other borrowing restrictions outlined in the 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 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 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 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.

8.625% Senior Notes

On June 29, 2009, Cinemark USA, Inc. issued $470,000 aggregate principal amount of 8.625% senior notes due 2019 (the “8.625% Senior Notes”), with an original issue discount of $11,468, resulting in proceeds of approximately $458,532. On June 24, 2013, Cinemark USA, Inc. redeemed its 8.625% Senior Notes at 112.035% of the principal amount, inclusive of a make-whole premium, plus accrued and unpaid interest, utilizing the proceeds from the issuance of the 4.875% Senior Notes discussed above. As a result of the redemption, 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, 2013.

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 $1,822,997$1,817,295 and $1,814,572$1,809,311 as of December 31, 20142017 and 2015,2018, respectively, excluding debt issuance costs of $31,419$29,815 and $33,237,$28,700, respectively. The fair value of the Company’s long term debt was $1,790,987$1,840,918 and $1,806,276$1,774,066 as of December 31, 20142017 and 2015,2018, respectively.

Covenant Compliance and Debt Maturity

As of December 31, 2015,2018, the Company believes it was in full financial compliance with all agreements, including related covenants, governing its outstanding debt.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The Company’s long-term debt, excluding unamortized debt issuance costs, at December 31, 20152018 matures as follows:

 

2016

  $8,405  

2017

   8,389  

2018

   8,389  

2019

   8,389  

 

$

7,984

 

2020

   7,000  

 

 

6,595

 

2021

 

 

6,595

 

2022

 

 

406,595

 

2023

 

 

761,595

 

Thereafter

   1,774,000  

 

 

619,947

 

  

 

 

Total

  $1,814,572  

 

$

1,809,311

 

  

 

 

Interest Rate Swap Agreements

10.INTEREST RATE SWAP AGREEMENT

The Company is currently a party to onethree interest rate swap agreementagreements that isare used to hedge a portion of the interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualifiesqualify for cash flow hedge accounting. The fair valuevalues of the interest rate swap isswaps are recorded on the Company’s consolidated balance sheet as an asset or liability with the effective portion of the interest rate swap’srelated gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings.loss. The changes in fair value are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged item affectsitems affect 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 counterparty to the interest rate swap agreement and the fixed rates that the Company is obligated to pay under 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 11 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 agreementagreements designated as cash flow hedgehedges as of December 31, 2015:2018:

               Estimated 

Notional

Amount

  Effective Date  Pay Rate  Receive Rate  Expiration Date  Total Fair Value at
December 31,
2015(1)
 

$100,000

  November 2011   1.7150 1-Month LIBOR  April 2016  $373  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value at

 

Notional

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

Amount

 

 

Effective Date

 

Pay Rate

 

 

Receive Rate

 

Expiration Date

 

2018 (1)

 

$

175,000

 

 

December 31, 2018

 

2.751%

 

 

1-Month LIBOR

 

December 31, 2022

 

$

1,983

 

$

137,500

 

 

December 31, 2018

 

2.765%

 

 

1-Month LIBOR

 

December 31, 2022

 

$

1,624

 

$

137,500

 

 

December 31, 2018

 

2.746%

 

 

1-Month LIBOR

 

December 31, 2022

 

$

1,486

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

5,093

 

(1)

Included in accrued other currentlong-term liabilities on the consolidated balance sheet as of December 31, 2015.2018.

The changestotal estimated fair value of the interest rate swaps of $5,093, net of deferred taxes of $1,243, is reflected in accumulated other comprehensive loss net of taxes, related to the Company’s interest rate swap agreements for the yearsyear ended December 31, 2013, 2014 and 2015 were as follows:2018.  

 

   2013   2014   2015 

Beginning balances – January 1

  $(8,867  $(5,716  $(2,870
  

 

 

   

 

 

   

 

 

 

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  
  

 

 

   

 

 

   

 

 

 

Net other comprehensive income

   3,151     2,846     2,636  
  

 

 

   

 

 

   

 

 

 

Ending balances – December 31

  $(5,716)  $(2,870  $(234
  

 

 

   

 

 

   

 

 

 

F-29


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

11.

10.

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.

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, 2014:2018:

 

   Carrying
Value
   Fair Value 

Description

    Level 1   Level 2   Level 3 

Interest rate swap liabilities – current (see Note 10)

  $(4,255  $—      $—      $(4,255

Interest rate swap liabilities – long term (see Note 10)

  $(317  $—      $—      $(317

Investment in RealD (see Note 5)

  $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, 2015:

 

 

Carrying

 

 

Fair Value

 

Description

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Interest rate swap liabilities

 

$

(5,093

)

 

$

 

 

$

 

 

$

(5,093

)

 

   Carrying
Value
   Fair Value 

Description

    Level 1   Level 2   Level 3 

Interest rate swap liabilities – current (see Note 10)

  $(373  $—      $—      $(373

Investment in RealD (see Note 5)

  $12,900    $12,900    $—      $—    

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
  

 

 

   

 

 

 

Ending balances – December 31

  $4,572    $373  
  

 

 

   

 

 

 

 

 

Liabilities (1)

 

 

 

2018

 

Beginning balance - January 1

 

$

 

Interest rate swaps effective December 31, 2018

 

 

5,093

 

Ending balance - December 31

 

$

5,093

 

(1)

Represents interest rate swap liabilities.  See Note 11 for further discussion.

The Company also uses the market approach for fair value measurements on a nonrecurring basis in the impairment evaluations of its long-lived assets (see Note 61 and Note 7)9). Additionally, the Company uses the market approach to estimate the fair value of its long-term debt (see Note 9)11).  There were no changes in valuation techniques during the period. There were no transfers in or out of Level 1, Level 2 or Level 3 during the years ended December 31, 2013, 20142016, 2017 and 2015.2018.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

12.

11.

FOREIGN CURRENCY TRANSLATION

The accumulated other comprehensive loss account in stockholders’stockholder’s equity of $144,772$253,282 and $271,686$319,007 at December 31, 20142017 and 2015,2018, respectively, includes the cumulative foreign currency losses of $147,930$253,565 and $273,404,$315,300, respectively, from translating the financial statements of the Company’s international subsidiaries and the change in fair values of the Company’s interest rate swap agreements that are designated as hedges and the change in fair valuehedges.

As of the Company’s available-for-sale securities.

AllDecember 31, 2018, all foreign countries where the Company has operations, other than Argentina, are non-highly inflationary, and the local currency is the same as the functional currency in all of the locations. Thus, any fluctuation in the currency results in a cumulative foreign currency translation adjustment recorded to accumulated other comprehensive loss.  The Company deemed Argentina to be highly inflationary beginning July 1, 2018.  A highly inflationary economy is defined as an economy with a cumulative inflation rate of approximately 100 percent or more over a three-year period. If a country’s economy is classified as highly inflationary, the financial statements of the foreign entity operating in that country must be remeasured to the functional currency of the reporting entity.  The financial statements of the Company’s Argentina subsidiaries has been remeasured in U.S. dollars in accordance with ASC Topic 830, Foreign Currency Matters, effective beginning July 1, 2018.

F-30


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Below is a summary of the impact of translating the financial statements of all of the Company’s international subsidiaries as of and for the years ended December 31, 2013, 20142016, 2017 and 2015.2018.

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive

 

 

 

 

 

 

 

 

 

 

 

Income (Loss)

 

              Other Comprehensive 

 

Exchange Rate as of December 31,

 

 

For the Year Ended December 31,

 

Country

  Exchange Rates as of
December 31,
   Income (Loss)
For Year Ended December 31,
 

 

2016

 

2017

 

2018

 

 

2016

 

 

2017

 

 

2018

 

  2013   2014   2015   2013 2014 2015 

Brazil

   2.36     2.69     3.96    $(34,451 $(30,723 $(74,559

 

 

3.26

 

 

3.31

 

 

3.88

 

 

$

37,286

 

 

$

(4,567

)

 

$

(34,086

)

Argentina(1)

   6.52     8.55     12.95     (24,845 (20,197 (30,520

 

 

16.04

 

18.65

 

 

37.68

 

 

 

(13,362

)

 

 

(8,200

)

 

 

(14,357

)

Colombia

   1,926.83     2,392.46     3,149.47     (2,969 (7,632 (8,043

 

 

3,000.71

 

2,936.67

 

 

3,249.75

 

 

 

1,278

 

 

 

246

 

 

 

(1,795

)

Chile

   525.5     606.2     709.16     (3,570 (5,580 (6,572

 

 

679.09

 

615.97

 

 

694.74

 

 

 

1,855

 

 

 

5,672

 

 

 

(8,924

)

Peru

   2.84     3.05     3.46     (3,685 (2,785 (4,882

 

 

3.45

 

3.24

 

 

3.39

 

 

 

87

 

 

 

2,752

 

 

 

(2,136

)

All other

         (185 (2,066 (898

 

 

 

 

 

 

 

 

 

 

 

(783

)

 

 

(869

)

 

 

(955

)

Sale of Mexico subsidiary

         22,088    —      —    
        

 

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

$

26,361

 

 

$

(4,966

)

 

$

(62,253

)

        $(47,617 $(68,983 $(125,474
        

 

  

 

  

 

 

(1)  

Amount represents the cumulative comprehensive loss recorded for Argentina through June 30, 2018.  The impact of translating Argentina financial results to U.S. dollars, beginning July 1, 2018, which was not significant, has been recorded in foreign currency exchange gain (loss) on the Company’s consolidated statement of income.  

During November 2013,the year ended December 31, 2017, the Company completed the salereclassified $1,551 of certain of its Mexico subsidiaries. Ascumulative foreign currency translation adjustments, related to a result of this sale, theCanadian subsidiary that was liquidated, from accumulated other comprehensive loss previously unrealized for these Mexico subsidiariesto foreign currency exchange gain (loss) on the consolidated statement of $22,088 was recognized byincome.

During the year ended December 31, 2018, the Company as partreclassified $518 of cumulative foreign currency translation adjustments, related to the settlement of an intercompany note between a domestic and an international subsidiary, from accumulated other comprehensive loss to foreign currency exchange gain (loss) on sale. See Note 3 for additional information.the consolidated statement of income.

13.

12.

NONCONTROLLING INTERESTS IN SUBSIDIARIES

Noncontrolling interests in subsidiaries of the Company were as follows at December 31:

 

  December 31, 

 

December 31,

 

  2014   2015 

 

2017

 

 

2018

 

Cinemark Partners II — 24.6% interest (in one theatre)

  $7,769    $7,753  

 

$

8,795

 

 

$

8,152

 

Laredo Theatres – 25% interest (in two theatres)

   1,112     1,761  

 

 

1,746

 

 

 

2,308

 

Greeley Ltd. — 49.0% interest (in one theatre)

   589     740  

Greeley Ltd. — 49% interest (in one theatre)

 

 

843

 

 

 

1,411

 

Other

   859     851  

 

 

509

 

 

 

508

 

  

 

   

 

 

Total

  $10,329    $11,105  

 

$

11,893

 

 

$

12,379

 

  

 

   

 

 

During August 2013,December 2016 the Company purchased the 49.9%remaining 25% noncontrolling interest share of one of its BrazilianChilean subsidiaries, Adamark CinemasFlix Impirica S.A. (“Adamark”Flix Impirica”), for approximately $5,621$450 in cash. Adamark had investments in two of the Company’s Brazilian theatres.  The increase in the Company’s ownership interest in the BrazilianChilean 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,$27, which represented the difference between the cash paid and the book value of the BrazilianChilean subsidiary’s noncontrolling interest account.account, which was approximately $423. As a result of this transaction, the Company now owns 100% of the shares in Adamark.Flix Impirica.

F-31


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

Below is a summary of the impact of changes in the Company’s ownership interest in its subsidiaries on its equity:

 

  Year ended December 31, 

 

Year ended December 31,

 

  2013   2014   2015 

 

2016

 

 

2017

 

 

2018

 

Net income attributable to Cinemark USA, Inc.

  $149,843    $194,380    $218,532  

 

$

256,777

 

 

$

265,643

 

 

$

215,735

 

  

 

   

 

   

 

 

Transfers from noncontrolling interests

      

 

 

 

 

 

 

 

 

 

 

 

 

Decrease in Cinemark USA, Inc. additional paid-in-capital for the buyout of Adamark non-controlling interest

   (4,618   —       —    
  

 

   

 

   

 

 

Decrease in Cinemark USA, Inc. additional paid-in-capital for the buyout of Flix Impirica non-controlling interest

 

 

(27

)

 

 

 

 

 

 

Net transfers from non-controlling interests

   (4,618   —       —    

 

 

(27

)

 

 

 

 

 

 

  

 

   

 

   

 

 

Change from net income attributable to Cinemark USA, Inc. and transfers from noncontrolling interests

  $145,225    $194,380    $218,532  

 

$

256,750

 

 

$

265,643

 

 

$

215,735

 

  

 

   

 

   

 

 

 

14.

13.

CAPITAL STOCK

Common and Preferred Stock —Cinemark USA, Inc. has 1,500 shares of Class A common stock and 182,648 shares of Class B common stock outstanding, all of which isare held by Cinemark Holdings, Inc.  Holders of Class A common stock have exclusive voting rights. Holders of Class B common stock have no voting rights except upon any proposed amendments to the articles of incorporation. However, they may convert their Class B common stock, at their option, to Class A common stock. In the event of any liquidation, holders of the Class A and Class B common stock will be entitled to their pro-rata share of assets remaining after any holders of preferred stock have received their preferential amounts based on their respective shares held.

The Company has 1,000,000 shares of preferred stock, $1.00 par value, authorized with none issued or outstanding. The rights and preferences of preferred stock will be determined by the Board of Directors at the time of issuance.

The Company’s ability to pay dividends is effectively limited by the terms of its senior notes indentures its senior subordinated notes indenture and its senior secured credit facility, which also significantly restricts the ability of certain of the Company’s subsidiaries to pay dividends directly or indirectly to it. See Note 9. Furthermore, certain9 for a discussion of restrictions contained within the Company’s foreign subsidiaries currently have a deficit in retained earnings which prevents the Company from declaring and paying dividends from those subsidiaries.debt agreements.

Restricted Stock Options — Below is a summary of restricted stock option activity and related information for Cinemark Holdings, Inc. stock options held by the Company’s employees for the years ended December 31, 20132016, 2017 and 2014:2018:

 

  Year Ended   Year Ended 
  December 31, 2013   December 31, 2014 
      Weighted       Weighted 
      Average       Average 

 

Year Ended

 

 

Year Ended

 

 

Year Ended

 

  Number of   Exercise   Number of   Exercise 

 

December 31, 2016

 

 

December 31, 2017

 

 

December 31, 2018

 

  Options   Price   Options   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

   22,022    $7.63     14,584    $7.63  

 

 

757,775

 

 

$

30.73

 

 

 

606,618

 

 

$

33.51

 

 

 

650,581

 

 

$

35.81

 

Exercised

   (7,438  $7.63     (14,584  $7.63  
  

 

     

 

   

Granted

 

 

335,707

 

 

$

30.98

 

 

 

246,534

 

 

$

41.70

 

 

 

328,734

 

 

$

38.72

 

Vested

 

 

(430,056

)

 

$

26.60

 

 

 

(192,230

)

 

$

36.26

 

 

 

(250,442

)

 

$

31.27

 

Forfeited

 

 

(56,808

)

 

$

33.81

 

 

 

(10,341

)

 

$

33.48

 

 

 

(24,520

)

 

$

38.62

 

Outstanding at December 31

   14,584    $7.63     —      

 

 

606,618

 

 

$

33.51

 

 

 

650,581

 

 

$

35.81

 

 

 

704,353

 

 

$

38.68

 

  

 

     

 

   

Vested options at December 31

   14,584    $7.63     —      
  

 

     

 

   

The total intrinsic value of options exercised during the years ended December 2013 and 2014 was $168 and $296, respectively. The Company recognized tax benefits of approximately $71 and $124 related to the options exercised during the year ended December 31, 2013 and 2014, respectively.

F-32


CINEMARK USA, 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, 2013, 2014 and 2015:

   Year Ended   Year Ended   Year Ended 
   December 31, 2013   December 31, 2014   December 31, 2015 
   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

   1,534,163   $18.85     1,260,913   $21.86     878,897   $24.92  

Granted

   271,532   $30.09     269,774   $28.93     226,212   $42.79  

Vested

   (522,129 $17.27     (625,843 $20.53     (329,437 $23.72  

Forfeited

   (22,653 $22.92     (25,947 $22.94     (17,897 $27.58  
  

 

 

    

 

 

    

 

 

  

Outstanding at December 31

   1,260,913   $21.86     878,897   $24.92     757,775   $30.73  
  

 

 

    

 

 

    

 

 

  

During the year ended December 31, 2015,2018, Cinemark Holdings, Inc. granted 226,212328,734 shares of restricted stock to its directors and to employees of the Company. The fair value of the restricted stock granted was determined based on the market value of Cinemark Holdings, Inc.’s common stock on the datedates of grant, which ranged from $40.75$35.80 to $43.28$39.26 per share. The Company assumed forfeiture rates ranging from 0% to 10% for the restricted stock awards.  Restricted stock granted to directors vests over a one-year period.  Restricted stock granted to employees vests over periods ranging from one year to four years 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.

Below is a summary of restricted stock award activity recorded for the periods indicated:indicated.

 

   Year Ended December 31, 
   2013   2014   2015 

Compensation expense recognized during the period(1)

  $11,898    $8,591    $8,715  

Fair value of restricted shares that vested during the period(2)

  $9,161    $17,692    $13,276  

Income tax deduction upon vesting of restricted stock awards(3)

  $3,848    $5,171    $3,341  

 

 

Year Ended December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

Compensation expense recognized by the Company during the

   period

 

$

7,269

 

 

$

7,528

 

 

$

8,735

 

Additional compensation expense recognized by Cinemark

   Holdings, Inc. during the period

 

$

981

 

 

$

856

 

 

$

920

 

Fair value of restricted shares held by Company employees that

   vested during the period

 

$

13,739

 

 

$

7,255

 

 

$

8,699

 

Fair value of restricted shares held by Cinemark Holdings, Inc.’s

   directors that vested during the period

 

$

923

 

 

$

917

 

 

$

802

 

Income tax benefit recognized upon vesting of restricted stock

   awards held by Company employees

 

$

5,167

 

 

$

2,281

 

 

$

1,543

 

Additional income tax benefit recognized upon vesting of

   restricted stock awards held by Cinemark Holdings, Inc.'s directors

 

$

388

 

 

$

386

 

 

$

201

 

 

(1)Cinemark Holdings, Inc. recorded an additional $840, $943 and $885 of compensation expense related to these restricted stock awards during the years ended December 31, 2013, 2014 and 2015, respectively.
(2)The fair value of shares in which Cinemark Holdings, Inc.’s directors vested was $1,000, $1,081 and $1,148 during the years ended December 31, 2013, 2014 and 2015, respectively.
(3)Cinemark Holdings, Inc. recognized an additional tax benefit of $420, $454 and $482 on these vested awards during the years ended December 31, 2013, 2014 and 2015, respectively.

As of December 31, 2015,2018, the remaining unrecognized compensation expense related to these restricted stock awards was approximately $11,944$15,174, of which $11,490$14,758 will be recognized by the Company and $454$416 of which will be recognized by Cinemark Holdings, Inc. 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, 2013, 20142016, 2017 and 2015,2018, Cinemark Holdings, Inc. granted restricted stock units representing 115,107, 197,515253,661, 175,634 and 142,917228,194 hypothetical shares of Cinemark Holdings, Inc.’s common stock, respectively, to employees of the Company. 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”) for a two year measurement 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 and vest on a prorata basis according to the IRR achieved by the Company during the performance period. If the IRR for the defined 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 defined 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 defined measurement period is at least 12.5% (11.5%

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

for the 2015 grant), which is the maximum, 100% of the restricted stock units vest. Further, asAs an example, if the Company achieves an IRR equal to 11.0%,9.0% for the 2016 grant, 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 service requirement and will be paid in the form of common stock of Cinemark Holdings, Inc. if the participant continues to provide services through the fourth anniversary of the grant date.

F-33


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The financial performance factors and respective vesting rates for each of the 2016, 2017 and 2018 grants are as follows:

 

 

Year Ended December 31,

 

 

Percentage of Shares Vesting

 

 

 

2016

 

 

2017

 

 

2018

 

 

 

 

 

Threshold IRR

 

6.0%

 

 

7.0%

 

 

7.0%

 

 

33.3%

 

Target IRR

 

8.0%

 

 

9.5%

 

 

9.5%

 

 

66.6%

 

Maximum IRR

 

10.0%

 

 

13.0%

 

 

13.0%

 

 

100.0%

 

At the time of each of the restricted stock unit grants, the Company assumes the IRR level to be reached for the defined measurement period will be the mid-pointtarget IRR level in determining the amount of compensation expense to record for such grants. If and when additional information becomes available to indicate that something other than the mid-pointtarget IRR level will be achieved, the Company adjusts compensation expense on a prospective basis over the remaining service period. The Company assumed a forfeiture rates ranging from 0% torate of 5% for the restricted stock unit awards granted during 2015.2018. 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 sharesunits that could vest under restricted stock unit awards granted during the years ended December 31, 2013, 20142016, 2017 and 20152018 at each of the three levels of financial performance (excluding forfeitures):

 

  Granted During the Year Ended December 31, 
  2013  2014  2015 
  Number of
Units
  Value at
Grant(1)
  Number of
Units
  Value at
Grant(1)
  Number of
Units
  Value at
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  

 

 

Granted During the Year Ended December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

 

 

Number of

 

 

Value at

 

 

Number of

 

 

Value at

 

 

Number of

 

 

Value at

 

 

 

Units

 

 

Grant(1)

 

 

Units

 

 

Grant(1)

 

 

Units

 

 

Grant(1)

 

at threshold IRR

 

 

84,554

 

 

$

2,522

 

 

 

58,545

 

 

$

2,481

 

 

 

76,065

 

 

$

2,967

 

at target IRR

 

 

169,107

 

 

$

5,044

 

 

 

117,089

 

 

$

4,961

 

 

 

152,129

 

 

$

5,938

 

at maximum IRR

 

 

253,661

 

 

$

7,568

 

 

 

175,634

 

 

$

7,442

 

 

 

228,194

 

 

$

8,906

 

 

(1)

The weighted average grant date fair values for units issued during the years ended December 31, 2013, 2014,2016 and 20152017 were $29.44, $28.54$29.83 and $43.19,$42.37, respectively.  The grant date fair values for the units issued during the year ended December 31, 2018 ranged from $37.55 to $39.03.  

Below is a summary of activity for restricted stock unit awards for Cinemark Holdings, Inc. for the periods indicated:

 

 Year Ended December 31, 

 

Year Ended December 31,

 

 2013 2014 2015 

 

2016

 

 

2017

 

 

2018

 

Number of restricted stock unit awards that vested during the period

 295,751   395,751   123,769  

 

 

213,984

 

 

 

97,115

 

 

 

127,084

 

Fair value of restricted stock unit awards that vested during the period

 $8,723   $11,420   $5,483  

 

$

7,260

 

 

$

4,155

 

 

$

4,846

 

Accumulated dividends paid upon vesting of restricted stock unit awards

 $939   $1,352   $442  

 

$

662

 

 

$

558

 

 

$

526

 

Compensation expense recognized during the period

 

$

5,144

 

 

$

4,297

 

 

$

4,681

 

Income tax benefit recognized upon vesting of restricted stock unit awards

 $3,663   $4,796   $2,303  

 

$

3,049

 

 

$

1,745

 

 

$

708

 

Compensation expense recognized during the period

 $4,148   $3,284   $6,158  

F-34


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

During the year ended December 31, 2015,2016, the Compensation Committee of the Board of Directors of Cinemark Holdings, Inc. approved a modification to each of the 2013 and 20142015 restricted stock unit grants. The modificationsmodification resulted in a cap on the foreign currency exchange rate devaluation impact to be used in calculating the IRR for the respective measurement periods.  The Company revalued each of the grants based on Cinemark Holdings, Inc.’sthe Company’s stock price at the date of modification, which was $33.02.$37.98. The modifications resulted in incremental compensation expense of approximately $2,460$562 for the year ended December 31, 2015.2016.  

As of December 31, 2015,2018, the Company had restricted stock units outstanding that represented a total 544,076594,266 hypothetical shares of Cinemark Holdings, Inc.’s common stock, net of actual cumulative forfeitures of 22,98518,667 units, assuming the maximum IRR is achieved for all of the outstanding restricted stock unit awards.

As of December 31, 2015,2018, the remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $6,600,$8,416, which reflects anthe maximum IRR level of 11.1% that was achieved for the 2012 grants,2015 grant, an IRR level of 12.5%7.2% that was achieved for the 2013 and 2014 grants2016 grant, an IRR level of 11.2% that is estimated for the 2017 grant and an IRR level of 9.5% that is estimated to be achieved for the 2015 grant.2018 grants. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

15.

14.

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 4)

  $98,797    $8,216    $15,421  

Investment in AC JV, LLC (see Note 5)

  $8,333    $—      $—    

Issuance of promissory note related to investment in AC JV, LLC (see Note 5)

  $(8,333  $—      $—    

Noncash distributions to Cinemark Holdings, Inc.

  $(4,971  $—      $(17,935

Receipt of promissory note related to sale of investment in Taiwan joint venture

  $—      $—      $2,304  

 

 

Year Ended December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

Cash paid for interest

 

$

108,101

 

 

$

99,232

 

 

$

98,411

 

Cash paid for income taxes, net of refunds received

 

$

93,368

 

 

$

95,043

 

 

$

64,199

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Change in accounts payable and accrued expenses for the

   acquisition of theatre properties and equipment (1)

 

$

(29,471

)

 

$

9,349

 

 

$

(5,728

)

Theatre properties acquired under capital lease

 

$

33,282

 

 

$

46,727

 

 

$

18,851

 

Investment in NCM – receipt of common units (see

   Note 4)

 

$

11,111

 

 

$

18,363

 

 

$

5,012

 

Interest expense - NCM (see Note 3)

 

$

 

 

$

 

 

$

(19,724

)

 

(1)

Additions to theatre properties and equipment included in accounts payable as of December 31, 20142017 and 20152018 were $13,235$31,276 and $10,744,$37,004, respectively.

F-35

16.INCOME TAXES

Income before income taxes consisted of the following:

   Year Ended December 31, 
   2013   2014   2015 

Income before income taxes:

      

U.S.

  $164,904    $208,377    $262,336  

Foreign

   101,177     84,542     88,015  
  

 

 

   

 

 

   

 

 

 

Total

  $266,081    $292,919    $350,351  
  

 

 

   

 

 

   

 

 

 

Current and deferred income taxes were as follows:

   Year Ended December 31, 
   2013   2014   2015 

Current:

      

Federal

  $98,206    $62,686    $72,185  

Foreign

   42,690     27,681     35,874  

State

   11,056     6,256     10,806  
  

 

 

   

 

 

   

 

 

 

Total current expense

  $151,952    $96,623    $118,865  
  

 

 

   

 

 

   

 

 

 

Deferred:

      

Federal

  $(30,833  $6,322    $10,420  

Foreign

   2,653     (6,437   (3,339

State

   (9,612   642     4,014  
  

 

 

   

 

 

   

 

 

 

Total deferred taxes

   (37,792   527     11,095  
  

 

 

   

 

 

   

 

 

 

Income taxes

  $114,160    $97,150    $129,960  
  

 

 

   

 

 

   

 

 

 


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

15.

INCOME TAXES

On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act made changes to the U.S. tax code, which included (1) reduced U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries, (3) a one-time transition tax on certain undistributed earnings of foreign subsidiaries, and (4) created new taxes on certain foreign-sourced earnings.  

As of December 31, 2018, the amounts recorded for the Tax Act are final for the 2017 transition tax, the re-measurement of deferred taxes, and the Company’s reassessment of valuation allowances.  The Company recorded a net additional charge as a result of the Tax Act and its recently issued guidance of $19,180, all non-cash, including a true up of the re-measurement of deferred tax liabilities using the lower U.S. corporate income tax rate and a reduction in a deferred tax asset with regard to foreign tax credit carryforwards.

The Company’s provision for federal and foreign income tax expense for continuing operations consisted of the following:

 

 

Year Ended December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

Income before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

277,474

 

 

$

282,896

 

 

$

292,238

 

Foreign

 

 

85,890

 

 

 

64,842

 

 

 

21,007

 

Total

 

$

363,364

 

 

$

347,738

 

 

$

313,245

 

Current and deferred income taxes were as follows:

 

 

Year Ended December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

66,210

 

 

$

55,224

 

 

$

47,333

 

Foreign

 

 

32,047

 

 

 

29,306

 

 

 

11,822

 

State

 

 

12,061

 

 

 

10,741

 

 

 

13,690

 

Total current expense

 

$

110,318

 

 

$

95,271

 

 

$

72,845

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(13,667

)

 

$

(14,046

)

 

$

27,055

 

Foreign

 

 

1,674

 

 

 

(4,270

)

 

 

(6,166

)

State

 

 

6,526

 

 

 

3,301

 

 

 

2,298

 

Total deferred taxes

 

$

(5,467

)

 

$

(15,015

)

 

$

23,187

 

Income taxes

 

$

104,851

 

 

$

80,256

 

 

$

96,032

 

F-36


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

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,

 

  2013   2014   2015 

 

2016

 

 

2017

 

 

2018

 

Computed statutory tax expense

  $93,128    $102,522    $122,623  

 

$

127,176

 

 

$

121,708

 

 

$

65,781

 

Foreign inflation adjustments

   67     641     (1,295

 

 

(281

)

 

 

 

 

State and local income taxes, net of federal income tax impact

   858     4,634     9,640  

 

 

12,081

 

 

 

12,857

 

 

 

12,686

 

Foreign losses not benefited and other changes in valuation allowance

   (2,052   (275   (2,408

Foreign losses not benefited and changes in valuation allowance

 

 

(34,757

)

 

 

249

 

 

 

822

 

Foreign tax rate differential

   (336   (2,125   (2,660

 

 

(942

)

 

 

(245

)

 

 

2,235

 

Foreign dividends

   3,294     1,083     —    

 

 

68,684

 

 

 

13,662

 

 

 

 

Sale of Mexican subsidiaries and related changes in intangible assets

   21,406     (10,065   —    

Foreign tax credits

 

 

(62,815

)

 

 

(21,647

)

 

 

3,927

 

Impacts related to 2017 Tax Act (1)(2)

 

 

 

 

(44,889

)

 

 

19,180

 

Changes in uncertain tax positions

   (2,024   (1,540   3,717  

 

 

921

 

 

 

983

 

 

 

(6,139

)

Other — net

   (181   2,275     343  

 

 

(5,216

)

 

 

(2,422

)

 

 

(2,460

)

  

 

   

 

   

 

 

Income taxes

  $114,160    $97,150    $129,960  

 

$

104,851

 

 

$

80,256

 

 

$

96,032

 

  

 

   

 

   

 

 

The Company reinvests the undistributed earnings of its non-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 subsidiary in Ecuador.

(1)

The year ended December 31, 2018 includes a one-time true-up of deferred taxes of $1,913 and a reduction in deferred tax assets with regard to foreign tax credit carryforwards of $17,267.

(2)

The year ended December 31, 2017 includes one-time benefit due to re-measurement of net deferred tax liabilities using a lower U.S. corporate tax rate and a reassessment of permanently reinvested earnings of ($79,834), a deemed repatriation tax of $14,512, and a reduction in deferred tax assets with regard to foreign tax credit carryforwards of $20,433.

As of December 31, 2015,2018, all earnings invested offshore subject to the Tax Act have been included in the transition tax. As of December 31, 2018, the Company had approximately $415,323 of accumulated undistributed earnings and profits, approximately $373,768 of which was subject to the one-time transition tax pursuant to the Tax Act. Any additional tax due on the repatriation of previously taxed earnings would generally be foreign withholding and U.S. state income taxes. The Company does not intend to repatriate these offshore earnings and profits, and therefore has not providedrecorded any deferred taxes on approximately $316,000 of undistributed earnings of non-U.S. subsidiaries, as it is the Company’s policy to indefinitely reinvest these earnings in non-U.S. operations. However, thesuch earnings. The Company may periodically repatriate a portion of these earnings to the extent that it does not incur an additional U.S. tax liability. Quantificationconsiders any excess of the amount for financial reporting over the tax basis of its investment in its foreign subsidiaries to be indefinitely reinvested. At this time, the determination of deferred tax liability, if any, associated with indefinitely reinvested earningsliabilities on this amount is not practicable.

F-37


CINEMARK USA, 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, 20142017 and 20152018 consisted of the following:

 

  December 31, 

 

December 31,

 

  2014   2015 

 

2017

 

 

2018

 

Deferred liabilities:

    

 

 

 

 

 

 

 

 

Theatre properties and equipment

  $127,010    $141,155  

 

$

147,208

 

 

$

158,797

 

Tax impact of items in accumulated other comprehensive income (loss)

   55     158  

Intangible asset — other

   29,342     28,889  

 

 

30,770

 

 

 

33,561

 

Intangible asset — tradenames

   111,726     112,413  

 

 

72,967

 

 

 

73,261

 

Investment in partnerships

   111,328     108,733  

 

 

67,449

 

 

 

63,217

 

  

 

   

 

 

Total deferred liabilities

   379,461     391,348  

 

 

318,394

 

 

 

328,836

 

  

 

   

 

 

Deferred assets:

    

 

 

 

 

 

 

 

 

Deferred lease expenses

   27,341     26,966  

 

 

14,714

 

 

 

13,464

 

Exchange loss

   —       3,736  

 

 

220

 

 

 

1,306

 

Deferred revenue - NCM

   124,366     128,642  

 

 

85,816

 

 

 

70,688

 

Capital lease obligations

   73,306     75,966  

 

 

67,369

 

 

 

63,895

 

Tax loss carryforwards

   7,764     7,379  

Alternative minimum tax and other credit carryforwards

   43,384     41,300  

Tax impact of items in accumulated other comprehensive income

 

 

 

 

 

2,237

 

Other tax loss carryforwards

 

 

15,564

 

 

 

15,608

 

Other tax credit carryforwards

 

 

38,436

 

 

 

42,989

 

Other expenses, not currently deductible for tax purposes

   25,807     20,204  

 

 

13,801

 

 

 

26,776

 

  

 

   

 

 

Total deferred assets

   301,968     304,193  

 

 

235,920

 

 

 

236,963

 

  

 

   

 

 

Net deferred income tax liability before valuation allowance

   77,493     87,155  

 

 

82,474

 

 

 

91,873

 

Valuation allowance against deferred assets - current

   2,384     —    

Valuation allowance against deferred assets – non-current

   50,489     50,636  

 

 

35,246

 

 

 

54,725

 

  

 

   

 

 

Net deferred income tax liability

  $130,366    $137,791  

 

$

117,720

 

 

$

146,598

 

  

 

   

 

 

Net deferred tax liability — Foreign

  $12,213    $4,212  

Net deferred tax (asset) liability — Foreign

 

$

3,073

 

 

$

(5,449

)

Net deferred tax liability — U.S.

   118,153     133,579  

 

 

114,647

 

 

 

152,047

 

  

 

   

 

 

Total

  $130,366    $137,791  

 

$

117,720

 

 

$

146,598

 

  

 

   

 

 

The Company’s

A significant portion of our foreign tax credit carryforwards began to expire 2015.in 2023.  Some foreign net operating losses will expireexpired in the next reporting period;2018; 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 2035.2037.

During November 2015,The Company’s valuation allowance changed from $35,246 at December 31, 2017 to $54,725 at December 31, 2018 (see Note 19). The increase was a result of recently issued guidance for the FASB issued ASU 2015-17, which simplifiesTax Act and the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax assets and liabilities be classified as long-termimpact on the balance sheet. The Company elected to early adopt ASU 2015-17 effective December 31, 2015, on a prospective basis. Adoptionestimated usage of ASU 2015-17 resulted in a reclassification of the Company’s net current deferredforeign 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.credit carryforwards before their expiration.  

F-38


CINEMARK USA, 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, 2013, 20142016, 2017 and 2015:2018:

 

  Year Ended December 31, 

 

Year Ended December 31,

 

  2013   2014   2015 

 

2016

 

 

2017

 

 

2018

 

Balance at January 1,

  $33,222    $18,780    $16,515  

 

$

17,133

 

 

$

17,403

 

 

$

18,266

 

Gross increases-tax positions in prior periods

   413     10     40  

Gross decreases-tax positions in prior periods

   —       (2,379   —    

Gross increases - tax positions in prior periods

 

 

13

 

 

 

92

 

 

 

Gross decreases - tax positions in prior periods

 

 

 

 

(12

)

 

 

(143

)

Gross increases - current period tax positions

   1,476     1,324     2,112  

 

 

923

 

 

 

265

 

 

 

424

 

Gross decreases - current period tax positions

   —       —       —    

Settlements

   (15,444   (963   (871

 

 

(924

)

 

 

(177

)

 

 

(7,191

)

Foreign currency translation adjustments

   (887   (257   (663

 

 

258

 

 

 

695

 

 

 

(795

)

  

 

   

 

   

 

 

Balance at December 31,

  $18,780    $16,515    $17,133  

 

$

17,403

 

 

$

18,266

 

 

$

10,561

 

  

 

   

 

   

 

 

The Company had $15,693$20,231 and $17,008$13,953 of unrecognized tax benefits, including interest and penalties, as of December 31, 20142017 and 2015,2018, respectively. Of these amounts, $15,693$20,231 and $17,008$13,953  represent the amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate for the years ended December 31, 20142017 and 2015,2018, respectively. The Company had $2,500$5,288 and $3,198$3,390 accrued for interest and penalties as of December 31, 20142017 and 2015,2018, respectively.

The Company participates in the consolidatedand its subsidiaries file income tax return of Cinemark Holdings, Inc.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 2012.2015. Additionally, the Company began and concluded an audit from the Internal Revenue Service for the year 2016, with no changes.  The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2011. Certain state returns were amended as a result of the Internal Revenue Service examination closures for 2007 through 2009, and the statutes remain open for those amendments.2014. 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 2004.2005.

The Company is currently under audit in the non-U.S. tax jurisdictionsjurisdiction of Brazil and Chile.Brazil. The Company believes that it is reasonably possible that theconcluded an audit in Chile audit will be completed within the next twelve months.in 2018 and recorded a tax benefit of $6,802.

17.

16.

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 mostsome 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 $46,003$40,929 and $43,333$39,235 at December 31, 20142017 and 2015,2018, respectively, has been provided 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,

 

  2013   2014   2015 

 

2016

 

 

2017

 

 

2018

 

Fixed rent expense

  $224,056    $237,891    $240,057  

 

$

242,927

 

 

$

247,908

 

 

$

248,543

 

Contingent rent and other facility lease expenses

   83,795     79,205     79,704  

 

 

78,367

 

 

 

80,289

 

 

 

74,773

 

  

 

   

 

   

 

 

Total facility lease expense

  $307,851    $317,096    $319,761  

 

$

321,294

 

 

$

328,197

 

 

$

323,316

 

  

 

   

 

   

 

 

F-39


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

Future minimum lease payments under noncancelable operating and capital leases that have initial or remaining terms in excess of one year at December 31, 20152018 are due as follows:follows(1):

 

 

Operating

 

 

Capital

 

  Operating
Leases
   Capital
Leases
 

 

Leases

 

 

Leases

 

2016

  $248,498    $35,156  

2017

   236,630     33,640  

2018

   210,089     34,050  

2019

   181,967     33,394  

 

$

253,323

 

 

$

42,434

 

2020

   161,279     32,441  

 

 

242,336

 

 

 

41,502

 

2021

 

 

230,396

 

 

 

34,589

 

2022

 

 

204,628

 

 

 

32,462

 

2023

 

 

176,802

 

 

 

28,534

 

Thereafter

   661,398     155,164  

 

 

677,091

 

 

 

166,375

 

  

 

   

 

 

Total

  $1,699,861     323,845  

 

$

1,784,576

 

 

 

345,896

 

  

 

   

Amounts representing interest payments

     (96,113

 

 

 

 

 

 

(86,364

)

    

 

 

Present value of future minimum payments

     227,732  

 

 

 

 

 

 

259,532

 

Current portion of capital lease obligations

     (18,780

 

 

 

 

 

 

(27,065

)

    

 

 

Capital lease obligations, less current portion

    $208,952  

 

 

 

 

 

$

232,467

 

    

 

 

(1)  Represents amounts before the adoption of ASC Topic 842 – Leases.  See Note 2 for discussion of the expected impact of adoption.

Employment AgreementsOn August 20, 2015As of December 31, 2018, the Cinemark Holdings, Inc.’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. Cinemark Holdings, Inc. hashad employment agreements with Lee Roy Mitchell, Tim Warner, Mark Zoradi, Sean Gamble, Robert Copple, Valmir Fernandes and Michael Cavalier and Rob Carmony. Except for Mr. Warner’s, theCavalier. The employment agreements are subject to automatic extensions for a one-yearone year period, unless the employment agreements are terminated. Mr. Warner’s employment agreement 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) by Cinemark Holdings, Inc.’sthe 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 the Compensation Committee within the first 90 days of the fiscal year.

Effective February 20, 2018, the Company and Mr. Zoradi amended his employment agreement extending the term to December 31, 2019.

Effective January 2, 2018, Robert Carmony, Executive Vice President – Innovation, retired from the Company and his employment agreement was terminated.

Retirement Savings Plan — The Company has a 401(k) retirement savings plan (“401(k) Plan”) for the benefit of all eligible employees and makes matching contributions as determined annually byin accordance with the board of directors.401(k) Plan. Employer matching contribution payments of $2,718$6,380 and $3,043$5,076 were made in 2014 (for plan year 2013)during 2017 and 2015 (for plan year 2014),2018, respectively. A liability of approximately $3,333 has been$1,374 was recorded at December 31, 20152018 for employer contribution payments to be made in 2016 (for2019 for the remaining amounts owed for plan year 2015).2018.

Litigation Joseph Amey, et al.Silken Brown v. Cinemark USA, Inc.,Case No. 3:13cv05669, In the United States District Court for the Northern District of California, San Francisco Division. Division. The case presents putative class action claims for damagespenalties and attorney’sattorney's fees arising from employeealleged violations of the California 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.statement law.  The claims areclaim is also asserted as a representative action under the California Private Attorney General Act (“PAGA”).(PAGA) for penalties. The CompanyCourt granted class certification. The company denies the claims, denies that class certification is appropriate, and denies that a PAGA representative actionthe plaintiff has standing to assert the claims alleged and is vigorously defending against the claims.  The company denies the claims, denies that class certification is appropriate, denies that the plaintiff has standing to assert the claims alleged and is vigorously defending against the claims.  The Company denies any violation of law; however, to avoid the cost and uncertainty associated with litigation the Company and the plaintiff entered into a Joint Stipulation of Class Action Settlement and Release of Claims (the “Settlement Agreement”) to fully and finally dismiss all claims that would be brought in the case.  The Settlement Agreement must be approved by the Court.  During the year ended December 31, 2018, the Company recorded a litigation reserve based on the proposed Settlement Agreement in loss on disposal of assets and other on the consolidated income statement.

F-40


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Flagship Theatres of Palm Desert, LLC d/b/a Cinemas Palme D’Or v. Century Theatres, Inc., and Cinemark USA, Inc.; Superior Court of the State of California, County of Los Angeles.  Plaintiff in this case alleges that the Company violated California antitrust and unfair competition laws by engaging in “circuit dealing” with various motion picture distributors and tortuously interfered with Plaintiff’s business relationships.  Plaintiff seeks compensatory damages, trebling of those damages under California law, punitive damages, injunctive relief, attorneys’ fees, costs and plansinterest.  Plaintiff also alleges that the Company’s conduct ultimately resulted in closure of its theatre in June 2016.  The Company denied the allegations.  In 2008, the Company moved for summary judgment on Plaintiff’s claims, arguing primarily that clearances between the theatres at issue were lawful and that Plaintiff lacked proof sufficient to vigorously defend against allsupport certain technical elements of its antitrust claims.  The trial court granted that motion and dismissed Plaintiff’s claims.  Plaintiff appealed and, in 2011, the Court recently determinedof Appeal reversed, holding, among other things, that class certificationPlaintiff’s claims were not about the illegality of clearances but were focused, instead, on “circuit dealing.”  Having re-framed the claims in that manner, the Court of Appeal held that the trial court’s decision to limit discovery to the market where the theatres at issue operated was an error, as “circuit dealing” necessarily involves activities in different markets.  Upon return to the trial court, the parties engaged in additional, broadened discovery related to Plaintiff’s “circuit dealing” claim.  Thereafter, the Company moved again for summary judgment on all of Plaintiff’s claims.  That new motion for summary judgment was pending when, on or about April 11, 2014, the trial court granted the Company’s motion for terminating sanctions and entered a judgment dismissing the case with prejudice.  Plaintiff then appealed that second dismissal, seeking to have the judgment reversed and the case remanded to the trial court.  The Court of Appeal issued a ruling on May 24, 2016, reversing the granting of terminating sanctions and instead imposed a lesser evidentiary and damages preclusion sanction.  The case returned to the trial court on October 6, 2016.  On May 10, 2018, after a five-week jury trial, the jury found no liability on one circuit dealing claim and awarded Plaintiff damages on the other claim, which are tripled for antitrust damage awards.  Plaintiff would also be entitled to certain court costs and to seek at least some portion of its attorney’s fees.  During the year ended December 31, 2018, the Company recorded a litigation reserve based on an estimate of the jury award, which is not appropriatereflected in loss on disposal of assets and determined thatother on the consolidated income statement.  The trial court denied a PAGA representative action is not appropriate. The plaintiff may appeal these rulings.motion for a judgment notwithstanding the verdict and a motion for a new trial. The Company is unableintends to appeal the judgment.  Although the Company denies that it engaged in any form of circuit dealing, it cannot predict the outcome of the litigationits pending motions or the range of potential loss.future appeals.

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.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

18.

17.

SEGMENTS

The Company manages its international market and its U.S. market as separate reportable operating segments. Thesegments, with the international segment consistsconsisting of operations in Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Curacao. The Company sold its theatres in Mexico on November 15, 2013.Paraguay. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues, primarily screen advertising.revenues. The measure of segment profit and loss the Company uses to evaluate performance and allocate its resources is Adjusted EBITDA, as definedshown in the reconciliation table below.below, because we believe it provides management and investors with additional information to measure the Company’s performance and liquidity, estimate the Company’s value and evaluate the Company’s ability to service debt. In addition, the Company uses Adjusted EBITDA for incentive

F-41


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

compensation purposes.  The Company does not report asset information by segment because that information is not used to evaluate theCompany performance or allocate resources between segments.

Below is a breakdown of select financial information by reportable operating segment:

 

 

Year Ended December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

2,230,693

 

 

$

2,236,237

 

 

$

2,551,719

 

International

 

 

701,573

 

 

 

769,436

 

 

 

682,778

 

Eliminations

 

 

(13,501

)

 

 

(14,126

)

 

 

(12,762

)

Total revenues

 

$

2,918,765

 

 

$

2,991,547

 

 

$

3,221,735

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

550,150

 

 

$

559,693

 

 

$

650,189

 

International

 

 

157,690

 

 

 

165,576

 

 

 

132,941

 

Total Adjusted EBITDA

 

$

707,840

 

 

$

725,269

 

 

$

783,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

242,271

 

 

$

321,040

 

 

$

270,870

 

International

 

 

84,637

 

 

 

59,822

 

 

 

75,203

 

Total capital expenditures

 

$

326,908

 

 

$

380,862

 

 

$

346,073

 

 

   Year Ended December 31, 
   2013   2014   2015 

Revenues:

      

U.S.

  $1,912,674    $1,934,990    $2,137,733  

International

   783,053     704,623     728,735  

Eliminations

   (12,833   (12,623   (13,859
  

 

 

   

 

 

   

 

 

 

Total revenues

  $2,682,894    $2,626,990    $2,852,609  
  

 

 

   

 

 

   

 

 

 
   Year Ended December 31, 
   2013   2014   2015 

Adjusted EBITDA(1):

      

U.S.

  $456,866    $438,776    $499,138  

International

   169,834     159,662     166,416  
  

 

 

   

 

 

   

 

 

 

Total Adjusted EBITDA

  $626,700    $598,438    $665,554  
  

 

 

   

 

 

   

 

 

 
   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  
  

 

 

   

 

 

   

 

 

 

 

(1)

Distributions from NCMequity investees are reported entirely within the U.S. operating segmentsegment.

The following table sets forth a reconciliation of net income to Adjusted EBITDA:

 

 

Year Ended December 31,

 

 

 

2016

 

 

2017

 

 

2018

 

Net income

 

$

258,513

 

 

$

267,482

 

 

$

217,213

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

104,851

 

 

 

80,256

 

 

 

96,032

 

Interest expense (1)

 

 

108,313

 

 

 

105,918

 

 

 

109,994

 

Loss on debt amendments and refinancing

 

 

13,445

 

 

 

521

 

 

 

1,484

 

Other income (2)

 

 

(44,813

)

 

 

(43,121

)

 

 

(18,450

)

Other cash distributions from equity investees (3)

 

 

21,916

 

 

 

25,973

 

 

 

30,143

 

Depreciation and amortization

 

 

209,071

 

 

 

237,513

 

 

 

261,162

 

Impairment of long-lived assets

 

 

2,836

 

 

 

15,084

 

 

 

32,372

 

Loss on disposal of assets and other

 

 

20,459

 

 

 

22,812

 

 

 

38,702

 

Deferred lease expenses

 

 

(990

)

 

 

(1,268

)

 

 

(1,320

)

Amortization of long-term prepaid rents

 

 

1,826

 

 

 

2,274

 

 

 

2,382

 

Share based awards compensation expense

 

$

12,413

 

 

$

11,825

 

 

$

13,416

 

Adjusted EBITDA

 

$

707,840

 

 

$

725,269

 

 

$

783,130

 

(1)

Includes amortization of debt issue costs.

(2)

Includes interest income, foreign currency exchange gain (loss), interest expense – NCM and equity in income of affiliates and excludes distributions from NCM.

(3)

Includes distributions received from equity investees that were recorded as a reduction of the respective investment balances.  

F-42


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

The following table sets forth a reconciliation of net income to Adjusted EBITDA:

   Year Ended December 31, 
   2013   2014   2015 

Net income

  $151,921    $195,769    $220,391  

Add (deduct):

      

Income taxes

   114,160     97,150     129,960  

Interest expense(1)

   124,714     113,698     112,741  

Loss on early retirement of debt

   72,302     —       —    

Loss on amendment to debt agreement

   —       —       925  

Other income(2)

   (24,688   (22,150   (20,041

Depreciation and amortization

   163,970     175,656     189,206  

Impairment of long-lived assets

   3,794     6,647     8,801  

(Gain) loss on sale of assets and other

   (3,845   15,715     8,143  

Deferred lease expenses

   5,701     2,536     (1,806

Amortization of long-term prepaid rents

   2,625     1,542     2,361  

Share based awards compensation expense

   16,046     11,875     14,873  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $626,700    $598,438    $665,554  
  

 

 

   

 

 

   

 

 

 

(1)Includes amortization of debt issue costs.
(2)Includes interest income, foreign currency exchange loss, and equity in income of affiliates and excludes distributions from NCM.

Financial Information About Geographic Area

Below is a breakdown of select financial information by geographic area:

 

  Year Ended December 31, 

 

Year Ended December 31,

 

  2013   2014   2015 

 

2016

 

 

2017

 

 

2018

 

Revenues

      

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

  $1,912,674    $1,934,990    $2,137,733  

 

$

2,230,693

 

 

$

2,236,237

 

 

$

2,551,719

 

Brazil

   325,762     333,919     291,959  

 

 

304,407

 

 

 

341,485

 

 

 

283,009

 

Other foreign countries

   457,291     370,704     436,776  

Other international countries

 

 

397,166

 

 

 

427,951

 

 

 

399,769

 

Eliminations

   (12,833   (12,623   (13,859

 

 

(13,501

)

 

 

(14,126

)

 

 

(12,762

)

  

 

   

 

   

 

 

Total

  $2,682,894    $2,626,990    $2,852,609  

 

$

2,918,765

 

 

$

2,991,547

 

 

$

3,221,735

 

  

 

   

 

   

 

 

 

   December 31, 
   2014   2015 

Theatres properties and equipment, net

    

U.S.

  $1,094,076    $1,175,535  

Brazil

   204,107     163,505  

Other foreign countries

   152,629     166,029  
  

 

 

   

 

 

 

Total

  $1,450,812    $1,505,069  
  

 

 

   

 

 

 

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

 

December 31, 2017

 

 

December 31, 2018

 

Theatre Properties and Equipment-net

 

 

 

 

 

 

 

 

U.S.

 

$

1,439,168

 

 

$

1,479,603

 

Brazil

 

 

179,669

 

 

 

140,570

 

Other international countries

 

 

209,217

 

 

 

212,960

 

Total

 

$

1,828,054

 

 

$

1,833,133

 

 

19.

18.

RELATED PARTY TRANSACTIONS

The Company manages theatres for Laredo 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 Cinemark Holdings, Inc.’s Chairman of the Board and directly and indirectly owns approximately 9%8% of Cinemark Holdings, Inc.’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 $558, $564$506, $586 and $567$654 of management fee revenues during the years ended December 31, 2013, 20142016, 2017 and 2015,2018, 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, 2013, 20142016, 2017 and 2015,2018, the aggregate amounts paid to Copper Beech Capital, LLC for the use of the aircraft was approximately $91, $74$110, $131 and $410,$68, respectively.

The Company holds events for its employees and their families at Pinstack, an entertainment facility, at various times throughout the year.  Pinstack is majority-owned by Mr. Mitchell and his wife, Tandy Mitchell.  In connection with the event, the Company paid Pinstack approximately $70, $36 and $5 during the years ended December 31, 2016, 2017 and 2018, respectively.  

F-43


CINEMARK USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The Company currently leases 1514 theatres and one parking facility from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy. Raymond Syufy is one of Cinemark Holdings, Inc.’s directors and is an officer of the general partner of Syufy. Of these 1615 leases, 1514 have fixed minimum annual rent. The one lease without minimum annual rent has rent based upon a specified percentage of gross sales as defined in the lease. For the years ended December 31, 2013, 20142016, 2017 and 2015,2018, the Company paid total rent of approximately $22,876, $21,040$21,124, $22,483 and $20,581,$23,447, respectively, to Syufy.

The Company has paid certain fees and expenses on behalf of its parent, Cinemark Holdings, Inc. and Cinemark Holdings, Inc. has paid income taxes on behalf of the Company. The Company paid cash dividends to Cinemark Holdings, Inc. of $105,150, $115,000$124,900, $134,500 and $115,225$148,750 during the years ended December 31, 2013, 20142016, 2017 and 2015,2018, respectively. Additionally, theThe Company made noncash distributions tohad a receivable from Cinemark Holdings, Inc. of $4,971, $0$14,581 and $17,935 during$19,530 as of December 31, 2016, 2017 and 2018, respectively.

The Company has a 50% voting interest in FE Concepts, a joint venture with AWSR, an entity owned by Lee Roy Mitchell and Tandy Mitchell.  FE Concepts will develop and operate a family entertainment center that offers bowling, gaming, movies and other amenities.  See Note 5 for further discussion.  

19.

VALUATION AND QUALIFYING ACCOUNTS

The Company’s valuation allowance for deferred tax assets for the years ended December 31, 2013, 20142016, 2017 and 2015, respectively, related to expenses paid on behalf of Cinemark Holdings, Inc.2018 were as follows:

 

 

Valuation Allowance for Deferred Taxes

 

Balance at January 1, 2016

 

$

50,636

 

Additions

 

 

483

 

Deductions

 

 

(36,595

)

Balance at December 31, 2016

 

$

14,524

 

Additions

 

 

21,347

 

Deductions

 

 

(625

)

Balance at December 31, 2017

 

$

35,246

 

Additions (1)

 

 

22,005

 

Deductions

 

 

(2,526

)

Balance at December 31, 2018

 

$

54,725

 

(1)

A valuation allowance was provided against certain deferred tax assets arising from carryforwards of unused foreign tax credit benefits.

F-44


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

20.

VALUATION AND QUALIFYING ACCOUNTS

Condensed Consolidating Financial Information of Subsidiary Guarantors

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  
  

 

 

 

21.SUBSEQUENT EVENT

On February 16, 2016, the Compensation Committee of the Cinemark Holdings, Inc.’s board of directors approved 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.

22.CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION OF SUBSIDIARY GUARANTORS

As of December 31, 2015,2018, the Company had outstanding $400,000 aggregate principal amount of 5.125% senior notes due 2022, or the 5.125% Senior Notes, $530,000and $755,000 aggregate principal amount of 4.875% senior notes due 2023,  or the 4.875% Senior Notes, and $200,000 aggregate principal amount of 7.375% senior subordinated notes due 2021, or the Senior Subordinated Notes, (collectively the “Notes”). These Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the following subsidiaries of Cinemark USA, Inc.:

Sunnymead Cinema Corp., Cinemark Properties, Inc., Greeley Holdings, Inc., Cinemark Partners I, Inc., CNMK Investments, Inc., CNMK Texas Properties, LLC., Cinemark Concessions LLC, Century Theatres, Inc., Marin Theatre Management, LLC, Century Theatres NG, LLC, Cinearts LLC, Cinearts Sacramento, LLC, Corte Madera Theatres, LLC, Novato Theatres, LLC, San Rafael Theatres, LLC, Northbay Theatres, LLC, Century Theatres Summit Sierra, LLC and Century Theatres Seattle, LLC.

The following supplemental condensed consolidating financial statement information presents:

a.

Condensed consolidating balance sheet information as of December 31, 2017 and December 31, 2018 and condensed consolidating statements of income information, condensed consolidating statements of comprehensive income information and condensed consolidating statements of cash flows information for the years ended December 31, 2016, 2017 and 2018.

b.

Cinemark USA, Inc. (the “Parent” and “Issuer”), combined Guarantor Subsidiaries and combined Non-Guarantor Subsidiaries with their investments in subsidiaries accounted for using the equity method of accounting and therefore, the Parent column reflects the equity income of its Guarantor Subsidiaries and Non-Guarantor Subsidiaries, which are also separately reflected in the stand-alone Guarantor Subsidiaries and Non-Guarantor Subsidiaries column. Additionally, the Guarantor Subsidiaries column reflects the equity income (loss) of its Non-Guarantor Subsidiaries, which are also separately reflected in the stand-alone Non-Guarantor Subsidiaries column.

c.

Elimination entries necessary to consolidate the Parent and all of its Subsidiaries

1. Condensed consolidating balance sheet information as of December 31, 2014 and 2015, condensed consolidating statements of income information, condensed consolidating statements of comprehensive income (loss) information and condensed consolidating statements of cash flows information for the years ended December 31, 2013, 2014 and 2015.F-45

2. Cinemark USA, Inc. (the “Parent” and “Issuer”), combined Guarantor Subsidiaries and combined Non-Guarantor Subsidiaries with their investments in subsidiaries accounted for using the equity method of accounting and therefore, the Parent column reflects the equity income (loss) of its Guarantor Subsidiaries and Non-Guarantor Subsidiaries, which are also separately reflected in the stand-alone Guarantor Subsidiaries and Non-Guarantor Subsidiaries column. Additionally, the Guarantor Subsidiaries column reflects the equity income (loss) of its Non-Guarantor Subsidiaries, which are also separately reflected in the stand-alone Non-Guarantor Subsidiaries column.

3. Elimination entries necessary to consolidate the Parent and all of its Subsidiaries.


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

DECEMBER 31, 20142017

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

  Parent
Company
   Subsidiary
Guarantors
   Subsidiary
Non-Guarantors
   Eliminations Consolidated 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

  (In thousands) 

 

(In thousands)

 

Assets

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

  $129,505    $74,643    $434,693    $—     $638,841  

 

$

130,590

 

 

$

180,623

 

 

$

211,202

 

 

$

 

 

$

522,415

 

Other current assets

   126,091     18,471     67,826     (110,302 102,086  

 

 

59,661

 

 

 

17,841

 

 

 

76,789

 

 

 

(19,270

)

 

 

135,021

 

Accounts receivable from parent or subsidiaries

   277,823     —       —       (265,185 12,638  

 

 

117,972

 

 

 

119,616

 

 

 

 

 

 

(223,007

)

 

 

14,581

 

  

 

   

 

   

 

   

 

  

 

 

Total current assets

   533,419     93,114     502,519     (375,487 753,565  

 

 

308,223

 

 

 

318,080

 

 

 

287,991

 

 

 

(242,277

)

 

 

672,017

 

Theatre properties and equipment - net

   498,446     575,652     376,714     —     1,450,812  

 

 

650,783

 

 

 

765,500

 

 

 

411,771

 

 

 

 

 

 

1,828,054

 

Investment in subsidiaries

   1,260,333     380,365     —       (1,640,698  —    

 

 

1,691,626

 

 

 

121,795

 

 

 

 

 

 

(1,813,421

)

 

 

 

Other assets

   1,389,912     140,320     401,783     (3,276 1,928,739  

 

 

1,427,328

 

 

 

134,845

 

 

 

536,816

 

 

 

(113,720

)

 

 

1,985,269

 

  

 

   

 

   

 

   

 

  

 

 

Total assets

  $3,682,110    $1,189,451    $1,281,016    $(2,019,461 $4,133,116  

 

$

4,077,960

 

 

$

1,340,220

 

 

$

1,236,578

 

 

$

(2,169,418

)

 

$

4,485,340

 

  

 

   

 

   

 

   

 

  

 

 

Liabilities and equity

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

  $7,000    $—      $1,423    $—     $8,423  

 

$

5,710

 

 

$

 

 

$

1,389

 

 

$

 

 

$

7,099

 

Current portion of capital lease obligations

   5,411     9,125     1,958     —     16,494  

 

 

9,532

 

 

 

11,124

 

 

 

4,855

 

 

 

 

 

 

25,511

 

Accounts payable and accrued expenses

   259,973     105,761     125,638     (102,406 388,966  

 

 

215,580

 

 

 

116,409

 

 

 

110,089

 

 

 

(6,402

)

 

 

435,676

 

Accounts payable to parent or subsidiaries

   —       84,555     180,630     (265,185  —    

 

 

 

 

 

 

 

 

223,007

 

 

 

(223,007

)

 

 

 

  

 

   

 

   

 

   

 

  

 

 

Total current liabilities

   272,384     199,441     309,649     (367,591 413,883  

 

 

230,822

 

 

 

127,533

 

 

 

339,340

 

 

 

(229,409

)

 

 

468,286

 

Long-term liabilities

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion

   1,777,581     —       7,442     (1,868 1,783,155  

 

 

1,878,992

 

 

 

 

 

 

11,211

 

 

 

(109,822

)

 

 

1,780,381

 

Capital lease obligations, less current portion

   103,786     75,416     22,776     —     201,978  

 

 

132,189

 

 

 

75,767

 

 

 

43,195

 

 

 

 

 

 

251,151

 

Other long-term liabilities and deferrals

   401,965     79,116     125,600     (9,304 597,377  

 

 

426,355

 

 

 

60,567

 

 

 

93,871

 

 

 

(16,766

)

 

 

564,027

 

  

 

   

 

   

 

   

 

  

 

 

Total long-term liabilities

   2,283,332     154,532     155,818     (11,172 2,582,510  

 

 

2,437,536

 

 

 

136,334

 

 

 

148,277

 

 

 

(126,588

)

 

 

2,595,559

 

Commitments and contingencies

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cinemark USA, Inc.’s stockholder’s equity:

         

Cinemark USA, Inc.'s stockholder's equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

   49,543     457,369     10,219     (467,588 49,543  

 

 

49,543

 

 

 

457,368

 

 

 

10,238

 

 

 

(467,606

)

 

 

49,543

 

Other stockholder’s equity

   1,076,851     378,109     795,001     (1,173,110 1,076,851  
  

 

   

 

   

 

   

 

  

 

 

Total Cinemark USA, Inc. stockholder’s equity

   1,126,394     835,478     805,220     (1,640,698 1,126,394  

Other stockholder's equity

 

 

1,360,059

 

 

 

618,985

 

 

 

726,830

 

 

 

(1,345,815

)

 

 

1,360,059

 

Total Cinemark USA, Inc. stockholder's equity

 

 

1,409,602

 

 

 

1,076,353

 

 

 

737,068

 

 

 

(1,813,421

)

 

 

1,409,602

 

Noncontrolling interests

   —       —       10,329     —     10,329  

 

 

 

 

 

 

 

 

11,893

 

 

 

 

 

 

11,893

 

  

 

   

 

   

 

   

 

  

 

 

Total equity

   1,126,394     835,478     815,549     (1,640,698 1,136,723  

 

 

1,409,602

 

 

 

1,076,353

 

 

 

748,961

 

 

 

(1,813,421

)

 

 

1,421,495

 

  

 

   

 

   

 

   

 

  

 

 

Total liabilities and equity

  $3,682,110    $1,189,451    $1,281,016    $(2,019,461 $4,133,116  

 

$

4,077,960

 

 

$

1,340,220

 

 

$

1,236,578

 

 

$

(2,169,418

)

 

$

4,485,340

 

  

 

   

 

   

 

   

 

  

 

 

F-46


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

DECEMBER 31, 20152018

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

  Parent
Company
   Subsidiary
Guarantors
   Subsidiary
Non-Guarantors
   Eliminations Consolidated 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

  (In thousands) 

 

(In thousands)

 

Assets

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

  $141,364    $95,865    $351,274    $—     $588,503  

 

$

197,965

 

 

$

10,886

 

 

$

217,365

 

 

$

 

 

$

426,216

 

Other current assets

   78,797     18,407     61,432     (32,024 126,612  

 

 

60,829

 

 

 

19,997

 

 

 

67,149

 

 

 

(15,178

)

 

 

132,797

 

Accounts receivable from parent or subsidiaries

   212,299     —       —       (211,128 1,171  

 

 

 

 

 

284,893

 

 

 

 

 

 

(265,363

)

 

 

19,530

 

  

 

   

 

   

 

   

 

  

 

 

Total current assets

   432,460     114,272     412,706     (243,152 716,286  

 

 

258,794

 

 

 

315,776

 

 

 

284,514

 

 

 

(280,541

)

 

 

578,543

 

Theatre properties and equipment - net

   539,082     614,821     351,166     —     1,505,069  

 

 

664,759

 

 

 

789,536

 

 

 

378,838

 

 

 

-

 

 

 

1,833,133

 

Investment in subsidiaries

   1,326,790     293,900     —       (1,620,690  —    

 

 

1,806,255

 

 

 

57,845

 

 

 

-

 

 

 

(1,864,100

)

 

 

-

 

Other assets

   1,402,062     135,022     475,187     (105,994 1,906,277  

 

 

1,500,366

 

 

 

155,011

 

 

 

546,834

 

 

 

(112,536

)

 

 

2,089,675

 

  

 

   

 

   

 

   

 

  

 

 

Total assets

  $3,700,394    $1,158,015    $1,239,059    $(1,969,836 $4,127,632  

 

$

4,230,174

 

 

$

1,318,168

 

 

$

1,210,186

 

 

$

(2,257,177

)

 

$

4,501,351

 

  

 

   

 

   

 

   

 

  

 

 

Liabilities and equity

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

  $7,000    $—      $1,405    $—     $8,405  

 

$

6,595

 

 

$

 

 

$

1,389

 

 

$

 

 

$

7,984

 

Current portion of capital lease obligations

   6,426     9,962     2,392     —     18,780  

 

 

11,918

 

 

 

9,406

 

 

 

5,741

 

 

 

 

 

 

27,065

 

Accounts payable and accrued expenses

   197,268     123,759     116,353     (25,396 411,984  

 

 

297,302

 

 

 

58,544

 

 

 

96,780

 

 

 

(13,622

)

 

 

439,004

 

Accounts payable to parent or subsidiaries

   —       23,965     187,163     (211,128  —    

 

 

40,421

 

 

 

 

 

 

224,942

 

 

 

(265,363

)

 

 

-

 

  

 

   

 

   

 

   

 

  

 

 

Total current liabilities

   210,694     157,686     307,313     (236,524 439,169  

 

 

356,236

 

 

 

67,950

 

 

 

328,852

 

 

 

(278,985

)

 

 

474,053

 

Long-term liabilities

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion

   1,868,763     —       9,534     (105,367 1,772,930  

 

 

1,872,627

 

 

 

 

 

 

7,955

 

 

 

(107,955

)

 

 

1,772,627

 

Capital lease obligations, less current portion

   114,513     67,440     26,999     —     208,952  

 

 

123,329

 

 

 

59,539

 

 

 

49,599

 

 

 

 

 

 

232,467

 

Other long-term liabilities and deferrals

   404,278     77,774     118,533     (7,255 593,330  

 

 

413,177

 

 

 

60,137

 

 

 

77,844

 

 

 

(6,137

)

 

 

545,021

 

  

 

   

 

   

 

   

 

  

 

 

Total long-term liabilities

   2,387,554     145,214     155,066     (112,622 2,575,212  

 

 

2,409,133

 

 

 

119,676

 

 

 

135,398

 

 

 

(114,092

)

 

 

2,550,115

 

Commitments and contingencies

   —       —       —       —      —    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cinemark USA, Inc.’s stockholder’s equity:

         

Cinemark USA, Inc.'s stockholder's equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

   49,543     457,369     10,240     (467,609 49,543  

 

 

49,543

 

 

 

457,368

 

 

 

10,238

 

 

 

(467,606

)

 

 

49,543

 

Other stockholder’s equity

   1,052,603     397,746     755,335     (1,153,081 1,052,603  
  

 

   

 

   

 

   

 

  

 

 

Total Cinemark USA, Inc. stockholder’s equity

   1,102,146     855,115     765,575     (1,620,690 1,102,146  

Other stockholder's equity

 

 

1,415,262

 

 

 

673,174

 

 

 

723,319

 

 

 

(1,396,494

)

 

 

1,415,261

 

Total Cinemark USA, Inc. stockholder's equity

 

 

1,464,805

 

 

 

1,130,542

 

 

 

733,557

 

 

 

(1,864,100

)

 

 

1,464,804

 

Noncontrolling interests

   —       —       11,105     —     11,105  

 

 

 

 

 

 

 

 

12,379

 

 

 

 

 

 

12,379

 

  

 

   

 

   

 

   

 

  

 

 

Total equity

   1,102,146     855,115     776,680     (1,620,690 1,113,251  

 

 

1,464,805

 

 

 

1,130,542

 

 

 

745,936

 

 

 

(1,864,100

)

 

 

1,477,183

 

  

 

   

 

   

 

   

 

  

 

 

Total liabilities and equity

  $3,700,394    $1,158,015    $1,239,059    $(1,969,836 $4,127,632  

 

$

4,230,174

 

 

$

1,318,168

 

 

$

1,210,186

 

 

$

(2,257,177

)

 

$

4,501,351

 

  

 

   

 

   

 

   

 

  

 

 

F-47


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

YEAR ENDED DECEMBER 31, 20132016

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

  Parent
Company
 Subsidiary
Guarantors
 Subsidiary
Non-Guarantors
 Eliminations Consolidated 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

  (In thousands) 

 

(In thousands)

 

Revenues

  $816,489   $1,099,257   $808,972   $(41,824 $2,682,894  

 

$

1,014,713

 

 

$

1,219,218

 

 

$

737,981

 

 

$

(53,147

)

 

$

2,918,765

 

Cost of operations

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatre operating expenses

   650,731   743,531   585,695   (41,824 1,938,133  

 

 

804,041

 

 

 

828,905

 

 

 

540,310

 

 

 

(53,147

)

 

 

2,120,109

 

General and administrative expenses

   22,275   78,749   62,110    —     163,134  

 

 

13,085

 

 

 

84,453

 

 

 

43,099

 

 

 

 

 

 

140,637

 

Depreciation and amortization

   43,501   63,234   57,235    —     163,970  

 

 

70,654

 

 

 

79,139

 

 

 

59,278

 

 

 

 

 

 

209,071

 

Impairment of long-lived assets

   2,301   319   1,174    —     3,794  

 

 

1,929

 

 

 

 

 

 

907

 

 

 

 

 

 

2,836

 

(Gain) loss on sale of assets and other

   99   1,870   (5,814  —     (3,845
  

 

  

 

  

 

  

 

  

 

 

Loss on disposal of assets and other

 

 

5,613

 

 

 

13,759

 

 

 

1,087

 

 

 

 

 

 

 

20,459

 

Total cost of operations

   718,907   887,703   700,400   (41,824 2,265,186  

 

 

895,322

 

 

 

1,006,256

 

 

 

644,681

 

 

 

(53,147

)

 

 

2,493,112

 

  

 

  

 

  

 

  

 

  

 

 

Operating income

   97,582   211,554   108,572    —     417,708  

 

 

119,391

 

 

 

212,962

 

 

 

93,300

 

 

 

 

 

 

425,653

 

Other income (expense)

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

   (110,484 (9,915 (4,315  —     (124,714

 

 

(96,442

)

 

 

(7,538

)

 

 

(5,642

)

 

 

1,309

 

 

 

(108,313

)

Loss on debt amendments and refinancing

 

 

(13,445

)

 

 

 

 

 

 

 

 

 

 

 

(13,445

)

Distributions from NCM

   124    —     20,577    —     20,701  

 

 

1,414

 

 

 

 

 

 

13,242

 

 

 

 

 

 

14,656

 

Equity in income of affiliates

   196,580   54,524   22,682   (251,104 22,682  

 

 

245,010

 

 

 

58,528

 

 

 

30,370

 

 

 

(301,946

)

 

 

31,962

 

Loss on early retirement of debt

   (72,302  —      —      —     (72,302

Other income (expense)

   101   (8 1,913    —     2,006  
  

 

  

 

  

 

  

 

  

 

 

Total other income (expense)

   14,019   44,601   40,857   (251,104 (151,627
  

 

  

 

  

 

  

 

  

 

 

Other income

 

 

351

 

 

 

19

 

 

 

13,790

 

 

 

(1,309

)

 

 

12,851

 

Total other income

 

 

136,888

 

 

 

51,009

 

 

 

51,760

 

 

 

(301,946

)

 

 

(62,289

)

Income before income taxes

   111,601   256,155   149,429   (251,104 266,081  

 

 

256,279

 

 

 

263,971

 

 

 

145,060

 

 

 

(301,946

)

 

 

363,364

 

Income taxes

   (38,242 76,938   75,464    —     114,160  

 

 

(498

)

 

 

52,277

 

 

 

53,072

 

 

 

 

 

 

104,851

 

  

 

  

 

  

 

  

 

  

 

 

Net income

   149,843   179,217   73,965   (251,104 151,921  

 

 

256,777

 

 

 

211,694

 

 

 

91,988

 

 

 

(301,946

)

 

 

258,513

 

Less: Net income attributable to noncontrolling interests

   —      —     2,078    —     2,078  

 

 

 

 

 

 

 

 

1,736

 

 

 

 

 

 

1,736

 

  

 

  

 

  

 

  

 

  

 

 

Net income attributable to Cinemark USA, Inc.

  $149,843   $179,217   $71,887   $(251,104 $149,843  

 

$

256,777

 

 

$

211,694

 

 

$

90,252

 

 

$

(301,946

)

 

$

256,777

 

  

 

  

 

  

 

  

 

  

 

 

F-48


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

YEAR ENDED DECEMBER 31, 20142017

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

  Parent
Company
 Subsidiary
Guarantors
 Subsidiary
Non-Guarantors
 Eliminations Consolidated 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

  (In thousands) 

 

(In thousands)

 

Revenues

  $851,299   $1,084,852   $733,435   $(42,596 $2,626,990  

 

$

1,013,960

 

 

$

1,220,993

 

 

$

807,350

 

 

$

(50,756

)

 

$

2,991,547

 

Cost of operations

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatre operating expenses

   693,323   739,686   524,045   (42,596 1,914,458  

 

 

795,976

 

 

 

834,135

 

 

 

591,223

 

 

 

(50,756

)

 

 

2,170,578

 

General and administrative expenses

   17,978   74,971   55,639    —     148,588  

 

 

13,176

 

 

 

82,955

 

 

 

54,780

 

 

 

 

 

 

150,911

 

Depreciation and amortization

   50,858   67,460   57,338    —     175,656  

 

 

79,676

 

 

 

87,463

 

 

 

70,374

 

 

 

 

 

 

237,513

 

Impairment of long-lived assets

   6,334   313    —      —     6,647  

 

 

3,725

 

 

 

1,502

 

 

 

9,857

 

 

 

 

 

 

15,084

 

Loss on sale of assets and other

   8,954   3,278   3,483    —     15,715  
  

 

  

 

  

 

  

 

  

 

 

Loss on disposal of assets and other

 

 

16,895

 

 

 

3,372

 

 

 

2,545

 

 

 

 

 

 

22,812

 

Total cost of operations

   777,447   885,708   640,505   (42,596 2,261,064  

 

 

909,448

 

 

 

1,009,427

 

 

 

728,779

 

 

 

(50,756

)

 

 

2,596,898

 

  

 

  

 

  

 

  

 

  

 

 

Operating income

   73,852   199,144   92,930    —     365,926  

 

 

104,512

 

 

 

211,566

 

 

 

78,571

 

 

 

 

 

 

394,649

 

Other income (expense)

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

   (101,224 (9,111 (3,392 29   (113,698

 

 

(94,229

)

 

 

(7,675

)

 

 

(5,447

)

 

 

1,433

 

 

 

(105,918

)

Loss on debt amendments and refinancing

 

 

(521

)

 

 

 

 

 

 

 

 

 

 

 

(521

)

Distributions from NCM

   2,375    —     16,166    —     18,541  

 

 

 

 

 

 

 

 

16,407

 

 

 

 

 

 

16,407

 

Equity in income of affiliates

   208,900   53,950   22,464   (262,571 22,743  

 

 

255,594

 

 

 

16,838

 

 

 

33,742

 

 

 

(270,189

)

 

 

35,985

 

Other income (expense)

   79    —     (643 (29 (593
  

 

  

 

  

 

  

 

  

 

 

Total other income (expense)

   110,130   44,839   34,595   (262,571 (73,007
  

 

  

 

  

 

  

 

  

 

 

Other income

 

 

2,475

 

 

 

1,040

 

 

 

5,054

 

 

 

(1,433

)

 

 

7,136

 

Total other income

 

 

163,319

 

 

 

10,203

 

 

 

49,756

 

 

 

(270,189

)

 

 

(46,911

)

Income before income taxes

   183,982   243,983   127,525   (262,571 292,919  

 

 

267,831

 

 

 

221,769

 

 

 

128,327

 

 

 

(270,189

)

 

 

347,738

 

Income taxes

   (10,398 71,687   35,861    —     97,150  

 

 

2,188

 

 

 

69,770

 

 

 

8,298

 

 

 

 

 

 

80,256

 

  

 

  

 

  

 

  

 

  

 

 

Net income

   194,380   172,296   91,664   (262,571 195,769  

 

 

265,643

 

 

 

151,999

 

 

 

120,029

 

 

 

(270,189

)

 

 

267,482

 

Less: Net income attributable to noncontrolling interests

   —      —     1,389    —     1,389  

 

 

 

 

 

 

 

 

1,839

 

 

 

 

 

 

1,839

 

  

 

  

 

  

 

  

 

  

 

 

Net income attributable to Cinemark USA, Inc.

  $194,380   $172,296   $90,275   $(262,571 $194,380  

 

$

265,643

 

 

$

151,999

 

 

$

118,190

 

 

$

(270,189

)

 

$

265,643

 

  

 

  

 

  

 

  

 

  

 

 

F-49


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

YEAR ENDED DECEMBER 31, 20152018

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

  Parent
Company
 Subsidiary
Guarantors
 Subsidiary
Non-Guarantors
 Eliminations Consolidated 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

  (In thousands) 

 

(In thousands)

 

Revenues

  $959,347   $1,178,873   $764,631   $(50,242 $2,852,609  

 

$

1,192,478

 

 

$

1,362,043

 

 

$

723,804

 

 

$

(56,590

)

 

$

3,221,735

 

Cost of operations

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatre operating expenses

   767,446   804,236   545,131   (50,242 2,066,571  

 

 

916,726

 

 

 

933,858

 

 

 

541,981

 

 

 

(56,590

)

 

 

2,335,975

 

General and administrative expenses

   16,152   81,240   56,660    —     154,052  

 

 

11,497

 

 

 

100,407

 

 

 

50,736

 

 

 

 

 

 

162,640

 

Depreciation and amortization

   59,759   73,708   55,739    —     189,206  

 

 

89,429

 

 

 

99,627

 

 

 

72,106

 

 

 

 

 

 

261,162

 

Impairment of long-lived assets

   6,445   1,600   756    —     8,801  

 

 

4,118

 

 

 

13,612

 

 

 

14,642

 

 

 

 

 

 

32,372

 

(Gain) loss on sale of assets and other

   6,191   3,728   (1,776  —     8,143  
  

 

  

 

  

 

  

 

  

 

 

Loss on disposal of assets and other

 

 

13,321

 

 

 

23,337

 

 

 

2,044

 

 

 

 

 

 

38,702

 

Total cost of operations

   855,993   964,512   656,510   (50,242 2,426,773  

 

 

1,035,091

 

 

 

1,170,841

 

 

 

681,509

 

 

 

(56,590

)

 

 

2,830,851

 

  

 

  

 

  

 

  

 

  

 

 

Operating income

   103,354   214,361   108,121    —     425,836  

 

 

157,387

 

 

 

191,202

 

 

 

42,295

 

 

 

-

 

 

 

390,884

 

Other income (expense)

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

   (100,608 (8,500 (4,009 376   (112,741

 

 

(97,585

)

 

 

(6,520

)

 

 

(7,266

)

 

 

1,377

 

 

 

(109,994

)

Loss on amendment to debt agreement

   (925  —      —      —     (925

Loss on debt amendments and refinancing

 

 

(1,484

)

 

 

 

 

 

 

 

 

 

 

 

(1,484

)

Distributions from NCM

   2,116    —     16,024    —     18,140  

 

 

 

 

 

 

 

 

15,389

 

 

 

 

 

 

15,389

 

Interest expense - NCM

 

 

(19,724

)

 

 

 

 

 

 

 

 

 

 

 

(19,724

)

Equity in income of affiliates

   217,567   55,082   27,262   (271,785 28,126  

 

 

183,463

 

 

 

(12,561

)

 

 

33,167

 

 

 

(164,827

)

 

 

39,242

 

Other income (expense)

   200   20   (7,929 (376 (8,085
  

 

  

 

  

 

  

 

  

 

 

Total other income (expense)

   118,350   46,602   31,348   (271,785 (75,485
  

 

  

 

  

 

  

 

  

 

 

Other income

 

 

4,287

 

 

 

(14

)

 

 

(3,964

)

 

 

(1,377

)

 

 

(1,068

)

Total other income

 

 

68,957

 

 

 

(19,095

)

 

 

37,326

 

 

 

(164,827

)

 

 

(77,639

)

Income before income taxes

   221,704   260,963   139,469   (271,785 350,351  

 

 

226,344

 

 

 

172,107

 

 

 

79,621

 

 

 

(164,827

)

 

 

313,245

 

Income taxes

   3,172   79,131   47,657    —     129,960  

 

 

10,608

 

 

 

68,624

 

 

 

16,800

 

 

 

-

 

 

 

96,032

 

  

 

  

 

  

 

  

 

  

 

 

Net income

   218,532   181,832   91,812   (271,785 220,391  

 

 

215,736

 

 

 

103,483

 

 

 

62,821

 

 

 

(164,827

)

 

 

217,213

 

Less: Net income attributable to noncontrolling interests

   —      —     1,859    —     1,859  

 

 

 

 

 

 

 

 

1,478

 

 

 

 

 

 

1,478

 

  

 

  

 

  

 

  

 

  

 

 

Net income attributable to Cinemark USA, Inc.

  $218,532   $181,832   $89,953   $(271,785 $218,532  

 

$

215,736

 

 

$

103,483

 

 

$

61,343

 

 

$

(164,827

)

 

$

215,735

 

  

 

  

 

  

 

  

 

  

 

 

F-50


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME INFORMATION

YEAR ENDED DECEMBER 31, 20132016

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

 

 

(In thousands)

 

Net income

 

$

256,777

 

 

$

211,694

 

 

$

91,988

 

 

$

(301,946

)

 

$

258,513

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $138

 

 

234

 

 

 

 

 

 

 

 

 

 

 

 

234

 

Other comprehensive income of equity method investments

 

 

89

 

 

 

 

 

 

89

 

 

 

(89

)

 

 

89

 

Foreign currency translation adjustments

 

 

26,361

 

 

 

 

 

 

26,394

 

 

 

(26,361

)

 

 

26,394

 

Total other comprehensive income, net of tax

 

 

26,684

 

 

 

 

 

 

26,483

 

 

 

(26,450

)

 

 

26,717

 

Total comprehensive income, net of tax

 

$

283,461

 

 

$

211,694

 

 

$

118,471

 

 

$

(328,396

)

 

$

285,230

 

Comprehensive income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

(1,769

)

 

 

 

 

 

(1,769

)

Comprehensive income attributable to Cinemark USA, Inc.

 

$

283,461

 

 

$

211,694

 

 

$

116,702

 

 

$

(328,396

)

 

$

283,461

 

F-51

   Parent
Company
  Subsidiary
Guarantors
   Subsidiary
Non-Guarantors
  Eliminations  Consolidated 
   (In thousands) 

Net income

  $149,843   $179,217    $73,965   $(251,104 $151,921  

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, net of settlements

   3,151    —       —      —      3,151  

Unrealized loss due to fair value adjustments on available-for-sale securities, net of taxes of $1,223

   (2,041  —       —      —      (2,041

Other comprehensive income in equity method investments

   2,386    —       2,386    (2,386  2,386  

Foreign currency translation adjustments

   (47,617  —       (47,699  47,617    (47,699
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total other comprehensive loss, net of tax

   (44,121  —       (45,313  45,231    (44,203
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total comprehensive income, net of tax

  $105,722   $179,217    $28,652   $(205,873 $107,718  

Comprehensive income attributable to noncontrolling interests

   —      —       (1,996  —      (1,996
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Comprehensive income attributable to Cinemark USA, Inc.

  $105,722   $179,217    $26,656   $(205,873 $105,722  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME INFORMATION

YEAR ENDED DECEMBER 31, 20142017

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

 

 

(In thousands)

 

Net income

 

$

265,643

 

 

$

151,999

 

 

$

120,029

 

 

$

(270,189

)

 

$

267,482

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income of equity method investments

 

 

248

 

 

 

 

 

 

248

 

 

 

(248

)

 

 

248

 

Foreign currency translation adjustments

 

 

(4,966

)

 

 

 

 

 

(4,966

)

 

 

4,966

 

 

 

(4,966

)

Total other comprehensive loss, net of tax

 

 

(4,718

)

 

 

 

 

 

(4,718

)

 

 

4,718

 

 

 

(4,718

)

Total comprehensive income, net of tax

 

$

260,925

 

 

$

151,999

 

 

$

115,311

 

 

$

(265,471

)

 

$

262,764

 

Comprehensive income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

(1,839

)

 

 

 

 

 

(1,839

)

Comprehensive income attributable to Cinemark USA, Inc.

 

$

260,925

 

 

$

151,999

 

 

$

113,472

 

 

$

(265,471

)

 

$

260,925

 

 

   Parent
Company
  Subsidiary
Guarantors
   Subsidiary
Non-Guarantors
  Eliminations  Consolidated 
   (In thousands) 

Net income

  $194,380   $172,296    $91,664   $(262,571 $195,769  

Other comprehensive income (loss), net of tax

       

Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes of $1,759, net of settlements

   2,846    —       —      —      2,846  

Unrealized gain due to fair value adjustments on available-for-sale securities, net of taxes of $1,479

   2,507    —       —      —      2,507  

Other comprehensive income in equity method investments

   676    —       643    (643  676  

Foreign currency translation adjustments

   (68,982  —       (68,997  68,982    (68,997
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total other comprehensive loss, net of tax

   (62,953  —       (68,354  68,339    (62,968
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total comprehensive income, net of tax

  $131,427   $172,296    $23,310   $(194,232 $132,801  

Comprehensive income attributable to noncontrolling interests

   —      —       (1,374  —      (1,374
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Comprehensive income attributable to Cinemark USA, Inc.

  $131,427   $172,296    $21,936   $(194,232 $131,427  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

F-52


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) INFORMATION

YEAR ENDED DECEMBER 31, 20152018

 

   Parent
Company
  Subsidiary
Guarantors
   Subsidiary
Non-Guarantors
  Eliminations  Consolidated 
   (In thousands) 

Net income

  $218,532   $181,832    $91,812   $(271,785 $220,391  

Other comprehensive income (loss), net of tax

       

Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes of $1,562, net of settlements

   2,636    —       —      —      2,636  

Unrealized loss due to fair value adjustments on available-for-sale securities, net of taxes of $572

   (957  —       —      —      (957

Other comprehensive loss in equity method investments

   (3,119  —       (3,086  3,086    (3,119

Foreign currency translation adjustments, net of taxes of $888

   (125,474  —       (125,512  125,474    (125,512
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total other comprehensive loss, net of tax

   (126,914  —       (128,598  128,560    (126,952
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total comprehensive income (loss), net of tax

  $91,618   $181,832    $(36,786 $(143,225 $93,439  

Comprehensive income attributable to noncontrolling interests

   —      —       (1,821  —      (1,821
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Comprehensive income (loss) attributable to Cinemark USA, Inc.

  $91,618   $181,832    $(38,607 $(143,225 $91,618  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

 

 

(In thousands)

 

Net income

 

$

215,736

 

 

$

103,483

 

 

$

62,821

 

 

$

(164,827

)

 

$

217,213

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes of $1,243, net of settlements

 

 

(3,851

)

 

 

 

 

 

 

 

 

 

 

 

(3,851

)

Other comprehensive loss of equity method investments

 

 

(139

)

 

 

 

 

 

(139

)

 

 

139

 

 

 

(139

)

Foreign currency translation adjustments

 

 

(62,253

)

 

 

 

 

 

(62,253

)

 

 

62,253

 

 

 

(62,253

)

Total other comprehensive loss, net of tax

 

 

(66,243

)

 

 

 

 

 

(62,392

)

 

 

62,392

 

 

 

(66,243

)

Total comprehensive income, net of tax

 

$

149,493

 

 

$

103,483

 

 

$

429

 

 

$

(102,435

)

 

$

150,970

 

Comprehensive income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

(1,478

)

 

 

 

 

 

(1,478

)

Comprehensive income attributable to Cinemark USA, Inc.

 

$

149,493

 

 

$

103,483

 

 

$

(1,049

)

 

$

(102,435

)

 

$

149,492

 

F-53


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

YEAR ENDED DECEMBER 31, 20132016

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

  Parent
Company
 Subsidiary
Guarantors
 Subsidiary
Non-Guarantors
 Eliminations Consolidated 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

  (In thousands) 

 

(In thousands)

 

Operating activities

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

  $149,843   $179,217   $73,965   $(251,104 $151,921  

 

$

256,777

 

 

$

211,694

 

 

$

91,988

 

 

$

(301,946

)

 

$

258,513

 

Adjustments to reconcile net income to cash provided by operating activities

   (174,847 22,276   44,824   251,104   143,357  

 

 

(178,147

)

 

 

55,128

 

 

 

53,381

 

 

 

301,946

 

 

 

232,308

 

Changes in assets and liabilities

   115,254   (148,810 47,640    —     14,084  

 

 

154,085

 

 

 

(164,005

)

 

 

(18,642

)

 

 

 

 

 

(28,562

)

  

 

  

 

  

 

  

 

  

 

 

Net cash provided by operating activities

   90,250   52,683   166,429    —     309,362  

 

 

232,715

 

 

 

102,817

 

 

 

126,727

 

 

 

 

 

 

462,259

 

Investing activities

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions to theatre properties and equipment

   (41,948 (74,568 (143,154  —     (259,670

 

 

(108,439

)

 

 

(130,843

)

 

 

(87,626

)

 

 

 

 

 

(326,908

)

Acquisition of theatres in the U.S.

 

 

(15,300

)

 

 

 

 

 

 

 

 

 

 

 

(15,300

)

Acquisition of screen advertising business

 

 

 

 

 

 

 

 

(1,450

)

 

 

 

 

 

(1,450

)

Proceeds from sale of theatre properties and equipment and other

   21,084   8,881   4,306    —     34,271  

 

 

2,912

 

 

 

374

 

 

 

284

 

 

 

 

 

 

3,570

 

Acquisition of theatres in the U.S., net of cash acquired

   (259,247  —      —      —     (259,247

Proceeds from disposition of Mexico theatres

   —      —     126,167    —     126,167  

Proceeds from sale of marketable securities

 

 

13,451

 

 

 

 

 

 

 

 

 

 

 

 

13,451

 

Intercompany note issuances

 

 

(4,455

)

 

 

 

 

 

 

 

 

4,455

 

 

 

 

 

Dividends received from subsidiaries

   2,633   3,000   707   (6,340  —    

 

 

26,033

 

 

 

229,649

 

 

 

 

 

 

(255,682

)

 

 

 

Investment in joint ventures and other

   —      —     (6,222  —     (6,222

 

 

(1,000

)

 

 

 

 

 

(132

)

 

 

 

 

 

(1,132

)

  

 

  

 

  

 

  

 

  

 

 

Net cash used for investing activities

   (277,478 (62,687 (18,196 (6,340 (364,701

Net cash provided by (used for) investing activities

 

 

(86,798

)

 

 

99,180

 

 

 

(88,924

)

 

 

(251,227

)

 

 

(327,769

)

Financing activities

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to parent

   (105,150 (707 (5,633 6,340   (105,150

 

 

(124,900

)

 

 

 

 

 

(255,682

)

 

 

255,682

 

 

 

(124,900

)

Payroll taxes paid as a result of restricted stock withholdings

   —     (3,464  —      —     (3,464

Proceeds from issuance of notes

   530,000    —      —      —     530,000  

Redemption of senior notes

   (461,946  —      —      —     (461,946

Net repayments of other long-term debt

   (7,000  —     (866  —     (7,866

Proceeds from issuance of Senior Notes, net of discount

 

 

222,750

 

 

 

 

 

 

 

 

 

 

 

 

222,750

 

Retirement of Senior Subordinated Notes

 

 

(200,000

)

 

 

 

 

 

 

 

 

 

 

 

(200,000

)

Repayments of long-term debt

 

 

(15,201

)

 

 

 

 

 

(1,404

)

 

 

 

 

 

(16,605

)

Payments of debt issue costs

 

 

(7,217

)

 

 

 

 

 

 

 

 

 

 

 

(7,217

)

Fees paid related to debt amendments

 

 

(11,076

)

 

 

 

 

 

 

 

 

 

 

 

(11,076

)

Intercompany loan proceeds

 

 

 

 

 

 

 

 

4,455

 

 

 

(4,455

)

 

 

-

 

Payments on capital leases

   (2,910 (6,892 (2,213  —     (12,015

 

 

(6,645

)

 

 

(10,005

)

 

 

(2,693

)

 

 

 

 

 

(19,343

)

Payment of debt issue costs

   (9,328  —      —      —     (9,328

Purchases of noncontrolling interests

   —      —     (5,621  —     (5,621

Other

   —     2,962   (2,918  —     44  

 

 

1,863

 

 

 

(6,834

)

 

 

(1,759

)

 

 

 

 

 

(6,730

)

  

 

  

 

  

 

  

 

  

 

 

Net cash used for financing activities

   (56,334 (8,101 (17,251 6,340   (75,346

 

 

(140,426

)

 

 

(16,839

)

 

 

(257,083

)

 

 

251,227

 

 

 

(163,121

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

   —      —     (11,516  —     (11,516

 

 

 

 

 

 

 

 

1,266

 

 

 

 

 

 

1,266

 

  

 

  

 

  

 

  

 

  

 

 

Increase (decrease) in cash and cash equivalents

   (243,562 (18,105 119,466    —     (142,201

 

 

5,491

 

 

 

185,158

 

 

 

(218,014

)

 

 

 

 

 

(27,365

)

Cash and cash equivalents:

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

   305,627   193,863   242,605    —     742,095  

 

 

141,364

 

 

 

95,865

 

 

 

351,274

 

 

 

 

 

 

588,503

 

  

 

  

 

  

 

  

 

  

 

 

End of year

  $62,065   $175,758   $362,071   $—     $599,894  

 

$

146,855

 

 

$

281,023

 

 

$

133,260

 

 

$

 

 

$

561,138

 

  

 

  

 

  

 

  

 

  

 

 

F-54


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

YEAR ENDED DECEMBER 31, 20142017

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

 

 

(In thousands)

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

265,643

 

 

$

151,999

 

 

$

120,029

 

 

$

(270,189

)

 

$

267,482

 

Adjustments to reconcile net income to cash provided by operating activities

 

 

(122,559

)

 

 

71,023

 

 

 

33,515

 

 

 

270,189

 

 

 

252,168

 

Changes in assets and liabilities

 

 

18,223

 

 

 

(35,138

)

 

 

25,649

 

 

 

 

 

 

8,734

 

Net cash provided by operating activities

 

 

161,307

 

 

 

187,884

 

 

 

179,193

 

 

 

 

 

 

528,384

 

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions to theatre properties and equipment

 

 

(146,385

)

 

 

(172,874

)

 

 

(61,603

)

 

 

 

 

 

(380,862

)

Acquisition of theatres in the U.S. and international markets, net of cash acquired

 

 

(12,500

)

 

 

-

 

 

 

(28,497

)

 

 

 

 

 

(40,997

)

Proceeds from sale of theatre properties and equipment and other

 

 

2,149

 

 

 

12,271

 

 

 

678

 

 

 

 

 

 

15,098

 

Dividends received from subsidiaries

 

 

127,600

 

 

 

1,873

 

 

 

 

 

 

(129,473

)

 

 

 

Investment in joint ventures and other

 

 

 

 

 

(104

)

 

 

(3,611

)

 

 

 

 

 

(3,715

)

Net cash used for investing activities

 

 

(29,136

)

 

 

(158,834

)

 

 

(93,033

)

 

 

(129,473

)

 

 

(410,476

)

Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to parent

 

 

(134,500

)

 

 

(127,000

)

 

 

(2,473

)

 

 

129,473

 

 

 

(134,500

)

Repayments of long-term debt

 

 

(4,282

)

 

 

 

 

 

(1,389

)

 

 

 

 

 

(5,671

)

Payments on capital leases

 

 

(7,952

)

 

 

(9,707

)

 

 

(4,066

)

 

 

 

 

 

(21,725

)

Fees paid related to debt amendments

 

 

(521

)

 

 

 

 

 

 

 

 

 

 

 

(521

)

Proceeds from financing lease

 

 

 

 

 

10,200

 

 

 

 

 

 

 

 

 

10,200

 

Other

 

 

(1,181

)

 

 

(2,943

)

 

 

(1,088

)

 

 

 

 

 

(5,212

)

Net cash provided by financing activities

 

 

(148,436

)

 

 

(129,450

)

 

 

(9,016

)

 

 

129,473

 

 

 

(157,429

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

 

 

 

798

 

 

 

 

 

 

798

 

Increase (decrease) in cash and cash equivalents

 

 

(16,265

)

 

 

(100,400

)

 

 

77,942

 

 

 

 

 

 

(38,723

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

146,855

 

 

 

281,023

 

 

 

133,260

 

 

 

 

 

 

561,138

 

End of year

 

$

130,590

 

 

$

180,623

 

 

$

211,202

 

 

$

 

 

$

522,415

 

 

   Parent
Company
  Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Eliminations  Consolidated 
   (In thousands) 

Operating activities

      

Net income

  $194,380   $172,296   $91,664   $(262,571 $195,769  

Adjustments to reconcile net income to cash provided by (used for) operating activities

   (134,559  42,620    31,874    262,571    202,506  

Changes in assets and liabilities

   232,167    (246,598  70,284    —      55,853  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided by (used for) operating activities

   291,988    (31,682  193,822    —      454,128  

Investing activities

      

Additions to theatre properties and equipment

   (93,608  (52,896  (98,201  —      (244,705

Proceeds from sale of theatre properties and equipment and other

   1,109    98    1,338    —      2,545  

Acquisition of theatres in the U.S., net of cash acquired

   (7,951  —      —      —      (7,951

Dividends received from subsidiaries

   1,094    8    —      (1,102  —    

Investments in, and loans to, subsidiaries

   (1,918  —      —      1,918    —    

Investment in joint ventures and other

   —      —      (3,228  —      (3,228
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used for investing activities

   (101,274  (52,790  (100,091  816    (253,339

Financing activities

      

Dividends paid to parent

   (115,000  (700  (402  1,102    (115,000

Repayments of other long-term debt

   (7,000  —      (2,846  —      (9,846

Payments on capital leases

   (4,082  (8,000  (1,953  —      (14,035

Capital contributions and loans from parent

   —      1,918    —      (1,918  —    

Other

   2,808    (9,861  (386  —      (7,439
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used for financing activities

   (123,274  (16,643  (5,587  (816  (146,320

Effect of exchange rate changes on cash and cash equivalents

   —      —      (15,522  —      (15,522
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

   67,440    (101,115  72,622    —      38,947  

Cash and cash equivalents:

      

Beginning of year

   62,065    175,758    362,071    —      599,894  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

End of year

  $129,505   $74,643   $434,693   $—     $638,841  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

F-55


CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

YEAR ENDED DECEMBER 31, 20152018

 

 

Parent

 

 

Subsidiary

 

 

Subsidiary

 

 

 

 

 

 

 

 

 

 

 

Company

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

 

 

(In thousands)

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

215,736

 

 

$

103,483

 

 

$

62,821

 

 

$

(164,827

)

 

$

217,213

 

Adjustments to reconcile net income to cash provided by operating activities

 

 

(36,894

)

 

 

162,811

 

 

 

55,915

 

 

 

164,827

 

 

 

346,659

 

Changes in assets and liabilities

 

 

229,325

 

 

 

(233,263

)

 

 

(3,635

)

 

 

 

 

 

(7,573

)

Net cash provided by operating activities

 

 

408,167

 

 

 

33,031

 

 

 

115,101

 

 

 

 

 

 

556,299

 

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions to theatre properties and equipment

 

 

(91,244

)

 

 

(173,042

)

 

 

(81,787

)

 

 

 

 

 

(346,073

)

Acquisition of theatres in international markets, net of cash acquired

 

 

 

 

 

 

 

 

(11,289

)

 

 

 

 

 

(11,289

)

Proceeds from sale of theatre properties and equipment and other

 

 

1,244

 

 

 

2,025

 

 

 

651

 

 

 

 

 

 

3,920

 

Proceeds from intercompany note repayments

 

 

1,867

 

 

 

 

 

 

 

 

 

(1,867

)

 

 

 

Acquisition of NCM common units

 

 

(78,393

)

 

 

 

 

 

 

 

 

 

 

 

(78,393

)

Investment in joint ventures and other

 

 

 

 

 

(19,896

)

 

 

361

 

 

 

 

 

 

(19,535

)

Net cash used for investing activities

 

 

(166,526

)

 

 

(190,913

)

 

 

(92,064

)

 

 

(1,867

)

 

 

(451,370

)

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to parent

 

 

(148,750

)

 

 

 

 

 

 

 

 

 

 

 

(148,750

)

Repayments of long-term debt

 

 

(7,984

)

 

 

 

 

 

 

 

 

 

 

 

(7,984

)

Payment of debt issue costs

 

 

(5,218

)

 

 

 

 

 

 

 

 

 

 

 

(5,218

)

Payments on capital leases

 

 

(11,610

)

 

 

(8,950

)

 

 

(4,793

)

 

 

 

 

 

(25,353

)

Payments on intercompany loans

 

 

 

 

 

-

 

 

 

(1,867

)

 

 

1,867

 

 

 

 

Other

 

 

(704

)

 

 

(2,905

)

 

 

(992

)

 

 

 

 

 

(4,601

)

Net cash used for financing activities

 

 

(174,266

)

 

 

(11,855

)

 

 

(7,652

)

 

 

1,867

 

 

 

(191,906

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

 

 

 

(9,222

)

 

 

 

 

 

(9,222

)

Increase (decrease) in cash and cash equivalents

 

 

67,375

 

 

 

(169,737

)

 

 

6,163

 

 

 

 

 

 

(96,199

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

130,590

 

 

 

180,623

 

 

 

211,202

 

 

 

 

 

 

522,415

 

End of year

 

$

197,965

 

 

$

10,886

 

 

$

217,365

 

 

$

 

 

$

426,216

 

*   *   *   *   *

 

   Parent
Company
  Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Eliminations  Consolidated 
   (In thousands) 

Operating activities

      

Net income

  $218,532   $181,832   $91,812   $(271,785 $220,391  

Adjustments to reconcile net income to cash provided by operating activities

   (142,602  39,156    43,223    271,785    211,562  

Changes in assets and liabilities

   67,253    (67,850  23,869    —      23,272  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

   143,183    153,138    158,904    —      455,225  

Investing activities

      

Additions to theatre properties and equipment

   (98,193  (121,605  (111,928  —      (331,726

Proceeds from sale of theatre properties and equipment and other

   2,737    5,264    1,965    —      9,966  

Acquisition of theatre in Brazil

   —      —      (2,651  —      (2,651

Dividends received from subsidiaries

   1,685    15    —      (1,700  —    

Intercompany note issuances

   (3,500  —      (100,000  103,500    —    

Investment in joint ventures and other

   (518  —      (3,211  18    (3,711
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used for investing activities

   (97,789  (116,326  (215,825  101,818    (328,122

Financing activities

      

Dividends paid to parent

   (115,225  (1,700  —      1,700    (115,225

Repayments of long-term debt

   (8,385  —      (35  —      (8,420

Payments of debt issue costs

   (6,957  —      —      —      (6,957

Payments on capital leases

   (5,389  (9,120  (2,004  —      (16,513

Intercompany loan proceeds

   100,000    —      3,518    (103,518  —    

Other

   2,421    (4,770  (1,045  —      (3,394
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided by (used for) financing activities

   (33,535  (15,590  434    (101,818  (150,509

Effect of exchange rate changes on cash and cash equivalents

   —      —      (26,932  —      (26,932
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

   11,859    21,222    (83,419  —      (50,338

Cash and cash equivalents:

      

Beginning of year

   129,505    74,643    434,693    —      638,841  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

End of year

  $141,364  ��$95,865   $351,274   $—     $588,503  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


UNAUDITED SUPPLEMENTAL SCHEDULES

As required by the indentures governing the Company’s 5.125% Senior Notes and 4.875% Senior Notes and Senior Subordinated Notes (collectively the “Notes”), the Company has included in this filing, financial information for its subsidiaries that have been designated as unrestricted subsidiaries as defined by the indentures. As required by the indentures governing the Notes, the Company has included a condensed consolidating balance sheet and condensed consolidating statements of income, comprehensive income and cash flows for the Company and its subsidiaries. These supplementary schedules separately identify the Company’s restricted subsidiaries and unrestricted subsidiaries as required by the indentures.


CINEMARK USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

DECEMBER 31, 20152018

(In thousands)

 

 

Restricted

 

 

Unrestricted

 

 

 

 

 

 

 

 

 

  Restricted
Group
   Unrestricted
Group
 Eliminations Consolidated 

 

Group

 

 

Group

 

 

Eliminations

 

 

Consolidated

 

Assets

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

  $394,852    $193,651   $—     $588,503  

 

$

370,460

 

 

$

55,756

 

 

$

 

 

$

426,216

 

Other current assets

   213,164     (85,381  —     127,783  

 

 

267,077

 

 

 

(106,143

)

 

 

(8,607

)

 

 

152,327

 

  

 

   

 

  

 

  

 

 

Total current assets

   608,016     108,270    —     716,286  

 

 

637,537

 

 

 

(50,387

)

 

 

(8,607

)

 

 

578,543

 

Theatre properties and equipment, net

   1,505,069     —      —     1,505,069  

 

 

1,833,133

 

 

 

 

 

 

 

 

 

1,833,133

 

Other assets

   1,771,028     242,268   (107,019 1,906,277  

 

 

1,916,169

 

 

 

522,225

 

 

 

(348,719

)

 

 

2,089,675

 

  

 

   

 

  

 

  

 

 

Total assets

  $3,884,113    $350,538   $(107,019 $4,127,632  

 

$

4,386,839

 

 

$

471,838

 

 

$

(357,326

)

 

$

4,501,351

 

  

 

   

 

  

 

  

 

 

Liabilities and equity

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

  $7,016    $1,389   $—     $8,405  

 

$

6,595

 

 

$

1,389

 

 

$

 

 

$

7,984

 

Current portion of capital lease obligations

   18,780     —      —     18,780  

 

 

27,065

 

 

 

 

 

 

 

 

 

27,065

 

Accounts payable and accrued expenses

   411,980     4    —     411,984  

 

 

447,610

 

 

 

1

 

 

 

(8,607

)

 

 

439,004

 

  

 

   

 

  

 

  

 

 

Total current liabilities

   437,776     1,393    —     439,169  

 

 

481,270

 

 

 

1,390

 

 

 

(8,607

)

 

 

474,053

 

Long-term liabilities

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion

   1,768,763     4,167    —     1,772,930  

 

 

2,014,327

 

 

 

-

 

 

 

(241,700

)

 

 

1,772,627

 

Capital lease obligations, less current portion

   208,952     —      —     208,952  

 

 

232,467

 

 

 

 

 

 

 

 

 

232,467

 

Other long-term liabilities and deferrals

   492,519     100,811    —     593,330  

 

 

484,528

 

 

 

60,493

 

 

 

 

 

 

545,021

 

  

 

   

 

  

 

  

 

 

Total long-term liabilities

   2,470,234     104,978    —     2,575,212  

 

 

2,731,322

 

 

 

60,493

 

 

 

(241,700

)

 

 

2,550,115

 

Commitments and contingencies

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

   976,103     244,167   (107,019 1,113,251  

 

 

1,174,247

 

 

 

409,955

 

 

 

(107,019

)

 

 

1,477,183

 

  

 

   

 

  

 

  

 

 

Total liabilities and equity

  $3,884,113    $350,538   $(107,019 $4,127,632  

 

$

4,386,839

 

 

$

471,838

 

 

$

(357,326

)

 

$

4,501,351

 

  

 

   

 

  

 

  

 

 

Note:  “Restricted Group”"Restricted Group" and “Unrestricted Group”"Unrestricted Group" are defined in the indentures for the senior notes and senior subordinated notes.


CINEMARK USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

YEAR ENDED DECEMBER 31, 20152018

(In thousands)

 

 

Restricted

 

 

Unrestricted

 

 

 

 

 

 

 

 

 

  Restricted
Group
 Unrestricted
Group
 Eliminations   Consolidated 

 

Group

 

 

Group

 

 

Eliminations

 

 

Consolidated

 

Revenues

  $2,852,609   $—     $—      $2,852,609  

 

$

3,221,735

 

 

$

 

 

$

 

 

$

3,221,735

 

Cost of operations

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatre operating costs

   2,066,571    —      —       2,066,571  

 

 

2,335,975

 

 

 

 

 

 

 

 

 

2,335,975

 

General and administrative expenses

   154,050   2    —       154,052  

 

 

162,645

 

 

 

(5

)

 

 

 

 

 

162,640

 

Depreciation and amortization

   189,206    —      —       189,206  

 

 

261,162

 

 

 

 

 

 

 

 

 

261,162

 

Impairment of long-lived assets

   8,801    —      —       8,801  

 

 

32,372

 

 

 

 

 

 

 

 

 

32,372

 

Loss on sale of assets and other

   8,143    —      —       8,143  

 

 

38,702

 

 

 

 

 

 

 

 

 

38,702

 

  

 

  

 

  

 

   

 

 

Total cost of operations

   2,426,771   2    —       2,426,773  

 

 

2,830,856

 

 

 

(5

)

 

 

 

 

 

2,830,851

 

  

 

  

 

  

 

   

 

 

Operating income (loss)

   425,838   (2  —       425,836  

 

 

390,879

 

 

 

5

 

 

 

 

 

 

390,884

 

Other income (expense)

   (118,425 42,940    —       (75,485

 

 

(154,545

)

 

 

76,906

 

 

 

 

 

 

(77,639

)

  

 

  

 

  

 

   

 

 

Income before income taxes

   307,413   42,938    —       350,351  

 

 

236,334

 

 

 

76,911

 

 

 

 

 

 

313,245

 

Income taxes

   113,472   16,488    —       129,960  

 

 

72,086

 

 

 

23,946

 

 

 

 

 

 

96,032

 

  

 

  

 

  

 

   

 

 

Net income

   193,941   26,450    —       220,391  

 

 

164,248

 

 

 

52,965

 

 

 

 

 

 

217,213

 

Less: Net income attributable to noncontrolling interests

   1,859    —      —       1,859  

 

 

1,478

 

 

 

 

 

 

 

 

 

1,478

 

  

 

  

 

  

 

   

 

 

Net income attributable to Cinemark USA, Inc.

  $192,082   $26,450   $—      $218,532  

 

$

162,770

 

 

$

52,965

 

 

$

 

 

$

215,735

 

  

 

  

 

  

 

   

 

 

Note:  “Restricted Group”"Restricted Group" and “Unrestricted Group”"Unrestricted Group" are defined in the indentures for the senior notes and senior subordinated notes.


CINEMARK USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF

COMPREHENSIVE INCOME INFORMATION

YEAR ENDED DECEMBER 31, 20152018

(In thousands)

 

 

Restricted

 

 

Unrestricted

 

 

 

 

 

 

 

 

 

  Restricted
Group
 Unrestricted
Group
 Eliminations   Consolidated 

 

Group

 

 

Group

 

 

Eliminations

 

 

Consolidated

 

Net income

  $193,941   $26,450   $—      $220,391  

 

$

164,248

 

 

$

52,965

 

 

$

 

 

$

217,213

 

Other comprehensive income (loss), net of tax

      

Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $1,562

   2,636    —      —       2,636  

Unrealized loss due to fair value adjustments on available-for-sale securities, net of taxes of $572

   (957  —      —       (957

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes of $1,243, net of settlements

 

 

(3,851

)

 

 

 

 

 

 

 

 

(3,851

)

Other comprehensive loss in equity method investments

   (33 (3,086  —       (3,119

 

 

 

 

 

(139

)

 

 

 

 

 

(139

)

Foreign currency translation adjustments, net of taxes of $888

   (125,512  —      —       (125,512
  

 

  

 

  

 

   

 

 

Total other comprehensive loss, net of tax

   (123,866 (3,086  —       (126,952
  

 

  

 

  

 

   

 

 

Foreign currency translation adjustments

 

 

(62,253

)

 

 

 

 

 

 

 

 

(62,253

)

Total other comprehensive income (loss), net of tax

 

 

(66,104

)

 

 

(139

)

 

 

 

 

 

(66,243

)

Total comprehensive income, net of tax

   70,075   23,364    —       93,439  

 

 

98,144

 

 

 

52,826

 

 

 

 

 

 

150,970

 

Comprehensive income attributable to noncontrolling interests

   (1,821  —      —       (1,821

 

 

(1,478

)

 

 

 

 

 

 

 

 

(1,478

)

  

 

  

 

  

 

   

 

 

Comprehensive income attributable to Cinemark USA, Inc.

  $68,254   $23,364   $—      $91,618  

 

$

96,666

 

 

$

52,826

 

 

$

 

 

$

149,492

 

  

 

  

 

  

 

   

 

 

Note:  “Restricted Group”"Restricted Group" and “Unrestricted Group”"Unrestricted Group" are defined in the indentures for the senior notes and senior subordinated notes.


CINEMARK USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

YEAR ENDED DECEMBER 31, 20152018

(In thousands)

 

 

Restricted

 

 

Unrestricted

 

 

 

 

 

 

 

 

 

  Restricted
Group
 Unrestricted
Group
 Eliminations   Consolidated 

 

Group

 

 

Group

 

 

Eliminations

 

 

Consolidated

 

Operating activities

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

  $193,941   $26,450   $—      $220,391  

 

$

164,248

 

 

$

52,965

 

 

$

-

 

 

$

217,213

 

Adjustments to reconcile net income to cash provided by operating activities

   220,661   (9,099  —       211,562  

 

 

343,793

 

 

 

2,866

 

 

 

 

 

 

346,659

 

Changes in assets and liabilities

   15,124   8,148    —       23,272  

 

 

32,060

 

 

 

(39,633

)

 

 

 

 

 

(7,573

)

  

 

  

 

  

 

   

 

 

Net cash provided by operating activities

   429,726   25,499    —       455,225  

 

 

540,101

 

 

 

16,198

 

 

 

 

 

 

556,299

 

Investing activities

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions to theatre properties and equipment and other

   (331,726  —      —       (331,726

 

 

(346,073

)

 

 

 

 

 

 

 

 

(346,073

)

Acquisition of theatre in Brazil

   (2,651  —      —       (2,651

Proceeds from sale of theatre properties and equipment and other

   9,966    —      —       9,966  

 

 

3,920

 

 

 

 

 

 

 

 

 

3,920

 

Acquisition of theatres in international markets, net of cash acquired

 

 

(11,289

)

 

 

 

 

 

 

 

 

(11,289

)

Loans to affiliates

 

 

-

 

 

 

(21,700

)

 

 

21,700

 

 

 

 

Acquisition of NCM common units

 

 

(78,393

)

 

 

 

 

 

 

 

 

(78,393

)

Investment in joint ventures and other

   (500 (3,211  —       (3,711

 

 

(19,896

)

 

 

361

 

 

 

 

 

 

(19,535

)

  

 

  

 

  

 

   

 

 

Net cash used for investing activities

   (324,911 (3,211  —       (328,122

 

 

(451,731

)

 

 

(21,339

)

 

 

21,700

 

 

 

(451,370

)

Financing activities

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to parent

   (115,225  —      —       (115,225

 

 

(148,750

)

 

 

 

 

 

 

 

 

(148,750

)

Repayments of long-term debt

   (8,420  —      —      ��(8,420

Borrowings from affiliate

 

 

21,700

 

 

 

 

 

 

(21,700

)

 

 

 

Repayments on long-term debt

 

 

(7,984

)

 

 

-

 

 

 

 

 

 

(7,984

)

Payment of debt issue costs

   (6,957  —      —       (6,957

 

 

(5,218

)

 

 

-

 

 

 

 

 

 

(5,218

)

Payments on capital leases

   (16,513  —      —       (16,513

 

 

(25,353

)

 

 

 

 

 

 

 

 

(25,353

)

Other

   (3,394  —      —       (3,394

 

 

(4,601

)

 

 

 

 

 

 

 

 

(4,601

)

  

 

  

 

  

 

   

 

 

Net cash used for financing activities

   (150,509  —      —       (150,509

 

 

(170,206

)

 

 

 

 

 

(21,700

)

 

 

(191,906

)

Effect of exchange rate changes on cash and cash equivalents

   (26,932  —      —       (26,932

 

 

(9,222

)

 

 

 

 

 

 

 

 

(9,222

)

  

 

  

 

  

 

   

 

 

Increase (decrease) in cash and cash equivalents

   (72,626 22,288    —       (50,338

Decrease in cash and cash equivalents

 

 

(91,058

)

 

 

(5,141

)

 

 

 

 

 

(96,199

)

Cash and cash equivalents:

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

   467,478   171,363    —       638,841  

 

 

461,518

 

 

 

60,897

 

 

 

 

 

 

522,415

 

  

 

  

 

  

 

   

 

 

End of year

  $394,852   $193,651   $—      $588,503  

 

$

370,460

 

 

$

55,756

 

 

$

 

 

$

426,216

 

  

 

  

 

  

 

   

 

 

Note:  “Restricted Group”"Restricted Group" and “Unrestricted Group”"Unrestricted Group" are defined in the indentures for the senior notes and senior subordinated notes.

EXHIBITS

TO

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR

CINEMARK USA, INC.

FOR FISCAL YEAR ENDED

DECEMBER 31, 2015

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 Current Report on Form 8-K, File No, 000-47040, filed by Cinemark USA, Inc. on August 11, 2006).
      2.2Contribution 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).
      2.3Asset 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).
      3.1Amended and Restated Articles of Incorporation of the Company dated June 3, 1992 (incorporated by reference to Exhibit 3.1 to Cinemark USA, Inc.’s Registration Statement on Form S-4, File No. 333-162105, filed on September 24, 2009).
      3.2Amended and Restated Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.4(a) to Cinemark USA, Inc.’s Registration Statement on Form S-4, File No. 333-162105, filed on September 24, 2009).
      4.1(a)Indenture dated as of June 29, 2009, between Cinemark USA, Inc. and Wells Fargo Bank, N.A., as trustee governing the 8 58% 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).
      4.1(b)Form of 8 58% senior notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit 4.2(a) above) (incorporated by reference to Exhibit 4.3 to the Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed July 6, 2009).
      4.2(a)Indenture, dated as of June 3, 2011, between Cinemark USA, Inc. and Wells Fargo Bank, N.A. governing the 7 38% 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).
      4.2(b)Form of 7 38% senior subordinated notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit 4.3(a) above) (incorporated by reference to Exhibit 4.3 to the Cinemark Holdings, Inc.’s Current Report on Form 8-K, File No. 001-33401, filed on July 6, 2011).
      4.3(a)Indenture, dated as of December 18, 2012, between Cinemark USA, Inc. and Wells Fargo Bank, N.A. governing the 5 18% 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).
      4.3(b)Form of 5 18% senior notes of Cinemark USA, Inc. (contained in the Indenture listed as Exhibit 4.4(a) above) (incorporated by reference to Exhibit 4.1 to the Cinemark Holdings, Inc.’s Current Report on Form 8-K,File No. 001-33401, filed on December 20, 2012).
      4.4(a)Indenture, dated as of May 24, 2013, between Cinemark USA, Inc. and Well Fargo Bank, N.A. governing the 4.,875% 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 May 28, 2013).
      4.4(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 Form 8K,File No. 001-33401, filed May 28, 2013).
    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 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. (incorporated by reference to Exhibit 10.1(d) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No.001-33401, filed February 24, 2016).
    10.2License 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)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).
    10.4(c)Reaffirmation agreement, dated as of December 18, 2012, between Cinemark Holdings, Inc., Cinemark USA, Inc. and each subsidiary guarantor party thereto (incorporated by reference to Exhibit 10.4(c) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 28, 2013).

    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).
  +10.6(a)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).
  +10.6(b)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).
  +10.6(c)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 June 16, 2008, between Cinemark Holdings, Inc. and Michael Cavalier (incorporated by reference to Exhibit 10.4 to Cinemark Holdings, Inc.’s Quarterly Report on Form 10-Q,File No. 001-33401, filed August 8, 2008).
  +10.6(h)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).
  +10.6(l)Amended and Restated Employment Agreement, dated as of February 19, 2016, between Cinemark Holdings, Inc. and Mark Zoradi (incorporated by reference to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 24, 2016).
  +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).
  +10.7(b)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).
  +10.7(d)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).
  +10.7(e)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 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 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(h) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 24, 2016).
    10.8Amended and Restated Exhibitor Services Agreement between National CineMedia, LLC and Cinemark USA, Inc., dated as of December 26, 2013(incorporated by reference to Exhibit 10.45 to Cinemark Holdings, Inc.’s Annual Report on Form 10-K , File No. 001-33401, filed February 28, 2014).
    10.9Third 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, CA. (incorporated by reference to Exhibit 10.10(a) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).
    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, CA. (incorporated by reference to Exhibit 10.10(b) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).
    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)..
    10.12(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 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).
    10.12(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 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).
    10.12(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 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).
    10.12(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 14, Folsom, CA. (incorporated by reference to Exhibit 10.10(c) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).
    10.13(a)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).
    10.13(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 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).
    10.13(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 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).
    10.13(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 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).
    10.13(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 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).

    10.13(f)Fifth Amendment to Indenture of Lease, dated as of October 5, 2012 by and between Syufy Enterprises, L.P. as landlord and Century Theatres, Inc., as tenant, for Cinedome 12, Henderson, NV (incorporated by reference to Exhibit 10.13(f) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 27, 2015).
    10.14(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 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).
    10.14(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 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).
    10.14(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 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).
    10.14(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 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).
    10.14(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., as tenant, for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.17(e) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007).
    10.14(f)Fifth Amendment to Indenture of Lease dated as of May 1, 2014 by and between Syufy Enterprises, L.P., as landlord and Century Theatres, Inc., as tenant for Century 8, North Hollywood, CA (incorporated by reference to Exhibit 10.14(f) to Cinemark Holdings, Inc.’s Annual Report on Form 10-K, File No. 001-33401, filed February 27, 2015).
    10.15(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 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).
    10.15(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 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).
    10.15(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 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).
    10.15(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 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).
    10.15(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 Cinema 16, Mountain View, CA. (incorporated by reference to Exhibit 10.10(d) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).
    10.16(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 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, FileNo. 333-140390, filed April 20, 2007).
    10.16(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 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).
    10.16(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 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).
    10.16(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 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).
    10.16(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., 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).
    10.17(a)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).
    10.17(b)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).

    10.17(c)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).
    10.17(d)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, CA. (incorporated by reference to Exhibit 10.10(j) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q,File No. 001-33401, filed November 7, 2013).
    10.18(a)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).
    10.18(b)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).
    10.18(c)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).
    10.18(d)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, NV. (incorporated by reference to Exhibit 10.10(i) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q,File No. 001-33401, filed November 7, 2013).
    10.19(a)Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P.(succeeded by Stadium Promenade LLC), as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, CA (incorporated by reference to Exhibit 10.27(a) to Amendment No. 5 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 20, 2007).
    10.19(b)First Amendment, dated as of April 15, 2005, to Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P.(succeeded by Stadium Promenade LLC), as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, (incorporated by reference to Exhibit 10.27(b) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007).
    10.19(c)Second Amendment, dated as of September 29, 2005, to Lease Agreement, dated as of October 1, 1996, by and between Syufy Enterprises, L.P.(succeeded by Stadium Promenade LLC), as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, (incorporated by reference to Exhibit 10.27(c) to Amendment No. 3 to Cinemark Holdings, Inc.’s Registration Statement on Form S-1, File No. 333-140390, filed April 18, 2007).
    10.19(d)Third Amendment, dated as of August 5, 2006, to Lease Agreement, dated as of October 1, 1996, by and between Stadium Promenade LLC, as landlord and Century Theatres, Inc., as tenant, for Century Stadium 25, Orange, CA. (incorporated by reference to Exhibit 10.10(h) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q,File No. 001-33401, filed November 7, 2013).
    10.20(a)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).
    10.20(b)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).
    10.20(c)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).
    10.20(d)Third Amendment, dated as of August 7, 2006, 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 10.10(g) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).
    10.21(a)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).
    10.21(b)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).
    10.21(c)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).
    10.21(d)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, CA. (incorporated by reference to Exhibit 10.10(e) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q,File No. 001-33401, filed November 7, 2013).
    10.22(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 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).

    10.22(b)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).
    10.22(c)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).
    10.22(d)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).
    10.22(e)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).
    10.22(g)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).
    10.23(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 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).
    10.23(c)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).
    10.23(d)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, CA. (incorporated by reference to Exhibit 10.10(m) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).
    10.24(a)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).
    10.24(b)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).
    10.24(c)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).
    10.24(d)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).
    10.24(e)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).
    10.24(f)Fifth Amendment, dated as of August 7, 2006, to Indenture of Lease, dated as of September 30, 1995, by and between SYUT Properties, Inc. (succeeded by Syufy Properties, Inc.), as landlord and Century Theatres of Utah, Inc. (succeeded by Century Theatres, Inc.), as tenant, for Century 16, Salt Lake City, UT. (incorporated by reference to Exhibit 10.10(l) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).
    10.25(a)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).
    10.25(b)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).
    10.25(c)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).

    10.25(d)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).
    10.25(e)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, CA. (incorporated by reference to Exhibit 10.10(k) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q,File No. 001-33401, filed November 7, 2013).
    10.26(a)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).
    10.26(b)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).
    10.26(c)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).
    10.26(d)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, NV. (incorporated by reference to Exhibit 10.10(f) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q,File No. 001-33401, filed November 7, 2013).
    10.27(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 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).
    10.27(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 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).
    10.27(c)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).
    10.27(d)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).
    10.27(e)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).
    10.27(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. (succeeded by Century Theatres, Inc.), as tenant, for Century 16, Sacramento, CA (incorporated by reference to Exhibit 10.10(n) of Cinemark Holdings, Inc. Quarterly Report on Form 10-Q, File No. 001-33401, filed November 7, 2013).
  +10.28Cinemark Holdings, Inc. Performance Bonus Plan, as amended (incorporated by reference to Appendix B to Cinemark Holdings, Inc.’s Definitive Proxy Statement filed on April 11, 2013).
  +10.29Amended 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 28, 2014).
  *12Calculation of Ratio of Earnings to Fixed Charges.
  *21Subsidiaries of Cinemark USA, Inc.
  *31.1Certification of Mark Zoradi, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  *31.2Certification of Sean Gamble, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  *32.1Certification of Mark Zoradi, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.
  *32.2Certification of Sean Gamble, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.
*101The following financial information from Cinemark USA, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 4, 2016, formatted in XBRL includes: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements tagged as detailed text.

*Filed herewith.
+Any management contract, compensatory plan or arrangement.

 

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