UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 20182021
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
Commission File Number 33-47040
CINEMARK USA, INC.
(Exact Name of Registrant as Specified in its Charter)
Texas | 75-2206284 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3900 Dallas Parkway
Plano | 75093 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (972) (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☑
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☑
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☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑ 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. ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☑ | Smaller reporting company | ☐ | |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No☑ No☑
This registrant is privately held and there is no0 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 heldowned by non-affiliates.
As of March 1, 2019, 4, 2022, 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, 2018,2021, are incorporated by reference into Part III, Items 10-14, of this annual report on Form 10-K.
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Item 13. | Certain Relationships and Related Transactions, and Director Independence |
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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;
currency exchange rate and inflationary impacts;
projected capital expenditures;
access to capital resources;
the number orand diversity of popular movies released, the length of exclusive theatrical release windows, 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;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, including, among others, the impacts of the COVID-19 pandemic. Such risks and uncertainties 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 DefinitionsCinemark 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, Plano, Texas 75093. Our telephone number is (972) 665-1000. General information about us can be found at www.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 Exchange Act are available on our investor relations website at ir.cinemark.com free of charge under the heading "SEC Filings" as soon as reasonably practicable after such reports are filed with, or furnished 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 www.sec.gov.
Unless the context otherwise requires, all references to “we,” “our,” “us,” the “issuer”“the issuer”, “the Company” or “Cinemark” relate to Cinemark USA, Inc. and its consolidated subsidiaries. All references to Latin America are to Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. Unless otherwise specified, all operating and other statistical data areis as of andor for the year ended December 31, 2018.2021.
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Item 1. Business
Our Company
Cinemark USA, Inc. and its subsidiaries or the Company, us or our, is a leaderoperate in the motion picture exhibition industry, with theatres in the United States, or U.S.“U.S., Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao” and Paraguay.Latin America.
As of December 31, 2018, we managed our business under two reportable operating segments: U.S. markets and international markets. See Note 17 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 at www.cinemark.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, are available on our website free of charge under the heading “Investor 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 www.sec.gov.
Description of Business
We are a leader and one of the most geographically diverse operators in the motion picture exhibition industry. As of December 31, 2018,2021, we operated 546522 theatres and 6,0485,868 screens in the U.S. and Latin America and more than 282 million guests attended our theatres worldwide during the year ended December 31, 2018.America. Our U.S. circuit had 341321 theatres and 4,5864,408 screens in 41 states and our international circuit had 205201 theatres and 1,4621,460 screens inacross 15 countries. Our significant and diverse presence in the U.S. and Latin America has made us an important distribution channel for movie studios.studios and other content providers. We believe our portfolio of modern, high-quality theatres with multiple platforms provides a preferred destination for moviegoers and contributeshas contributed to our historically consistent financial performance.
Revenues,As of December 31, 2021, we managed our business under two reportable operating incomesegments: U.S. markets and net income attributableinternational markets. See Note 19 to our consolidated financial statements.
Impact of COVID-19 Pandemic
The COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread. We temporarily closed our theatres in the U.S. and Latin America beginning in March of 2020 at the onset of the COVID-19 outbreak. Additionally, we implemented various cash preservation strategies, including, but not limited to, temporary personnel and salary reductions, halting non-essential operating and capital expenditures, negotiating modified timing and/or abatement of contractual payments with landlords and other major suppliers and the suspension of dividends to Cinemark USA,Holdings, Inc. for
Throughout 2020 and 2021 we reopened theatres as soon as local restrictions and the status of the COVID-19 pandemic would allow. As of December 31, 2021, all of our domestic and international theatres were open. New film content returned in April 2021 and expanded throughout the year endedleading up to the December 31, 2018, were $3,221.8 million, $390.9 millionrelease of Spider-Man: No Way Home, which is now an all-time top 10 film in terms of worldwide box office. The industry’s recovery to historical levels of new film content, both in terms of the number of new films and $215.7 million, respectively. At December 31, 2018 we had cashbox office performance, is still underway, as the industry also continues to adjust to evolving theatrical release windows, competition from streaming and cash equivalents of $426.2 millionother delivery platforms, supply chain delays, inflationary pressures, labor shortages, wage rate pressures and total long-term debt of $1,809.3 million. Approximately $202.9 million, or 11%, of our long-term debt accrues interest at variable rates and $8.0 million of our long-term debt matures in 2019.other economic factors.
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Motion Picture Exhibition Industry Overview
Domestic Markets
The U.S. motion picture exhibition industry reportedPreliminary estimates indicate that North American box office revenues ofwere approximately $11.1$4.5 billion for 2017. Preliminary estimates for 2018 indicate that box office revenues reached an all-time high of $11.9 billion, an approximate 7% increase over 2017. 2021, up more than 100% as compared with 2020. Industry statistics continued to improve through 2021 as theatres reopened, new films were released and capacity and other restrictions were removed.
The following table represents the results of a survey by MPAAMotion Picture Association, or MPA, published duringin March 2018,2021, outlining the historical trends in U.S.North American box office performance for the ten yearfive-year period from 2008 to 2017 (industry data for 2018 has not yet been released):
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| Office Revenues |
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Year |
| ($ in billions) |
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| (in billions) |
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| Price |
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2008 |
| $ | 9.6 |
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| 1.34 |
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| $ | 7.18 |
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2009 |
| $ | 10.6 |
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| 1.42 |
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| $ | 7.50 |
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2010 |
| $ | 10.6 |
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| 1.34 |
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| $ | 7.89 |
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2011 |
| $ | 10.2 |
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| 1.28 |
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| $ | 7.93 |
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2012 |
| $ | 10.8 |
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| 1.36 |
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| $ | 7.96 |
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2013 |
| $ | 10.9 |
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| 1.34 |
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| $ | 8.13 |
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2014 |
| $ | 10.4 |
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| 1.27 |
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| $ | 8.17 |
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2015 |
| $ | 11.1 |
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| 1.32 |
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| $ | 8.43 |
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2016 |
| $ | 11.4 |
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| 1.32 |
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| $ | 8.65 |
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2017 |
| $ | 11.1 |
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| 1.24 |
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| $ | 8.97 |
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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, its continued ability to attract consumers and the fact that box2016 through 2020. Box office performance ishas historically been primarily dependent on the quality, quantity and quantitytiming 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.product.
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2016 |
| $ | 11.4 |
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| 1.32 |
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| $ | 8.65 |
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2017 |
| $ | 11.1 |
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| 1.24 |
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| $ | 8.97 |
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2018 |
| $ | 11.9 |
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| 1.30 |
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| $ | 9.11 |
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2019 |
| $ | 11.4 |
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| 1.24 |
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| $ | 9.16 |
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2020 |
| $ | 2.2 |
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| 0.24 |
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| $ | 9.37 |
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Films leading the box officereleased during the year ended December 31, 20182021 included Black Panther, Avengers: Infinity War, Incredibles 2, Jurassic World: Fallen Kingdom, Aquaman, Deadpool 2, Dr. Seuss’ The Grinch, Mission Impossible – Fallout, Ant-ManShang-Chi and the Wasp, Solo: A Star Wars Story, Venom,Legend of the Ten Rings, Venom: Let There Be Carnage, Black Widow, F9: The Fast Saga, Eternals, No Time to Die, A Quiet Place Crazy Rich Asians, Halloween, Bumblebee, Ralph BreaksPart II, Ghostbusters: Afterlife, Free Guy and Jungle Cruise and Spider-Man: No Way Home, among other films.
Currently, films scheduled for release in 2022 include the Internet, Fantastic Beasts: The Crimes of Grindelwald, Mary Poppins Returns, A Star is Born, Bohemian Rhapsody and other films,highly anticipated sequel Avatar 2, as well as Doctor Strange in the carryoverMultiverse of Madness, Thor: Love and Thunder, Black Panther: Wakanda Forever, The Greatest Showman, Jumanji: WelcomeBatman, Jurassic World: Dominion, Lightyear, Top Gun: Maverick, Minions: The Rise of Gru, Mario, Black Adam, Aquaman 2, Strange World and Spider-Man: Across the Spider-Verse, among others. As the industry continues to evolve and recover as the Jungle impact of the COVID-19 pandemic wanes, film release schedules, the availability and Star Wars: The Last Jedi.
Films scheduled forlength of exclusive theatrical 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,windows and Godzilla 2 among other films.
International Markets
Accordingstreaming release strategies are continuing to MPAA, internationalevolve and may have a direct impact on industry box office revenues increased approximately 7% to $29.5 billionresults.
International
Preliminary estimates 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 $3.4approximately $1.1 billion for the year ended December 31, 2017,2021, up more than 100% compared to $2.8 billionwith 2020 and more than 60% below 2019 levels. As noted above, industry results for the year ended December 31, 2016, an increase of approximately 22%. (Industry data for 2018 has2021 are not yet been released.)final.
While certainIn addition to the quality, quantity and timing of Hollywood film product, performance in Latin American countries have experienced recent political and economic challenges, performancemarkets is also impacted by political and social behaviors,conditions, growing populations, and continued retail development in select markets, and quality product from Hollywood, including 3-D and alternative content offerings.development. In many Latin American countries, including Brazil, Argentina, Colombia, Peru and Chile, successful local film product can also provide incrementalcontribute to box office growth opportunities.
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We believe many international markets will expand as new theatre technologies are introducedrevenues. As a result of the continued impacts of the COVID-19 pandemic, theatres in certain Latin American countries were subject to more locations, as filmphased re-openings, limited operating hours and other content offeringscapacity limitations during 2021. As of December 31, 2021, all of the Company's international theatres had reopened, though some remained subject to certain capacity and other restrictions. These restrictions are expected to continue to broaden,ease as ancillary revenue opportunities growCOVID-19 cases decrease and as local economies strengthen. We also believe most of these markets are underscreenedvaccination rates improve in comparison to the U.S. and European markets.Latin American countries.
Drivers of Continued Industry Success
WeIndustry dynamics continue to evolve as exhibitors recover from the widespread impacts of the COVID-19 pandemic, but we believe the following market trendsfactors 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. AIn addition to representing a significant share of a film’s overall revenues, we believe 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-viewnetwork television DVDs, SVOD, and network and syndicated television,streaming as well as theme parks and branded retail merchandise. While some film releases for 2021 did not have a normal exclusive theatrical release window due to temporary theatre closures, limited operating hours and capacity limitations as theatres reopened, and studio efforts to build their streaming platforms’ membership, theatrical exhibition is expected to continue to contribute a meaningful portion of overall studio revenues as demonstrated during 2021. For theatrical releases, we expect most of the studios to observe an exclusive theatrical window, albeit shorter than historical levels, as the effects of the COVID-19 pandemic wane.
Convenient and Affordable Form of Premium Out-Of-Home Entertainment. Movie going continues to beMovie-going remains one of the most convenient and affordable forms of out-of-home entertainment, with an estimatedentertainment. While the average movie ticket price in the U.S. of $8.97 in 2017. Averagewas $9.16 for 2019, average prices in 2017 for other forms of out-of-home entertainment in the U.S., including sporting events and theme parks, ranged from approximately $31.67$32.99 to $94.98$102.35 per ticket according to MPAA. (AsMPA. Industry data for 2021 is not yet available and 2020 data is not representative due to the impacts of the date of this report, 2018 industry data was not yet available.)COVID-19 pandemic.
Expansion of Concepts and Product Offerings that Enhance the Movie-GoingMovie Viewing Experience. TheOver recent years, the motion picture exhibition industry continues to develophas invested in the development of new movie theatre platforms and concepts to respond to varying and changing consumer preferences and to continueas well as to differentiate the movie-going experience from watching a movie at home. In addition toother in-home and out-of-home entertainment options. Some examples include changing the overall style of, and amenities offered in, someof theatres, including expansion of concession product offerings have continuedthat provide more variety to expand to more than just traditional popcorn, fountain drinks and candy items. Many locations now offer hot foods, alcohol offerings and/or healthier snack options for guests. Motioncandy. Enhanced digital projectors, enhanced sound equipment and motion seats are offered in some locations further enhancing the movie viewingto create an immersive movie-going experience. Virtual reality has also been developed for in-theatre enjoyment. New and enhanced programming alternatives expandalternative content is expanding the industry’s entertainment offerings to attract a broader customer base. We also developed mobile concessions ordering and delivery-to-seat options.
Contribution of International Markets3
Our Strategy
Our primary objective is to Box Office Performance. International marketsattract and expand audiences to maximize attendance and box office, and then pursue other opportunities to capture ancillary revenue. We have continued to focus on providing an extraordinary guest experience, investing in our core circuit and organic growth to accomplish these goals. Our near term focus is to effectively navigate the ongoing COVID-19 pandemic, reignite the theatrical exhibition industry and evolve our business for post-pandemic success. As always, we continue to be an increasingly important component ofkeep 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 componentssafety of our strategyemployees, guests and communities a key priority.
Our long-term strategies include:
Focus on ProvidingProvide an Extraordinary Guest Experience to Maximize Attendance. Experience.We differentiate our theatres by focusing on providing an extraordinaryvarious initiatives that continuously enhance the in-theatre guest experience through a variety of initiatives, as discussed below.experience. 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 withadapt our theatre amenities includingto each market, which may include Luxury Lounger recliner seats, enhancedour own premium large format, XD, expanded food and beverage offerings and our exhibitor-branded premium large format, XD, IMAX, motion seats, and a new virtual reality offeringSnacks In A Tap mobile concessions ordering. Investments in one of our domestic theatres. Our innovative and advanced technology selectionsthese amenities allow us to consistently deliver the highest quality presentation to fully immersecreate and maintain a high-quality theatrical experience throughout our guests in the on-screen action.
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Throughcircuit. We believe our various marketing initiatives, including enhanced and tailored customer interactions, continuedongoing focus on providing an extraordinary in-theatre guest experience is a primary factor of our consistent industry-leading results.
Enhance Overall Guest Engagement.Consistent investment in our website and app experiencesmobile application features, customized guest interactive functionality and development of our loyalty and membershipsubscription programs we are dedicatedprovide a personalized experience to further understandingour guests. We pursue a wide range of strategic marketing initiatives to communicate and build consumer awareness to better understand the unique preferences of our guests and enrichingenrich their movie-going experience.
Pursue Organic and Synergistic Growth Opportunities While Maintaining Core Circuit.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 utilizehave consistently reinvested our cash flows from operations to invest in our circuit with a focus on new and exciting ways to ensure the highest quality experience forattract guests. In addition to our guests. Our commitment to investing in our theatre assets is demonstrated by our level of capital expenditures for the years ended December 31, 2017Luxury Lounger recliner seats and 2018, at approximately $380.9 millionpremium large format XD auditoriums, we have incorporated premium concepts such as full bars and $346.1 million, respectively.dine-in options. 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, weWe built eleven newseven theatres with 8170 screens during 2021. We will continue to be opportunistic and acquired three theatres with 19 screens.make quality investments that meet our return on investment criteria while prioritizing our liquidity needs.
Competitive Strengths
We believe the following strengths allowhave allowed us to compete effectively:effectively in the past, helped us navigate the impacts of the COVID-19 pandemic and will be guiding principles as we continue to recover from the impacts of the pandemic:
Disciplined Operating Philosophy. We generated operating incomeOur balanced 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 thatinvestment approach centers on building new, andthoughtfully reinvesting in our existing high-quality theatres, focusingbuilding new theatres and acquiring theatres that will complement our circuit and offer a meaningful return. Our operating philosophy focuses on thecreating an extraordinary 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 theatreshave long believed 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 oura strong balance sheet and our continued commitment to earn a strong return onensuring our capital investments willearn a solid return. This philosophy has proven to be successful and helped us enter the COVID-19 pandemic in a healthy financial position. We were disciplined with our cash management and liquidity strategies as we navigated through the temporary closure of our theatres and during the phased reopening of our theatres. As we recover from the COVID-19 pandemic, we are focused on refortifying our balance sheet, while still investing in long-term growth opportunities. We continue to provide us withevaluate the financial flexibility to pursue further expansion opportunities and maintainperformance of our existing locations at a high standard, while also allowing us to effectively service our debt obligationscircuit and continue to offer our stockholders a strong dividend yield.carefully consider closing underperforming theatres if more favorable results cannot be achieved.
Leading Position in Our U.S. and Latin American Markets. We have a leading market share in most of the U.S. markets we serve, which includes a presence in 4142 states. For the year ended December 31, 2018,2021, 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. During 2021, we held our leadership position as we were one of the first circuits to begin reopening theatres in the U.S., gaining market share of the overall North American box office as a result. We retained a meaningful portion of that market share growth throughout 2021.
Located in Top Latin American Markets. 4
We have successfully established a significant presence in major cities in Latin America, with theatres in fourteen15 of the twenty20 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. While our performance during 2020 and 2021 was impacted by the temporary closure of our theatres, we gained overall market share in Latin America as we reopened all of our theatres during 2021. We have retained a meaningful portion of that market share growth as additional new film content was released throughout 2021.
State-of-the-Art Theatre Circuit. We offerbuild new theatres and consistently invest in our existing theatres to maintain a state-of-the-art movie-going experience, which we believe makes our theatres a preferred destinationdestinations 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 towill continue to add additional Luxury Loungersbe opportunistic and make quality investments in certain of our domestic locations during 2019.circuit while prioritizing our liquidity needs.
OurWe offer our guests a premium large format experience through our 16 IMAX auditoriums across our worldwide circuit and our 281 XD screensauditoriums represent the largest exhibitor-sponsoredexhibitor-branded 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 AuroAuro-Max 11.1 or Dolby Atmos sound systemsystems 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, inbenefits of our XD auditoriums. We also preferauditoriums include program flexibility, as we can show the economiescontent of our exhibitor-sponsored format since there ischoice with no additional revenue share component outside of routine film rental. As of December 31, 2018, we had 256We plan to continue adding new XD locations and second XD screens to certain existing domestic locations during 2022.
We have started a multi-year project to strategically convert our auditoriums in our worldwide circuit.to Cinionic RGB laser projectors, further enhancing the movie-going experiences. 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,have also incorporated Luxury Lounger recliner seats into all of which can be enjoyed in the comfort of the auditoriums, at approximately 58%our recent domestic new builds and have repositioned many of our worldwide theatres.existing domestic theatres to offer this premium seating feature. We also offer market-adaptive concepts with full bars or dine-in areascurrently feature Luxury Loungers in certain2,870 domestic auditoriums, representing more than 65% of our theatres, and continue to expand to additional locations.domestic circuit.
We currently have auditoriums that offer seats with immersive cinematic motion, which we refer to as motion seats, in 124 theatres throughout our worldwide circuit. These motion seats are programmed in harmony with the audio and video content of the film and further immerse guests ininto the on-screen action.
We offer motion seatsenhanced food and beverages such as gourmet pizzas, burgers, and sandwiches, and a selection of beers, wine and cocktails, all of which can be enjoyed in 229the comfort of the auditoriums, throughoutat a majority of our worldwide circuit.theatres. We also offer full bars or dine-in areas in many of our locations and we will continue to expand these amenities to additional locations. In the U.S., we offer mobile concession ordering called Snacks In A Tap at nearly all of our U.S. theatres allowing guests to pre-pay for select concession products and pick them up at the concession stand upon arrival or have them delivered to their seat. We plan to add motion seatsexpand mobile concession ordering and delivery to additional locations during 2019. seat to our Latin American theatres in 2022.
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, President and Chief Executive Officer Mark Zoradi, Chief Operating Officer andSean Gamble, Chief Financial Officer Sean Gamble, and President-InternationalMelissa Thomas, President International Valmir Fernandes, and Executive Vice President and General Counsel Michael Cavalier, our global operational management team has many years ofextensive industry experience. Each ofAdditionally, our international offices is led bycountry general managers that are local citizens familiar with political, social, cultural political and economic factors impacting each country.their country, which enables them to more effectively manage the local business. Our worldwideglobal management team has successfully navigated us through many industry and economic cycles over the years.years, and their leadership in steering the Company during the COVID-19 pandemic is a testament to their abilities and effectiveness as stewards of the Company.
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Theatre Operations
As of December 31, 2018,2021, we operated 546522 theatres and 6,0485,868 screens in 4142 U.S. states and 15 Latin American countries. The following tables summarize
We opened our first theatre in the geographic locations of our theatreU.S. in 1984. Our domestic circuit as of December 31, 2018.
United States Theatres
|
| Total |
| Total |
| |
State |
| Theatres |
| Screens |
| |
Texas |
| 86 |
|
| 1,136 |
|
California |
| 67 |
|
| 855 |
|
Ohio |
| 29 |
|
| 365 |
|
Utah |
| 15 |
|
| 190 |
|
Nevada |
| 9 |
|
| 140 |
|
Colorado |
| 9 |
|
| 136 |
|
Illinois |
| 9 |
|
| 126 |
|
Pennsylvania |
| 9 |
|
| 125 |
|
Florida |
| 6 |
|
| 110 |
|
Kentucky |
| 8 |
|
| 109 |
|
Arizona |
| 7 |
|
| 104 |
|
Oregon |
| 6 |
|
| 90 |
|
North Carolina |
| 7 |
|
| 83 |
|
Louisiana |
| 6 |
|
| 83 |
|
Virginia |
| 6 |
|
| 82 |
|
Oklahoma |
| 5 |
|
| 65 |
|
Iowa |
| 4 |
|
| 62 |
|
Washington |
| 5 |
|
| 61 |
|
Connecticut |
| 4 |
|
| 58 |
|
New Mexico |
| 4 |
|
| 54 |
|
Michigan |
| 3 |
|
| 46 |
|
Massachusetts |
| 3 |
|
| 46 |
|
Arkansas |
| 3 |
|
| 44 |
|
Mississippi |
| 3 |
|
| 41 |
|
Maryland |
| 2 |
|
| 39 |
|
Indiana |
| 3 |
|
| 34 |
|
South Carolina |
| 3 |
|
| 34 |
|
New Jersey |
| 2 |
|
| 28 |
|
Georgia |
| 2 |
|
| 27 |
|
South Dakota |
| 2 |
|
| 26 |
|
Montana |
| 2 |
|
| 25 |
|
Delaware |
| 2 |
|
| 22 |
|
West Virginia |
| 2 |
|
| 22 |
|
Kansas |
| 1 |
|
| 20 |
|
New York |
| 1 |
|
| 17 |
|
Alaska |
| 1 |
|
| 16 |
|
Missouri |
| 1 |
|
| 15 |
|
Alabama |
| 1 |
|
| 14 |
|
Tennessee |
| 1 |
|
| 14 |
|
Wisconsin |
| 1 |
|
| 14 |
|
Minnesota |
| 1 |
|
| 8 |
|
Total |
| 341 |
|
| 4,586 |
|
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Country |
| Total Theatres |
|
| Total Screens |
| ||
Brazil |
|
| 84 |
|
|
| 623 |
|
Colombia |
|
| 36 |
|
|
| 202 |
|
Argentina |
|
| 22 |
|
|
| 190 |
|
Central America(1) |
|
| 20 |
|
|
| 141 |
|
Chile |
|
| 19 |
|
|
| 133 |
|
Peru |
|
| 13 |
|
|
| 93 |
|
Ecuador |
|
| 8 |
|
|
| 51 |
|
Bolivia |
|
| 1 |
|
|
| 13 |
|
Paraguay |
|
| 1 |
|
|
| 10 |
|
Curacao |
|
| 1 |
|
|
| 6 |
|
Total |
|
| 205 |
|
|
| 1,462 |
|
|
|
has expanded primarily due to organic growth and acquisitions. We currently have theatres in 105 designated market areas, or DMAs. We first entered Latin America when we opened a theatre in Santiago, Chile in 1993. Since then, through our focused international growth strategy, we have developed one of the most geographically diverse theatre circuits in the region. We have balanced our risk through a diversified international portfolio, which includes theatres in fourteen15 of the twenty20 largest metropolitan areas in South America. We have established significant presence in Brazil and Argentina, where we are the largest exhibitor. We also have significant market presence in Colombia, Peru and Chile.
We believe that certain markets within Latin America continue to be underservedThe following table summarizes the geographic locations of our theatre circuit as penetration of movie screens per capita in these markets is substantially lower than in the U.S.December 31, 2021.
Country |
| Total Theatres |
|
| Total Screens |
| ||
United States |
|
| 321 |
|
|
| 4,408 |
|
Brazil |
|
| 86 |
|
|
| 631 |
|
Argentina |
|
| 22 |
|
|
| 191 |
|
Colombia |
|
| 30 |
|
|
| 177 |
|
Chile |
|
| 20 |
|
|
| 142 |
|
Central America(1) |
|
| 18 |
|
|
| 126 |
|
Peru |
|
| 14 |
|
|
| 113 |
|
Ecuador |
|
| 8 |
|
|
| 51 |
|
Bolivia |
|
| 1 |
|
|
| 13 |
|
Paraguay |
|
| 1 |
|
|
| 10 |
|
Curacao |
|
| 1 |
|
|
| 6 |
|
Total |
|
| 522 |
|
|
| 5,868 |
|
Content
Content
We offer a variety of content at our theatres. During 2021, we transitioned back from primarily offering library content to offering new releases as they became available. We also continued to offer our guests the ability to select a film for private viewing with our Private Watch Parties in a group of up to 20 family members and friends.
We monitor upcoming films and other 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 many locations, we offer either our exhibitor-brandedown premium large format, XD.XD or IMAX. We also offer a format that features motion seats and added sensory features in addition to the ultra-realistic images of 3-D technology in select locations.features.
We 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 guests. We offerhave historically offered a Classic Seriesclassic series, which involves playing digitally re-mastered classic movies from a variety of genres, 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 coversduring non-peak times. We exhibit a variety of genres of classicmulti-cultural foreign language films, that are generally exhibited during non-peak times.e-sports gaming events and private gaming parties in our theatres.
Our joint venture, AC JV, LLC, with Regal Entertainment Group, or Regal, and AMC Entertainment, Inc., or AMC, provides marketing and distribution of live and pre-recorded entertainment programming through Fathom Events to movie theatres to augment theatres’ feature film schedules, 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 identifyexplore new ways to utilize our theatre platform to provide entertainmentnew content to consumers.our guests, including electronic gaming events, traditional sports and other live and pre-recorded events.
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In the domestic marketplace,U.S., our corporate film department negotiates with film distributors to license films for each of our domestic theatres. InLocal film personnel in each of our international offices our local film personnel negotiate with local offices of major film distributors, as well as local film distributors and independent content providers to license films for our international theatres.
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Film distributors are responsible for determiningdetermine 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 bookings of other exhibitors within that area. In certain limited situations, our theatres compete with other nearby theatres for film content 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 in all markets. Our theatre personnel focus on providing 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 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 are based on a film’s box office receipts at our theatres. Filmreceipts. The majority of film rental rates are negotiated based on either a sliding scale formula, under which the rate is based on a standard rate matrix that is established prior to a film’s run;theatrical run. We negotiate other film rental rates on a firm terms formula, as determineda percentage of box office receipts negotiated prior to a film’s theatrical run, under which we pay a negotiated rate; or a rate that is negotiated after a film’s theatrical run.
Food and Beverage
Concession sales are our second largest revenue source, consistently representing approximately 35% of total revenues.source. We have devoted considerable management effort to expandingexpanded concession sales by enhancing our offerings and adapting to our customers’ changing preferences, as discussed below.
Concession Product Mix. Common Our core concession products offered at all of our theatres may include various sizes and types of popcorn, soft drinks, coffees, non-carbonated drinks, candy and quickly-prepared or pre-prepared food, such as hot dogs, pizza, pretzel bites, nachos and ice cream. TheOur food and beverage offerings may vary based on consumer preferences in a particular market. We have introduced some healthier snack andoffer beverage options for our guests which are available atincluding beer, wine and other alcoholic beverages, freshly-made Pizza Hut pizzas, burgers and sandwiches, as well as some locations, added alcohol offeringshealthier snacks, in a growing numbermany of our theatres and we also offer diverse ethnic foods based on market demographics.
In select locations, we have expanded concession product offerings to include a broader variety of food and drink options, such as fresh wraps, hot sandwiches, burgers, 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 many domestic and international theatres.
Our proprietary point-of-sale system allowssystems allow our category managers to monitor product sales and readily make adjustments to product mix on a theatre-by-theatre or market-by-market basis, when necessary.basis. This program flexibility also allows us to efficiently activate and manage both national or regional product launches and promotional initiatives to further grow food and beverage sales.
Pricing. New products and promotions are introduced on a regular basis to increase concession purchase incidence by existing buyersconsumers as well as to attract new buyers. We offer specially-priced product combinations at our theatres. We routinely offer discounts to our guests 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.consumers. In certain international countries and in all of our domestic theatres, we offer a free loyalty program that periodicallyroutinely offers food and beverage discounts. Our new Cinemarkpaid subscription programs, including Movie Club membership program also allowsand Movie Club Platinum in the US, allow our domestic guests to sign-up forreceive exclusive concessions discounts.
Staff Training. Employees are continually trained in proper sales techniques, food preparation and handling and maintaining concession product quality. Some of our product promotions include a motivational element, such as a bonus or commission, that rewards theatre staff for exceptional sales of certain promotional items.
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Theatre Design. Our theatres are designed to optimize the guest purchase experience at the concession stands, which includes multiple concession counters throughout a theatre to facilitate serving guests 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 incidenceimpulse purchases 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, and superior visibility of concession items. In someWe also have lobby bars and VIP lounges in many domestic and international theatres.
Our proprietary Snacks in a Tap online concessions ordering capability allows moviegoers to purchase their cinema snacks in advance and have them waiting to be picked up upon arrival or delivered directly to their seat. This functionality streamlines the guest experience as it transitions from digital to in-theatre, and results in significant added convenience and enhanced guest service for customers. As of December 31, 2021, Snacks in a Tap can be used at virtually all of our U.S. theatres. Additionally, guests in our international locations we allow guests to pre-ordercan pre-pay for select concession items, eitherproducts online or at a kiosk,kiosks within the theatre and pick them up in a dedicated line at the concession counter. stand. We plan to introduce delivery to guests at their seats in our international locations in 2022.
Cost Control. We negotiate prices, volume-based rebates and promotional-based rebates for concession supplies directly with concession vendors and manufacturers to obtain volume discounts and also negotiate volume-based and promotional-based rebates with our larger suppliers.vendors. Concession supplies are generally distributedmanaged through a distribution network. The concession distributor delivers inventory to thenetwork, with theatres afterplacing and receiving orders directly from the theatres or through an online electronic ordering system.directly. We conduct frequentmonitor inventory counts of concession productslevels at every theatre to ensure proper stock levels are maintained to appropriately serve our guests.
Pre-Feature 7
Supply chain interruptions inflationary pressures are increasing costs and limiting product availability in the near term. We source products from a variety of partners around the world to minimize supply chain interruptions and price increases, wherever possible.
Screen Advertising
In our domestic markets, ourOur U.S. 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 “Noovie” pre-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 our audience. We receive a monthly theatre access fee for participation in the NCM network and also earn screen advertisingrental revenue on a per patron basis.basis or revenue share basis depending on the placement of the advertisement. As of December 31, 2018,2021, we had an approximate 25%26% ownership interest in NCM. See Note 46 to theour consolidated financial statements for further discussion of our investment in NCM.
InThroughout our international markets, we have established our wholly-owned subsidiary Flix Media Publicidade E Entretenimento, Ltda., or Flix Media,brand that handles our screen advertising functions in Brazil.Brazil, Argentina, Chile, Central America, Colombia, Paraguay, Bolivia, Ecuador and Curacao. 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 totheatres as well as other exhibitors in Brazil through revenue share agreements. In Argentina, we have in-house personnel that work with local advertisers to arrange screen advertisingtheatres in our Argentina theatres. We also operate advertising subsidiaries that support our theatres in Chile, Central America, Colombia, Paraguay, Bolivia, Ecuador and Curacao. In Chile, our Flix subsidiary also represents Cinepolis, making our subsidiary the local leader in cinema advertising.markets. In addition to screen advertising in our theatres, we intendcontinue 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 programming benefits. The terms of our international screen advertising contracts vary by country,country; however, we generally earn a percentage of the screen advertising revenues for access to our screens.
Marketing and Promotions
Our investment in digital marketing and customer experience over the past several years has enabled us to expand our reach to our guests, communicate with them on a consistent basis, and streamline their digital customer journey. We generallycontinue to adapt our capabilities and strategies to engage movie-goers more effectively and make it as compelling and simple as possible for them to purchase their next movie ticket and accompanying concessions from us. Through organic and paid marketing efforts, we kept our millions of guests informed through email, social media, website and mobile app updates, and advertising to promote upcoming content and keep Cinemark elevated in the moviegoer consideration set. This was critical to raise awareness as our final theatres reopened in the first half of 2021 and to maintain interest throughout the year as daily lives returned closer to normal.
Transforming the digital customer journey enables us to more effectively reach movie-goers through targeted and refined search engine optimization, and gives the customer a better experience once they are directed to our website or app. We regularly conduct comprehensive analysis of the search and ticket purchase processes on our channels, making updates that reduce clicks and decrease the friction from search to ticket purchase. Regular enhancements result in driving higher traffic volume to our digital channels and increased ticket purchases.
In an effort to more deeply engage with our guests, the visual identity and physical flow of our theatres are regularly assessed. This includes paying close attention and keeping all signage, merchandise, food and beverage vessels and employee attire updated and reflective of the modern experience.
We market our theatres and special events, including new theatre grand openings, remodel openings and VIP events, using email, organic and paid digital advertising, directory film schedules, and radio and television advertising spots. We exhibit previews of coming attractions and current films as part of our on-screen pre-feature program. We offer guests access to movie times, the ability to buy their tickets and reserve their seats in advance and purchase gift cards at our website www.cinemark.com and via our smart phone and tabletmobile applications. CustomersGuests can subscribe to our weekly emails and push notifications 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 asbroadcasts, contests, promotions, and coupons for concession savings. Email communicationsour latest concessions and push notifications are utilized to provide customers with the latest information or exclusive offers such as screenings, contests or promotions.merchandise offerings. We partner with film distributors on a regular basis to
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promote upcoming 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
In the mediaevolution of our external communication, we are meeting movie-goers where they are and other third parties and other means to impact patronage for films showing at our theatres.
ensuring we are present as they scroll throughout the day. We interact with guestsmoviegoers every day on social media platforms, such
8
as Instagram, Facebook, on which we recently reached nine million followers,Snapchat, Twitter, and Instagram. Through social media, weTik Tok to provide relevant information, quick access to advanced ticketing, promotions, and event information and upcoming moviesto monitor and events, as well as to respond to guestguests’ questions and 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 aOur subscription membership program for our domestic circuit, in December 2017. Cinemark Movie Club, offers guests a standard monthly fixed-price 2D ticket credit, member-pricing for a companion ticket and concession and other transaction discounts. Cinemarkdiscounts for their choice of a monthly or annual fixed price. Movie Club is a unique option to reward our loyal guests and allows us to stay informed of our frequent guests’moviegoers’ preferences. In September 2021, we introduced Movie Club Platinum, allowing members with a high visit frequency and/or high volume of ticket purchases during the year to earn additional movie ticket credits, receive an increased concessions discount and the ability to purchase additional tickets at a discounted price.
We offer a free domestic loyalty program to our guests, called Connections, which was launched in 2016. Connectionsnamed Movie Fan. Movie Fan allows our guestsmoviegoers to earn pointsone point for different types of transactions as tracked through our Cinemark smart phone app.every dollar they spend. Points can then be redeemed for tickets, concession items and discounts, as well as unique and limited edition experientiallimited-edition rewards that relate to films currently playing atin our theatres. Our loyalty programs are closely monitored, and updates are consistently tested to compel consumers to prioritize visiting our theatres.
We also have loyalty programs in mostsome of our international markets that either allow customers to pay a nominal fee for an annual membership card that provides them with certain admissions and concession discounts or that allows guests to earn loyalty points for each purchase. Similar to the ConnectionsMovie Fan program, our points-based international programs offer discounts on movie tickets and concessions. Our global loyalty programs put us in direct contact with our guestsmoviegoers and providesprovide 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
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 guests, licensing films and developing new theatre sites. Our primary U.S. competitors include Regal and AMC and our primary international competitors, which vary by country, include Cinépolis, Cine Colombia, CinePlanet, Kinoplex (GSR), Village Cines, SuperCines and Araujo.
We are generally able to book films without regard to the film bookings of other exhibitors at many of our theatres. In certain 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 guests can depend on customer service quality, location, theatre capacity, quality of projection and sound equipment, film showtime availability 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 commercial terms, committed investment and resources, theatre design and capacity, revenue potential and financial stability.
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. We also face competition from other forms of out-of-home entertainment competing for the public’s leisure time and disposable income, such as family entertainment centers, concerts, theme parks and sporting events. We also face competition for guests from a number of alternative film distribution channels, such as streaming services, digital downloads, video on-demand and network television.
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Our revenues have historically been seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, theThe most successful motion pictures have historically been released during summer months in the U.S., extending from May to July, and during the holiday season, extending from 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 impact this seasonality trend. The timing, quantity and quality of film releases can have a significant impact on our results of operations, and the results of one period are not necessarily indicative of results for the following period or for the same period in the following year.future results.
Corporate Operations
Our worldwide headquarters, referred to as the Cinemark Service Center, or CSC, is located in Plano, Texas. Personnel at the Cinemark Service CenterCSC provide oversight and support for our domestic and international theatres, includingand includes our
9
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 and information technology. Our U.S. operations are comprised of twenty regions each of which is headed by a regional vice president. We have nine regional offices in Latin America responsible for the local management of theatres in fifteen countries (Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala and Curacao are managed out of one Central American regional office). Each regional office is headed by a general manager or a member of our international management team with additional personnel responsible for film licensing, marketing, human resources, information technology, operations and finance. We have divisional chief financial officers in Brazil and Argentina and a regional chief financial officer located in Chile that oversees Chile, Bolivia and Paraguay.
EmployeesHuman Capital
We have approximately 20,000 employees in the U.S., approximately 21% of whom are full time employeesOur business is seasonal and 79% of whom are part time employees. We have approximately 9,500 employees in our international markets, approximately 78% of whom are full time employees and approximately 22% of whom are part time employees. Due to the seasonal nature of our business as discussed above,therefore, our headcount can vary throughout the year depending on the timing and success of movie releases. SomeWhile we do not have unionized employees within our domestic employee base, some of our international locations are subject to union regulations.
Our focus upon the reopening of our theatres was to re-hire our hourly team members who were impacted when our theatres first closed. We regardhave reopened all of our relations withdomestic and international theatres and we currently have approximately 16,000 employees in the U.S., approximately 25% of whom are full-time employees and 75% of whom are part-time employees. We have approximately 8,700 employees in our international markets, approximately 40% of whom are full-time employees and approximately 60% of whom are part-time employees.
In our Mission, Vision and Values Statement, our employees form the core of our Cinemark Values. We strive to (i) act with honesty and integrity, respect and care for each other, our guests, communities and partners, (ii) provide a safe environment for our employees and guests, (iii) be satisfactory.the best in what we do and (iv) empower our people to make decisions and take responsibility. Guided by our Cinemark Values, we are committed to creating a company where everyone is included and respected, and where we support each other in reaching our full potential. We take pride in the fact that many of our employees, including executive management, international general managers and field employees, have significant tenure with the Company. Many of the field employees who were initially hired as we started reopening our theatres were employed by us before the pandemic.
RegulationsTo attract and retain the most qualified talent, we offer competitive benefits, including market-competitive compensation, healthcare, paid time off, parental leave, free movie passes and a 401(k) retirement savings and investment plan with generous Company matching. Additionally, many of our CSC employees are eligible to work on a hybrid remote schedule. We support the continuous development of professional, technical and leadership skills of our employees by offering tuition assistance, skills development courses through partnerships with leading educational institutions, and leadership development and training both generally and as part of our diversity and inclusion initiatives. Employees are encouraged to provide feedback about their experience through periodic employee engagement surveys. These voluntary surveys provide overall and department-specific reports and enables us to improve employee experience and culture. We aspire to provide a safe, open and accountable work environment for our employees. We provide a hotline for all employees to report workplace concerns and violations with the option to report on an anonymous basis. We address such concerns and take appropriate actions that uphold our Cinemark Values.
Regulations
The distribution of motion pictures is largely regulated by federal and state antitrust laws and has beenwas the subject of numerous antitrust cases.cases in the past. The manner in which we can license films from certain major film distributors has been influenced by consent decrees and other court orders resulting from these cases. Consent decrees bindthat bound certain major film distributors and requireare set to expire in 2022. These consent decrees required 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 enterhave not entered into long-term arrangements with major distributors but must negotiate for licenses on a theatre-by-theatre and film-by-film basis. While the consent decrees may no longer be in effect, we are still subject to the antitrust laws and do not expect a material shift in the way films are licensed.
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
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federal, state and local laws governing such matters as data privacy, wages, working conditions, citizenship, health and sanitation requirements and various business licensing and permitting.
As a result of the COVID-19 pandemic, we may be subject to certain restrictions and protocols, which may vary at the city, county and state level.
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 Paraguay, which are reflected in the consolidated financial statements. See Note 1719 to theour consolidated financial statements for segment information and financial information by geographic area.
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An investment in our debt securities involves risks and uncertainties and our actual results and future trends may differ materially from our past or projected future performance. We urge investors to consider carefully the risk factors described below in evaluating the information contained in this report.
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic has disrupted our industry and our business and could continue to materially affect our financial condition, liquidity, cash flows, results of operations and ability to service our existing and future indebtedness.
The outbreak of the COVID-19 pandemic has disrupted our industry and our business for an extended period of time. While we have reopened all of our theatres as of December 31, 2021, our business, results of operations, liquidity, cash flows and financial condition continue to be impacted by the COVID-19 pandemic. One of the key factors that has materially affected our business is the availability of new films for exhibition at our theatres. Due to the COVID-19 pandemic, production of films was temporarily halted or delayed and new film releases were postponed or shifted to streaming services, resulting in a drastic reduction in the volume of new films available for theatrical exhibition. Even when new films are available, certain studios have reduced the window for video and digital releases or released films directly to alternative distribution channels such as streaming services simultaneous with a theatrical release. In addition, studios may determine that certain types of film content will not be released for theatrical exhibition in the future and will go straight to streaming platforms.
In response to the COVID-19 pandemic federal, state and local governments implemented restrictions that limited in-person gathering and/or movement of guests. Even as many restrictions have been lifted, consumers may not yet be comfortable gathering in a large group or within a closed space for a few hours at a time, which could have an adverse effect on our business by resulting in fewer guests and reduced revenues.
We cannot predict when, or to what extent, we will recover from the effects of the COVID-19 pandemic. The longer the pandemic lasts, including repeat or cyclical outbreaks, the longer it will take for us to recover from the adverse effects, continuing to impact our business, results of operations, liquidity, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness.
The outbreak of COVID-19 has also significantly increased economic and demand uncertainty, and it is possible that it could cause a global recession. For additional information on risks related to a slowdown or recession, inflationary, supply chain and wage pressures, see “—Other General Risks—General political, social, health and economic conditions can adversely affect our attendance.”
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including but not limited to those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.
Risks Related to Our Business and Operations
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. Reduced volume of film releases, poor performance of films, the disruption in the
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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 production and marketing efforts of the film distributors to make and promote their films could have an adverse effect on our business by resulting in fewer patrons and reduced revenues. During 2020 and 2021, we saw a significant reduction in the quantity of films available to exhibit in our theatres. We expect the quantity of new film releases available for theatrical exhibition to continue to be lower than historical levels during 2022 as the industry rebounds from the impacts of the COVID-19 pandemic, however studios may determine that certain types of films will not be released for theatrical exhibition and will go straight to streaming platforms, further impacting the quantity of films available.
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.future periods.
A deterioration in relationships with film distributors could adverselyaffect 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 sevenfive major film distributors accounting for approximately 90%85.5% of U.S. box office revenues and 4841 of the top 50 grossing films during 2018. Numerous antitrust cases and consent decrees resulting from the antitrust cases impact the distribution of films.2021. 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 mayadversely 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, 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 competing forms of entertainment or the use of alternative film distribution channels or other competing forms of entertainment may reduce movietheatre 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 out-of-home entertainment, such as family entertainment centers, concerts, theme parks, gaming and sporting events, for our patrons’ leisure time and disposable income. We also face competition for patrons from a number of alternative film distribution channels, such as streaming, digital downloads, video on-demand and network television. Some of these distribution channels have seen growth in production in recent years. 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 the shrinking, or elimination of, video and digital releasewindows.
The average video and digital release window, which represents the time that elapses from the date of a film’s theatrical release to the date a film is available to consumers at home, has beenfor DVD, was approximately ninety90 days and digital purchase for ownership (also known as electronic sell-through) was approximately 74 days for several years prior to the past several years.COVID-19 pandemic. During the COVID-19 pandemic, certain studios adopted strategies that reduced, or in some cases eliminated, the
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release windows. Select studios released certain movie titles to their own streaming platforms either simultaneously with theatrical releases or bypassed theatrical releases altogether. Studios may continue to follow, or expand, these or similar strategies, leading to permanent changes that shorten or eliminate exclusive theatrical windows. If patronsstudios continue to reduce or eliminate the windows for certain films even after the industry recovers or, if our guests choose to wait for an in-home release rather than attend a theatre to view the film, it may continue to adversely impact our business and results of operations, financial condition and cash flows. 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 during a period 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, 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 currencyexchange risk.
We have 205201 theatres with 1,4621,460 screens in fifteen countries in Latin America.America as of December 31, 2021. Brazil represented approximately 9%5% of our consolidated 20182021 revenues. Governmental regulation of the motion picture industry in foreign markets differs from that in the U.S. Changes in regulations affecting prices and quota systems requiring the exhibition of locally-produced films 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 transferspayments to the U.S., all of which could have an adverse effect on the results of our operations.
We are subject to impairment losses due to potential declines in the fairvalue of our assets.
We have substantial long-term leasea significant amount of long-lived assets. We evaluate long-lived assets for impairment at the theatre level. Therefore, if a theatre is directly 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, 2018, we had $1,809.3 millionindividually impacted by increased competition, adverse changes in long-term debt obligations, $259.5 million in capital lease obligations and $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 financingmarket demographics, or adverse changes in the future for working capital, capital expenditures, acquisitionsdevelopment 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 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 conceptstradename intangible assets. Declines in our theatres; and
making us more vulnerablestock 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 downturndecline in our business and competitive pressures and limiting our flexibility to plan for, or react to, changesattendance 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 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 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 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 periodregion or country could result in impairments of time. A downgrade ofgoodwill and our debt ratings, depending on the extent, could increase the cost to borrow funds.intangible assets.
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 invest in technological innovations, such as motion 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 sitelocations, 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 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.
15Risks Related to Financing and Liquidity
We have substantial long-term lease and debt obligations, which mayrestrict 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, 2021, we had $2,083.3 million in long-term debt obligations, $117.2 million in finance lease obligations and $1,295.4 million in long-term operating lease obligations. Our substantial lease and debt obligations pose risk by:
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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. As we continue to recover from the COVID-19 pandemic, we may not be able to generate cash flows at historical 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 do notfail to make any required payment under the agreements governing our leases and indebtedness or fail to comply with the ADAfinancial 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 safe harbor framework includedlenders 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.
A lowering or withdrawal of the ratings assigned or a change in outlook to our outstanding debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.
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 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 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.
Our debt currently has a non-investment grade rating, and any rating assigned could be lowered (or outlook thereof could be changed) or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes in our business or industry, so warrant. Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing. In particular, our access to the capital markets may be impacted, our other funding sources may decrease, the cost of debt may increase as a result of increased interest rates or fees, and we may be required to provide additional credit assurances, including collateral, under certain contracts or arrangements.
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 consent ordercredit 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.
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We may not be able to generate additional revenues or continue to realize value from our investment in NCM.
As of December 31, 2021, we owned 43,161,550 common units of NCM, which represented an ownership interest in NCM of approximately 26%. We receive monthly theatre access and advertising fees 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, 2019, 2020 and 2021, the Company recorded approximately $45.8 million, $36.0 million and $44.1 million in other revenues related to NCM, respectively, $25.9 million, $14.2 million and $0.2 million in cash distributions recorded as a reduction of our investment in NCM, respectively, and $12.9 million, $7.0 million and $0.1 million in cash distributions in excess of our investment in NCM, respectively. Cinema advertising is a small component of the U.S. advertising market and therefore, NCM competes with larger, more established and well-known media platforms such as broadcast radio and television, cable and satellite television, outdoor advertising and Internet portals. 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. NCM revenues and excess cash distributions have been significantly impacted by the COVID-19 pandemic. Since NCM's revenues are primarily dependent on theatre attendance, future NCM revenues and excess cash distributions from NCM to the Company will depend on the recovery of the motion picture exhibition industry. Excess cash distributions we have historically received are also restricted through December 2023 in accordance with the credit agreement amendment NCM recently entered into with the Department of Justice, or the DOJ, we could beits lenders.
Regulatory Risks
We are subject to further litigation.various government regulations which could result in substantial costs.
Our theatresWe are subject to various federal, state and local laws, regulations and administrative practices in the U.S. and internationally. We must comply with laws regulating, among other things, antitrust activities, employment environment, sale of concession goods, alcoholic beverages, data protection and privacy and Title III of the ADAAmericans with Disabilities Act of 1990 ("ADA") and analogoussimilar state and localdisability rights laws. Compliance with the ADA and similar disability rights laws requires among other things thatus as a public facilities “reasonably accommodate”accommodation to reasonably accommodate individuals with disabilitiesdisabilities. This applies to the construction of new theatres, certain renovations, existing theatres, websites and thatmobile applications and presentations for the blind, deaf and hard of hearing. Changes in existing laws, regulations or administrative practices or new constructionlaws, regulations or alterations madeadministrative practices could have a significant impact on our business. In addition, we must comply with state and local government restrictions related to “commercial facilities” conform to accessibility guidelines unless “structurally impracticable” for new construction or technically infeasible for alterations. On November 15, 2004, Cinemarkthe COVID-19 pandemic.
We may face data protection, data security, and privacy risks in connection with privacy regulation.
Strict data privacy laws regulating the DOJ entered into a consent order, which was filed withcollection, transmission, storage and use of employee data and consumers’ personally identifying information are evolving in the U.S. District Courtand other jurisdictions in which we operate. These laws impose compliance obligations for the Northern Districtcollection, use, retention, security, processing, transfer and deletion of Ohio, Eastern Division. Underpersonally identifiable information of individuals and creates enhanced rights for individuals. These changes in the consent order,legal and regulatory environments in the DOJ approvedareas of customer and employee privacy, data security, and cross-border data flows could have a safe harbor framework for us to construct allmaterial adverse effect on our business, primarily through the impairment of our future stadium-style movie theatres. The DOJ has stipulatedmarketing and transaction processing activities, the limitation on the types of information that all theatres built in compliancewe may collect, process and retain, the resulting costs of complying with the consent order will comply with the wheelchair seatingsuch legal and regulatory requirements of the ADA. If we fail to comply with the ADA, remedies could include imposition of injunctive relief, fines, awardsand potential monetary forfeitures and penalties 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.noncompliance.
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 market conditions have recently driven increases in wages across our labor base and similar increases may continue in the future. 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.
A credit market crisis15
Provisions in certain agreements and corporate documents of Cinemark Holdings, Inc., our parent, as well as Delaware law, may adversely affect our ability to raise capital and may materially impact our operations.hinder a change of control.
Severe dislocations and liquidity disruptionsProvisions in the amended and restated certificate of incorporation and bylaws of Cinemark Holdings, Inc., as well as provisions of the Delaware General Corporation Law, could discourage unsolicited proposals to acquire us. These provisions include:
Certain provisions of our 8.750% secured notes indenture, 5.250% senior notes indenture, our 5.875% senior notes indenture and our senior secured credit markets could materially impact our ability to obtain debt financing on reasonable termsfacility may have the effect of delaying or at all. The inability to access debt financing on reasonable terms could materially impact our abilitypreventing future transactions involving a “change of control.” A “change of control” would require us to make acquisitions, invest in technology innovations or significantly expand our business inan offer to 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 arrayholders 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, complianceeach of our theatres8.750% Secured Notes, 5.250% Senior Notes and accompanying real estate with newour 5.875% Senior Notes (each as defined below) to repurchase all of the outstanding notes at a purchase price equal to 101% of the aggregate principal amount outstanding plus accrued 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 relatingunpaid interest to the protectiondate of the environment or human health. Such environmental lawspurchase. A “change of control” would also be an event of default under our senior secured credit facility.
Risks Related to Information Security and regulations include those that impose liability for the investigation and remediation of spills or releases of hazardous materials. We may incur such liability,Business Disruptions
An information security incident, 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.
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Cybercyber security threatsbreach, and our failure to protect our electronically stored data could adversely affect our business.business or reputation.
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. We 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 disruption, failure, unauthorized access, cyber-terrorism, human error, misuse, tampering, theft, and other 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 security measures and technology, operate a security program, and work continuously to evaluate and improve our security posture. However, the development and maintenance of these systems and programs are costly and require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. As such, there can be no assurance that these or similar events will not occur in the future or will not have an adverse effect on our business and results of operation.
In addition to Company-specific cyber threats or events, our business and results of operations could also be impacted by cyber-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.
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Other General Risks
General political, social, health and economic conditions can adversely affect ourattendance.
Our results of operations are dependent on general political, social, health 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 during a period 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. Supply chain interruptions may increase costs and limit product availability, as reduced supply of certain commodities and labor shortages in the transportation industry have led to limitations in product availability and continued increases in product pricing. Political events, such as terrorist attacks, and health-related pandemics or epidemics, such as flu or other virus outbreaks, could cause people to avoid our theatres or other public places where large crowds are in 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.
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 invest in technological innovations, such as laser projectors, motion 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.
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 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.
Product recalls and associated costs could adversely affect our reputation and financial condition.
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.Item 1B. Unresolved Staff Comments
We rely onNone.
17
Item 2. Properties
The following table sets forth 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 effectivenesssummary of our email and other marketing techniques and could resulttheatres 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.
We may not be able to generate additional revenues or continue to realize value from our investment in NCM.
As of December 31, 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 priceinternational markets 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 performance2021:
|
| Leased |
|
| Owned |
| ||
Segment |
| Theatres |
|
| Theatres |
| ||
U.S. |
|
| 279 |
|
|
| 42 |
|
International |
|
| 201 |
|
|
| — |
|
Total |
|
| 480 |
|
|
| 42 |
|
See also Item 1, Business – Theatre Operations, for a summary of the business, industry trends, generalgeographic locations for our U.S. 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 theinternational 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.
United States
Ascircuit as of December 31, 2018,2021.
The Company conducts a significant part of its theatre operations in the U.S., we operated 300 theatresleased properties under noncancelable operating and finance leases with 3,978 screens pursuant to leases and own the land and building for 41 theatres with 608 screens. Our leases are generally entered into on a long-term basis withbase terms including optional renewal periods, generally ranging from 2010 to 4525 years. AsIn addition to fixed lease payments, some of December 31, 2018, approximately 8%the leases provide for variable lease payments and some require the payment of taxes, insurance and other costs applicable to the property. Variable lease payments include payments based on a percentage of retail sales over defined thresholds or payments adjusted periodically for inflation or changes in attendance. 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. See Note 4 to our consolidated financial statements for further discussion of our theatre leases in the U.S., covering 25 theatres with 197 screens, have remaining terms, including optional renewal periods, of less than six years. Approximately 8% ofproperty leases.
In addition to our theatre leases in the U.S., covering 25 theatres with 326 screens, have remaining terms, including optional renewal periods, of between six and 15 years and approximately 84% of our theatre leases in the U.S., covering 250 theatres with 3,455 screens, have
18
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. Weproperties, we currently own an office building in Plano, Texas, which is our worldwide headquarters. We also lease office space in Frisco, Texas for theatre supportour Top Center and maintenance personnel.
International
As of December 31, 2018, internationally, we operated 205 theatres with 1,462 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, 2018, approximately 12% of our international theatre leases, covering 24 theatres with 208 screens, have remaining terms, including optional renewal periods, of less than six years. Approximately 48% of our international theatre leases, covering 99 theatres and 720 screens, have remaining terms, including optional renewal periods, of between six and 15 years and approximately 40% of our international theatre leases, covering 82 theatres and 534 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.warehouse in McKinney, Texas. We also lease office space in seven regions in Latin America for our local management.management teams.
SeeItem 3. Legal Proceedings
For a discussion of contingencies related to legal proceedings, see Note 1618 to theour 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.
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. The case presents putative class action claims for penalties and attorney's fees arising from alleged violations of the California wage statement law. The claim is also asserted as a representative action under the California Private Attorney General Act (PAGA) for penalties. The Court granted class certification. 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.
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 interest. 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 support 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 of Appeal reversed, holding, among other things, that Plaintiff’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 reflected in loss on disposal of assets and other 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 it engaged in any form of circuit dealing, it cannot predict the outcome of its pending motions or future appeals.hereby incorporated by reference.
We 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. 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 it 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 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.
2018
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
As of December 31, 2018,2021, 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, 2016, 20172019 and 2018,2020, we paid cash dividends of approximately $124.9 million, $134.5$158.5 million and $148.8$42.0 million, respectively, to our parent company, Cinemark Holdings, Inc. No such dividends were paid during the year ended December 31, 2021. Our ability to pay dividends is limited by the terms of our senior notes indentures 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 911 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
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, 2018. You should read the selected consolidated financial and operating data set forth below in conjunction with “Management’s7. 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, |
| |||||||||||||||||
|
| 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, |
| |||||||||||||||||
|
| 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 |
|
|
| 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 |
|
22
Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations
The following discussion and analysis should be read in conjunction withthe financial statements and accompanying notes included in this report. This discussion containsmay contain forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties and riskrisks associated with these statements. Discussion regarding our financial condition and results of operations for 2020 compared with 2019 is included in Item 7 of our 2020 Annual Report on Form 10-K filed March 3, 2021.
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 Paraguay. As of December 31, 2018,2021, we managed our business under two reportable operating segments – U.S. markets and international markets. See Note 1719 to our consolidated financial statements.
Impact of COVID-19 Pandemic
The COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread. We temporarily closed our theatres in the U.S. and Latin America beginning in March of 2020 at the onset of the COVID-19 outbreak. Additionally, we implemented various cash preservation strategies, including, but not limited to, temporary personnel and salary reductions, halting non-essential operating and capital expenditures, negotiating modified timing and/or abatement of contractual payments with landlords and other major suppliers, and the suspension of dividends to Cinemark Holdings, Inc.
Throughout 2020 and 2021 we reopened theatres as soon as local restrictions and the status of the COVID-19 pandemic would allow. As of December 31, 2021, all of our domestic and international theatres were open. New film content returned in April 2021 and expanded throughout the year leading up to the consolidated financial statements.December release of Spider-Man: No Way Home, which is now an all-time top 10 film in terms of worldwide box office. The industry’s recovery to historical levels of new film content, both in terms of the number of new films and box office performance, is still underway, as the industry also continues to adjust to evolving theatrical release windows, competition from streaming and other delivery platforms, supply chain delays, inflationary pressures, labor shortages, wage rate pressures and other economic factors.
Revenues and Expenses
We generate revenuesrevenue primarily from filmed entertainment box office receipts and concession sales with additional revenuesrevenue from screen advertising, salesscreen rental and other revenue streams, such as transactional fees, vendor marketing promotions, studio trailer placements, meeting rentals and electronic video games located in some of our theatres. We also offer alternative entertainment, such as the Metropolitan Opera, concert events, in-theatre gaming, live and pre-recorded sports programs and other special events in our theatres through Fathom Entertainment (operated by AC JV, LLC). NCM provides our domestic theatres with various forms of in theatrein-theatre 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 joint venture, AC JV, LLC. Our Flix Media initiative has also allowed us to expand oursubsidiaries provide screen advertising and alternative content withinfor our international circuit and to other international exhibitors.
Films leading the box officereleased during the year ended December 31, 20182021 included Black Panther, Avengers: Infinity War, Incredibles 2, Jurassic World: Fallen Kingdom, Aquaman, Deadpool 2, Dr. Seuss’ The Grinch, Mission Impossible – Fallout, Ant-ManShang-Chi and the Wasp, Solo: A Star Wars Story, Venom,Legend of the Ten Rings, Venom: Let There Be Carnage, Black Widow, F9: The Fast Saga, Eternals, No Time to Die, A Quiet Place Crazy Rich Asians, Halloween, Bumblebee, Ralph BreaksPart II, Ghostbusters: Afterlife, Free Guy and Jungle Cruise and Spider-Man: No Way Home, among other films.
Currently, films scheduled for release in 2022 include the Internet, Fantastic Beasts: The Crimes of Grindelwald, Mary Poppins Returns, A Star is Born, Bohemian Rhapsody and other films,highly anticipated sequel Avatar 2, as well as Doctor Strange in the carryoverMultiverse of Madness, Thor: Love and Thunder, Black Panther: Wakanda Forever, The Greatest Showman, Jumanji: WelcomeBatman, Jurassic World: Dominion, Lightyear, Top Gun: Maverick, Minions: The Rise of Gru, Mario, Black Adam, Aquaman 2, Strange World and Spider-Man: Across the Spider-Verse, among others. As the industry continues to evolve and recover as the Jungle impact of the COVID-19 pandemic wanes, film release schedules, the availability and Star Wars: The Last Jedi.length of exclusive theatrical release windows, streaming release strategies and consumer sentiment are continuing to evolve and may have a direct impact on industry box office results.
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.
Film rental costs are variable in nature and fluctuate with our admissions revenues.revenue. Film rental costs as a percentage of revenuesrevenue are generally higher for periods in which more blockbuster films are released. The Company received virtual print fees from studios for certain of its international locations, which are included as a contra-expense
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in film rental and advertising costs on the consolidated statements of income. However, these costs were fully recovered during 2021 and virtual print fees will not be received in future periods. Advertising costs, which are expensed as incurred, are primarily related to campaigns for new and renovatedremodeled theatres, our loyalty and membershipsubscription programs, and brand advertising thatand reengaging our audiences as our theatres reopened and new film content was released. These expenses vary depending on the timing and length of such campaigns.
Concession supplies expense is variable in nature and fluctuates with our concession revenuesrevenue and product mix. Supply chain interruptions and inflationary pressures have impacted product costs and product availability in the near term. We negotiate prices for concession supplies directly with concession vendorssource products from a variety of partners around the world to minimize supply chain interruptions and manufacturers to obtain volume rates.price increases, wherever possible.
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 tend to move in relation to revenuesrevenue as theatre staffing is adjusted to respond to changes in attendance. Staffing levels may vary based on the amenities offered at a location, such as full service restaurants, bars or expanded food and beverage options. In somecertain international locations, staffing levels are also subject to local regulations. Labor market conditions and inflationary pressures have recently driven increases in wages across our labor base and similar increases may continue in the future.
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 leases are subject to percentage rent only, while others are subject to percentage rent in addition to their fixed monthly rent if a target annual performance level is achieved. Facility lease expense as a percentage of revenuesrevenue is also affected by the number of theatres under operating leases, the number of theatres under capital and finance leases and the number of owned theatres.
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Utilities and other costs include both fixed and variable costs and primarily consist of utilities, expenses for projection and sound equipment maintenance and monitoring, property taxes, janitorial costs, credit card fees, third party ticket sales commissions, repairs and maintenance expenses, security services and expenses for the maintenance and security services.monitoring of projection and sound equipment.
General and administrative expenses are primarily fixed in nature and consist of the costs to support the overall management of the Company includingare primarily fixed in nature with certain variable expenses. Fixed expenses include salaries and wages incentive compensation and benefitbenefits costs for our corporate office personnel, facility expenses for our corporate and other offices, software maintenance costs and audit fees. Some variable expenses may include incentive compensation, consulting fees,and legal fees, audit fees, supplies and other costs that are not specifically associated with the operations of our theatres.
Critical Accounting Policies and Estimates
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 and estimates, 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
Our 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 revenuesrevenue when the showtime for a purchased movie ticket has passed. Concession revenues arerevenue is recognized when salesproducts are made atsold to the registers.consumer. Other revenues primarily consist of screen advertising, and otherscreen rental revenue, streams, such as transactional fees, vendor marketing promotions,promotional income, studio trailer placements meeting rentals and electronic video games located in some oftransactional fees. Except for NCM screen advertising advances (see Note 8 to our theatres. Screen advertisingconsolidated financial statements), these revenues are generally recognized over the period thatwhen we have performed the related advertising is delivered on-screen or in-theatre.services. We sell gift cards and discount ticket vouchers, the proceeds from which are recorded as current liabilities. Revenuesdeferred revenue. Deferred revenue for gift cards and discount ticket vouchers areis recognized when they are redeemed for concession items or, if redeemed for movie tickets, or concession items.when the showtime has passed. We generally record breakage revenue on gift cards and discount ticket vouchers based on redemption activity and historical experience with unused balances. We offer a subscription program in the U.S. whereby patrons can pay a monthly or annual fee to receive a monthly credit for use towards a future movie ticket purchase. We record the monthly subscription program fees as current liabilitiesdeferred revenue and record admissions revenues asrevenue when the credits are redeemedshowtime for a movie tickets.ticket purchased with a credit has passed. We also have loyalty programs in the U.S. and many of our international locations that either have a prepaid annual membership
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fee or award points to customers as purchases are made. For those loyalty programs that have ana prepaid annual membership fee, we recognize the fee collected as other revenuesrevenue on a straight-line basis over the term of the membership.program. For those loyalty programs that award points to customers based on their purchases, we record a portion of the original transaction proceeds as liabilitiesdeferred revenue based on the number of reward points issued to the customercustomers and recognize revenuesthe deferred revenue when the customer redeems such points.
In May 2014, The value of loyalty points issued is based on the Financial 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 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 disclosureestimated fair value of the nature, amount, timing,rewards offered. We record breakage revenue on deferred loyalty and uncertaintysubscription revenue generally upon the expiration of revenuepoints and cash flows arising fromsubscription credits, respectively. Advances collected on concession and other contracts are deferred and recognized during the contracts with customers. We adopted ASC Topic 606 effective January 1, 2018 under the modified retrospective method.
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Changes to the wayperiod in which we recognize revenue resultedsatisfy the related performance obligations, which may differ from the period in which the following impacts to our consolidated statements of income:advances are collected.
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Film rental costs are subject to the film licensing arrangement and accrued based on the applicable box office receipts and either firm terms oreither; 1) a sliding scale formula, which areis generally established prior to the opening of the film, 2) firm terms or 3) estimates of the final settlement rate, which occurs at the conclusion of the film run, subject torun. 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 licensing arrangement.for its full run. 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 filmfilm's theatrical run based upon how the film performs. Estimates are based on the expected success of a film. The success of a film can typicallygenerally be determined a few weeks after a film is released when the 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, the timing of which is generally atbased on the end of the year, thelease agreement, 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. Leasehold improvements for which we pay, and to which we have title, are amortized over the lesser of their useful life or the remaining lease term.
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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 or forecast theatre level cash flows;
theatre property and equipment carrying values;
operating lease right-of-use 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 a 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
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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 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 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.flows. 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. The long-lived asset
See further discussion of our impairment chargesevaluation policy in Note 1 of our consolidated financial statements. See a summary of the impairment evaluations performed and impairments recorded during each of the periods presented are specificyears ended December 31, 2019, 2020 and 2021 in Note 9 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.our consolidated financial statements.
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 twenty regions in the U.S. and seveneach of its international countries with Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala considered one reporting unit (the Company does not have goodwill recorded for all of its international locations). Under ASC Topic 350, Goodwill, Intangibles and Other (“, or ASC Topic 350”),350, we may perform a qualitative impairment assessment or a quantitative impairment assessment of our goodwill.
A quantitative analysis requires us to estimate the fair value of each 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 multiple of cash flows, which was eight times for the evaluations performed 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. A qualitative assessment
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includes consideration of historical and expected future industry performance, estimated future performance of the Company, current industry trading multiples and other economic factors, 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 performed 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 our goodwill for each reporting unit 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. 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 fair value. 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. A qualitative assessment considers 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.
DuringSee further discussion of our impairment evaluation policy in Note 1 of our consolidated financial statements. See a summary of the impairment evaluations performed during the year ended December 31, 2016, we performed a quantitative tradename impairment assessment for our tradename in Ecuador2021 and performed a qualitative tradename impairment analysis for all other tradename intangible assets. 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 tradename impairment analysis. As a result of the analysis performedimpairments recorded during each year, no impairment charges were recorded related to tradename intangible assets for the years ended December 31, 2016, 20172019, 2020 and 2018. 2021 in Note 9 to our consolidated financial statements.
Income Taxes
We participate in the consolidated return of Cinemark Holdings, Inc. However, our provision for income taxes is computed on a stand-alone basis. 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
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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. See Note 17 to our consolidated financial statements for further discussion of 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 the U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign
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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, we entered into an Exhibitor Services Agreement, (“ESA”),or ESA, with NCM pursuant to which NCM provides advertising, promotion and event services to our 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, we amended our operating agreement and the Exhibitor Services Agreement, or ESA, with NCM and received proceeds related to the modification of the ESA and our sale of certain of shares in NCM. The ESA modification reflected a shift from circuit share expense under the prior Exhibitor Services Agreement, which obligated NCM to pay us 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. As a result of the proceeds received as part of the NCM, Inc. initial public offering, the Company had a negative basis in its original membership units in NCM (referred to herein as its Tranche 1 Investment). The Company does not recognize undistributed equity in the earnings on its Tranche 1 Investment until NCM's future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company believes that the accounting model provided by ASC 323-10-35-22 for recognition of equity investee losses in excess of an investor's basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.
Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and Cinemark, AMC and Regal, collectively referred to as its Founding Members, annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated by each Founding Member. To account for the receipt of additional common units under the Common Unit Adjustment Agreement, the Company follows the guidance in ASC 323-10-35-29 (formerly EITF 02-18, Accounting for Subsequent Investments in an Investee after Suspension of Equity Loss Recognition) by analogy, which also refers to AICPA Technical Practice Aid 2220.14, which indicates that if a subsequent investment is made in an equity method investee that has experienced significant losses, the investor must determine if the subsequent investment constitutes funding of prior losses. The Company concluded that the construction or acquisition of new theatres that has led to the common unit adjustments equates to making additional investments in National CineMedia.NCM. The Company evaluated the receipt of the additional common units in National CineMediaNCM 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
Impact of New 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 entitySee Note 6 to recognize the amount of 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.
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Impact of New Lease Accounting Standard
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASU 2016-02”). 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 ASU 2016-02 will result in the recognition of a right-of-use asset and a 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 transition method to adopt ASU 2016-02. Under this new transition method, an entity initially applies ASU 2016-02 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 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:
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for further discussion of our investment in NCM.
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Results of Operations
The following table sets forth, for the periods indicated, the amounts for certain items reflected in our consolidated statements of income (loss) along with each of those items as a percentage of revenues.
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| Year Ended December 31, |
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| 2019 |
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| 2020 |
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| 2021 |
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Operating data (in millions): |
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Revenues |
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Admissions |
| $ | 1,805.3 |
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| $ | 356.5 |
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| $ | 780.0 |
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Concession |
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| 1,161.1 |
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| 231.1 |
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| 561.7 |
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Other |
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| 316.7 |
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| 98.7 |
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| 168.8 |
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Total revenues |
| $ | 3,283.1 |
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| $ | 686.3 |
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| $ | 1,510.5 |
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Cost of operations |
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Film rentals and advertising |
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| 1,003.8 |
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| 186.8 |
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| 415.0 |
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Concession supplies |
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| 206.5 |
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| 48.6 |
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| 97.9 |
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Salaries and wages |
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| 410.1 |
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| 145.0 |
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| 232.9 |
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Facility lease expense |
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| 346.1 |
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| 279.8 |
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| 280.0 |
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Utilities and other |
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| 474.7 |
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| 229.5 |
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| 282.9 |
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General and administrative expenses |
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| 170.8 |
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| 125.4 |
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| 158.5 |
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Depreciation and amortization |
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| 261.2 |
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| 259.8 |
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| 265.4 |
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Impairment of long-lived assets |
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| 57.0 |
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| 152.7 |
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| 20.8 |
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Restructuring costs |
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| — |
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| 20.4 |
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|
| (1.0 | ) |
(Gain) loss on disposal of assets and other |
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| 12.0 |
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|
| (8.9 | ) |
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| 8.0 |
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Total cost of operations |
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| 2,942.2 |
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| 1,439.1 |
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| 1,760.4 |
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Operating income (loss) |
| $ | 340.9 |
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| $ | (752.8 | ) |
| $ | (249.9 | ) |
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Operating data as a percentage of total revenues: |
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Revenues |
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Admissions |
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| 55.0 | % |
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| 51.9 | % |
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| 51.6 | % |
Concession |
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| 35.4 | % |
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| 33.7 | % |
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| 37.2 | % |
Other |
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| 9.6 | % |
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| 14.4 | % |
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| 11.2 | % |
Total revenues |
|
| 100.0 | % |
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| 100.0 | % |
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| 100.0 | % |
Cost of operations (1) |
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Film rentals and advertising |
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| 55.6 | % |
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| 52.4 | % |
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| 53.2 | % |
Concession supplies |
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| 17.8 | % |
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| 21.0 | % |
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| 17.4 | % |
Salaries and wages |
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| 12.5 | % |
| N/A |
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| 15.4 | % | |
Facility lease expense |
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| 10.5 | % |
| N/A |
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|
| 18.5 | % | |
Utilities and other |
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| 14.5 | % |
| N/A |
|
|
| 18.7 | % | |
General and administrative expenses |
|
| 5.2 | % |
| N/A |
|
|
| 10.5 | % | |
Depreciation and amortization |
|
| 8.0 | % |
| N/A |
|
|
| 17.6 | % | |
Impairment of long-lived assets |
|
| 1.7 | % |
| N/A |
|
|
| 1.4 | % | |
Restructuring costs |
|
| — | % |
| N/A |
|
|
| (0.1 | )% | |
(Gain) loss on disposal of assets and other |
|
| 0.4 | % |
| N/A |
|
|
| 0.5 | % | |
Total cost of operations |
|
| 89.6 | % |
| N/A |
|
|
| 116.5 | % | |
Operating income (loss) |
|
| 10.4 | % |
| N/A |
|
|
| (16.5 | )% | |
Average screen count (month end average) |
|
| 6,072 |
|
| N/A |
|
|
| 5,890 |
| |
Revenues per average screen (dollars) |
| $ | 540,695 |
|
| N/A |
|
| $ | 256,445 |
|
|
| 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 |
|
|
|
3025
Comparison of Years Ended December 31, 20182021 and December 31, 20172020
Year endedDecember 31, 2020 -All of our domestic and international theatres were temporarily closed effective March 17, 2020 and March 18, 2020, respectively, due to the COVID-19 pandemic. We began reopening our domestic theatres in June 2020 and began reopening our international theatres in August 2020. As of December 31, 2020, we had 217 domestic theatres and 129 international theatres reopened.
Year endedDecember 31, 2021 - We reopened our remaining theatres throughout the first half of the year as the status of the COVID-19 pandemic and local regulations would allow. As of December 31, 2021, all of our domestic and international theatres were opened.
Revenues. Total revenues increased $230.2 million to $3,221.8 million for 2018 from $2,991.6 million for 2017, representing 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 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Constant Currency (3) |
|
|
|
|
|
| ||
|
| 2021 |
| 2020 |
| % Change |
| 2021 |
| 2020 |
| % Change |
| 2021 |
| % Change |
| 2021 |
| 2020 |
| % Change |
Admissions revenue (1) |
| $671.7 |
| $291.6 |
| 130.3% |
| $108.3 |
| $64.9 |
| 66.9% |
| $117.0 |
| 80.3% |
| $780.0 |
| $356.5 |
| 118.8% |
Concession revenue (1) |
| $482.8 |
| $189.6 |
| 154.6% |
| $78.9 |
| $41.5 |
| 90.1% |
| $84.7 |
| 104.1% |
| $561.7 |
| $231.1 |
| 143.1% |
Other revenues (1)(2) |
| $139.1 |
| $75.7 |
| 83.8% |
| $29.7 |
| $23.0 |
| 29.1% |
| $32.4 |
| 40.9% |
| $168.8 |
| $98.7 |
| 71.0% |
Total revenues (1)(2) |
| $1,293.6 |
| $556.9 |
| 132.3% |
| $216.9 |
| $129.4 |
| 67.6% |
| $234.1 |
| 80.9% |
| $1,510.5 |
| $686.3 |
| 120.1% |
Attendance (1) |
| 73.0 |
| 34.9 |
| 109.2% |
| 32.6 |
| 19.4 |
| 68.0% |
|
|
|
|
| 105.6 |
| 54.3 |
| 94.5% |
Average ticket price (1) |
| $9.20 |
| $8.36 |
| 10.0% |
| $3.32 |
| $3.35 |
| (0.9)% |
| $3.59 |
| 7.2% |
| $7.39 |
| $6.57 |
| 12.5% |
Concession revenues per patron (1) |
| $6.61 |
| $5.43 |
| 21.7% |
| $2.42 |
| $2.14 |
| 13.1% |
| $2.60 |
| 21.5% |
| $5.32 |
| $4.26 |
| 24.9% |
|
| 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 | % |
|
|
|
|
|
|
U.S. Admissions revenues increased $104.3With a more consistent flow of new film content during the year, attendance rebounded to 73.0 million primarily due to a 6.3% increase in attendancepatrons generating $671.7 million of admissions revenue and a 1.4% increase in$482.8 million of concession revenue. Our average ticket price. Concession revenuesprice increased $102.3 million10% to $9.20 during 2021 compared with $8.36 during 2020, primarily due to the 6.3% increase in attendancea result of pricing, ticket type mix and a 6.4% increase inoptimized operating hours. Our concession revenues per patron.patron increased 21.7% to $6.61 during 2021 compared with $5.43 during 2020 driven by pricing and operating hours more conducive to concession purchases. Other revenues for 2021 of $139.1 million included the amortization of NCM screen advertising advances, as well as screen rental revenue, promotional and trailer placement income related to the recent new film releases and transactional fees, all of which were lower in 2020 as a result of limited new film content and reduced attendance.
International. Admissions revenues decreased $65.1 million as reported primarily due to a 9.8% decrease in average ticket price and a 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 the 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 international film slate during 20182021 compared to 2017. Average ticket price and concession revenues per patron decreased, as reported, primarily due to the impact of changes in foreign currency exchange rates in certain countries in which we operate. Other revenues increased primarily due to the impact of changes in 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.
3126
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, 20172020 and 2018.2021.
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Consolidated |
| |||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| Constant |
|
| 2021 |
|
| 2020 |
| |||||||
Film rentals and advertising |
| $ | 360.0 |
|
| $ | 155.3 |
|
| $ | 55.0 |
|
| $ | 31.5 |
|
| $ | 59.6 |
|
| $ | 415.0 |
|
| $ | 186.8 |
|
Concession supplies |
|
| 79.5 |
|
|
| 36.9 |
|
|
| 18.4 |
|
|
| 11.7 |
|
|
| 19.8 |
|
|
| 97.9 |
|
|
| 48.6 |
|
Salaries and wages |
|
| 198.2 |
|
|
| 113.8 |
|
|
| 34.7 |
|
|
| 31.2 |
|
|
| 37.4 |
|
|
| 232.9 |
|
|
| 145.0 |
|
Facility lease expense |
|
| 242.2 |
|
|
| 247.0 |
|
|
| 37.8 |
|
|
| 32.8 |
|
|
| 39.8 |
|
|
| 280.0 |
|
|
| 279.8 |
|
Utilities and other |
|
| 232.1 |
|
|
| 180.3 |
|
|
| 50.8 |
|
|
| 49.2 |
|
|
| 54.9 |
|
|
| 282.9 |
|
|
| 229.5 |
|
|
| 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 |
|
|
|
U.S.Film rentals and advertising costs for 2021 were $822.6 million, or 56.3%53.6% of admissions revenue compared with 53.3% for 2020. The rate for 2021 was impacted by new film content released during 2021, and specifically the highly successful Spiderman: No Way Home released in December 2021. In addition, promotion and advertising expense increased for 2021 as a result of aforementioned new film content, as well as promotions for our Movie Club and Movie Club Platinum programs. Concession supplies expenses for 2021 were 16.5% of concessions revenue compared with 19.5% of concession revenues for 20182020. The concession supplies rate for 2021 reflected modest price increases compared with Welcome Back pricing during 2020, the impact of a favorable product mix, and a reduced level of waste related to $756.4the disposal of perishable goods.
Salaries and wages increased to $198.2 million or 55.7%for 2021 as a result of increased operating hours and increased staffing to service growing attendance demand. Salaries and wages were also impacted by minimum wage and market rate increases. Facility lease expense, which is primarily fixed in nature, decreased $4.8 million primarily due to the permanent closure of certain theatres and a decline in common area maintenance costs. Utilities and other costs increased $51.8 million, as many of these costs, such as janitorial costs, security expenses, credit card fees and repairs and maintenance, are variable in nature and were impacted by increased operating hours and increased attendance for 2021.
Salaries and wages increased to $303.7$3.5 million as reported for 2018 from $265.8 million for 2017 primarily due to2021 compared with 2020 as a result of increased operating hours, increased staffing levels to support the increasedservice growing attendance and expanded concession offerings, staffing at new and recently remodeled theatresdemand in 2021 and increases in minimum and other wage rates.rates due to inflationary pressures in certain countries in which we operate. Facility lease expense increased to $245.1$5.0 million for 2018 from $241.0 million for 2017as reported due to the impact of rent abatements negotiated during 2020 while theatres were closed and higher percentage rent due to revenue growth.as a result of increased revenues. Utilities and other costs increased $1.6 million as reported, as many of these costs are variable in nature, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, and were impacted by increased operating hours and increased attendance for 2021. These expenses, as reported, were also impacted by exchange rates in each of the countries in which we operate.
General and Administrative Expenses. General and administrative expenses increased to $327.0$158.5 million for 2018 from $241.62021 compared with $125.4 million for 2017.2020. The increase is primarily due to the temporary salary reductions and furloughs for our corporate workforce during 2020, increased incentive and share based award compensation expense as a result of certain retention measures and the acceleration of share based award compensation expense for certain equity awards. See Note 15 for discussion of share based award activity.
Depreciation and Amortization. Depreciation and amortization expense increased to $265.4 million for 2021 compared with $259.8 million for 2020 primarily due to the digital projectors received in a non-cash distribution from
27
DCIP during the fourth quarter of 2020 and the impact of new theatres. See Note 7 to the consolidated financial statements for discussion of the non-cash distribution from DCIP.
Impairment of Long-Lived Assets. We recorded asset impairment charges of $20.8 million during 2021 and $152.7 million during 2020. The asset impairment charges recorded during 2021 impacted seven countries and were primarily related to certain theatres that were not showing sufficient recovery after reopening when compared with the rest of our theatre circuit. The asset impairment charges recorded during 2020 impacted eleven countries and were primarily a result of the prolonged impact of the COVID pandemic on our operations, as some theatres remained closed and film content continued to shift into future periods, both of which impacted our estimated future cash flows for theatres. See Note 9 to our consolidated financial statements.
Restructuring costs. Restructuring costs of $20.4 million were recorded during 2020 related to a restructuring plan implemented during the second quarter of 2020. The credit of $(1.0) million to restructuring costs during 2021 was primarily due to the presentation of transactional feesadjustments based on a gross basis versus net basis (seefinal facility lease payments for certain closed theatres as compared with original recorded amounts. 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). 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 $261.2 million for 2018 compared to $237.5 million for 2017. The increase was primarily due to depreciation expense related to theatre remodels, including Luxury Lounger conversions, and new theatres.
Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $32.4 million for 2018 compared to $15.1 million for 2017. Impairment charges for 2018 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.
(Gain) Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of $38.7$8.0 million during 20182021 compared to $22.8with a gain of $(8.9) million during 2017. The loss recorded during 20182020. Activity for 2021 was primarily related to a litigation settlement reserve and the write-off of certain digital projectors that were replaced with laser projectors, partially offset by gains on the sales of excess land parcels. Activity for 2020 was primarily due to a favorable litigation outcome for a case that was previously accrued, partially offset by the retirement of assets related to theatre remodels, 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.remodels.
Interest Expense. Interest costs incurred, includingexpense, which includes amortization of debt issueissuance costs were $110.0and amortization of accumulated losses for swap amendments, increased to $125.6 million during 2021 compared with $115.7 million for 2018 compared to $105.9 million for 2017.2020. The increase was primarily due to an increasethe issuance of notes discussed in the variable rate at which our term loan accrued interest during 2018. See Note 911 to our consolidated financial statements for discussionstatements.
Loss on Extinguishment of Debt. We recorded a loss on extinguishment of debt of $6.5 million during 2021 related to the refinancing of our long-term5.125% Senior Notes and 4.875% Senior Notes, including the write-off of the related unamortized debt issuance costs and legal and other fees paid. See Note 11 to our interest rate swap agreements.consolidated financial statements.
Foreign Currency Exchange Gain (Loss). Loss. We recorded a foreign currency exchange loss of $11.7$1.3 million during 20182021 and a foreign currency exchange gain of $0.9$4.9 million during 20172020 primarily related to intercompany transactions and changes in exchange rates from original transaction dates until cash settlement. See Notes 1 and 1113 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$0.1 million during 2018 and $16.42021 compared with $7.0 million recorded during 2017, which2020. These distributions were in excess of the carrying value of our Tranche 1 Investment. See Note 4 to our consolidated financial statements.
Interest expense –investment. Distributions from NCM. We recorded non-cash interest expense decreased beginning in the second quarter of $19.7 million during 2018 related2020 primarily due to the significant financing component associated with revenues collectedimpact of the COVID-19 pandemic as discussed in advance under certain of our agreements with NCM. See Note 3 to our consolidated financial statements. See Note 6 to our consolidated financial statements for further discussion of ASC Topic 606. our investment in NCM.
Cash and Non-Cash Distributions from DCIP. We recorded cash distributions from DCIP of $13.1 million during 2021. These distributions were in excess of the carrying value of our investment in DCIP. We recorded a non-cash distribution of $12.9 million during 2020 related to digital projectors distributed to us from DCIP. See Note 7 to our consolidated financial statements for discussion of our investment in DCIP.
Equity in IncomeLoss of Affiliates. We recorded equity in incomeloss of affiliates of $39.2$25.0 million during 2018 and $36.02021 compared with $38.7 million during 2017.2020. Our equity method investees are recovering from the impacts of the COVID-19 pandemic. See Notes 46 and 57 to our consolidated financial statements for information about our equity investments.
33
Income Taxes. IncomeAn income tax expensebenefit of $96.0$(32.3) million was recorded for 20182021 compared with an income tax benefit of $(303.6) million for 2020. The effective tax rate was approximately 7.8% for 2021 compared with 33.3% for 2020. As a result of continued losses in 2021, the 2021 effective tax rate was negatively impacted by valuation allowances related to $80.3 million recordedcertain foreign tax credits and deferred tax assets for 2017.which the ultimate realization is uncertain. The effective tax rate for 2018 was 30.7% and included2020 reflected the carryback of 2020 losses to tax years that had a net additional charge, as a result35% federal tax rate under the provisions of the Tax ActCARES Act. We have recorded an income tax receivable of $46.6 million at December 31, 2021 and its recently issued guidance,have received cash tax refunds of $19.2$137.8 million all non-cash. The effective tax rate for 2017 was 23.1%, which includedduring the impact of a one-time benefit of $44.9 million related to the enactment of the Tax Act.year ended December 31, 2021. See Note 1517 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 | % |
|
|
|
|
|
|
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 |
|
|
|
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. 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 $22.8 million during 2017 compared to $20.4 million during 2016. 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. The loss recorded during 2016 included the retirement of assets due to theatre remodels and closures, partially offset by a gain on the sale of our investment in RealD stock (see Note 5 to our consolidated financial statements) and a gain on the sale of a land parcel.
Interest Expense. Interest costs incurred, including amortization of debt issue costs, were $105.9 million for 2017 compared to $108.3 million for 2016. 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 4.875% senior notes (the “4.875% Senior Notes), which occurred on March 21, 2016, as well as amendments to our senior secured credit 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.income taxes.
Foreign Currency Exchange Gain. We recorded a foreign currency exchange gain of $0.9 million during 2017 and a foreign currency exchange gain of $6.5 million during 2016 primarily related to intercompany transactions and changes in exchange rates from the original transaction date until cash settlement. See Notes 1 and 11 to our consolidated financial statements for discussion of foreign currency translation.28
Loss on Debt Amendments and Refinancing. 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 rate at which our term loan accrues interest, revisions to certain definitions within the agreement, a reduction of the 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 2016 primarily related to the early redemption of our $200.0 million 7.375% Senior Subordinated Notes. 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 $16.4 million during 2017 and $14.7 million during 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 $36.0 million during 2017 and $32.0 million during 2016. See Notes 4 and 5 to our consolidated financial statements for information about our equity investments.
Income Taxes. Income tax expense of $80.3 million was recorded for 2017 compared to $104.9 million recorded for 2016. 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. The effective tax rate for 2016 was 28.9%.
Liquidity and Capital Resources
Operating Activities
We primarily collect our revenuesrevenue in cash, mainly through box office receipts and the sale of concessions. In addition, our theatres provide the patron a choice of using a credit card or debit card. Since ourOur revenues are generally received in cash prior to the payment of related expenses,expenses; therefore, we have an operating “float” and historically have not
36
required traditional working capital financing. We temporarily closed all of our theatres during March 2020 and funded operating expenses with cash on hand and new financing discussed below under Financing Activities while theatres were closed and as we reopened our theatres. During the latter part of 2021, as we began to show a steady stream of new film content and our theatres were returning to more consistent operating hours, we began to generate positive cash flows from operations and transition back to our historical working capital “float” position. However, our working capital position will continue to fluctuate based on seasonality, the timing of interest payments on our long-term debt as well as timing of payment of other operating expenses that are paid annually or semi-annually, such as property and other taxes and incentive bonuses. We believe our existing cash and expected cash flows from operations will be sufficient to meet our working capital, capital expenditures, and expected cash requirements from known contractual obligations for the next twelve months and beyond.
Cash provided by (used for) operating activities amounted to $462.3 million, $528.4$(334.9) million and $556.3$176.4 million for the years ended December 31, 2016, 20172020 and 2018,2021, respectively. The increase in cash flows fromprovided by operating activities was primarily a result of increased attendance as theatres reopened and new film product was released, the receipt of income tax refunds, discussed at Income Taxes above, as a result of the carry back of net operating losses (see Note 17 to our financial statements) and the timing of payments to vendors for revenues generated in the years endedlatter part of 2021.
As discussed in Note 4 to our consolidated financial statements, we negotiated the deferral of a portion of our rent and other lease-related payments for part of 2020 and the first quarter of 2021 with many of our landlords. We began to repay previously deferred amounts during 2020 and continued to make scheduled repayments during 2021. As of December 31, 2017 and 2018 was primarily due to the increase2021, approximately $31.9 million in revenues and the amount and timingdeferred lease payments remain outstanding. The majority of vendor payments for movies releasedthese remaining deferred amounts will be repaid during December of those years.2022.
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 $327.8 million, $410.5$83.4 million and $451.4$89.3 million for the years ended December 31, 2016, 20172020 and 2018,2021, respectively. The increase in cash used for investing activities during 2017 was primarily due to increases inhigher capital expenditures and acquisitions. The increase in cash used for investing2021 as we resumed some non-essential projects after the suspension of such activities during 2018 was primarily due to the acquisitionin 2020.
Below is a summary of NCM common units (see Note 4) for $78.4 million, partially offsetcapital expenditures by a decrease in capital expenditures.
Capital expenditurescategory for the years ended December 31, 2016, 2017 and 2018 were as followsperiods indicated (in millions):
|
| Year Ended December 31, |
| |||||
|
| 2020 |
|
| 2021 |
| ||
New theatres |
| $ | 25.9 |
|
| $ | 38.0 |
|
Existing theatres |
| $ | 58.0 |
|
| $ | 57.5 |
|
Total capital expenditures |
| $ | 83.9 |
|
| $ | 95.5 |
|
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 |
|
|
|
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 341We operated 522 theatres with 4,5865,868 screens worldwide as of December 31, 2018. We2021. Theatres and screens built three new theatres and 32 screens and closed one theatre with 7 screens during the year ended December 31, 2018. At December 31, 2018, we had signed commitments to open six new theatres and 70 screens in domestic markets during 2019 and open five new theatres with 54 screens subsequent to 2019. We estimate the remaining capital expenditures for the development of these 124 domestic screens will be approximately $80 million.2021 were as follows:
Our international theatre circuit consisted of 205 theatres with 1,462 screens as29
|
| December 31, 2020 |
|
| Built |
|
| Closed |
|
| December 31, 2021 |
| ||||
U.S. |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Theatres |
|
| 331 |
|
|
| 3 |
|
|
| (13 | ) |
|
| 321 |
|
Screens |
|
| 4,507 |
|
|
| 42 |
|
|
| (141 | ) |
|
| 4,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
International |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Theatres |
|
| 200 |
|
|
| 4 |
|
|
| (3 | ) |
|
| 201 |
|
Screens |
|
| 1,451 |
|
|
| 28 |
|
|
| (19 | ) |
|
| 1,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Worldwide |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Theatres |
|
| 531 |
|
|
| 7 |
|
|
| (16 | ) |
|
| 522 |
|
Screens |
|
| 5,958 |
|
|
| 70 |
|
|
| (160 | ) |
|
| 5,868 |
|
As of December 31, 2018. We built eight new theatres and 49 screens, acquired three theatres with 19 screens and closed four screens during the year ended December 31, 2018. At December 31, 2018,2021, we had the following signed commitments (costs in millions):
|
| Theatres |
|
| Screens |
|
| Estimated Cost (1) |
| |||
Expected to open during 2022 |
|
|
|
|
|
|
|
|
| |||
U.S. |
|
| 2 |
|
|
| 28 |
|
| $ | 20.9 |
|
International |
|
| 1 |
|
|
| 19 |
|
|
| 7.7 |
|
Total during 2022 |
|
| 3 |
|
|
| 47 |
|
|
| 28.6 |
|
|
|
|
|
|
|
|
|
|
| |||
Expected to open subsequent to 2022 |
|
|
|
|
|
|
|
|
| |||
U.S. |
|
| 3 |
|
|
| 34 |
|
|
| 20.6 |
|
International |
|
| 6 |
|
|
| 36 |
|
|
| 15.6 |
|
Total subsequent to 2022 |
|
| 9 |
|
|
| 70 |
|
|
| 36.2 |
|
|
|
|
|
|
|
|
|
|
| |||
Total commitments at December 31, 2021 |
|
| 12 |
|
|
| 117 |
|
| $ | 64.8 |
|
Actual expenditures for continued theatre development, remodels and acquisitions are subject to change based upon the availability of attractive opportunities. WeDuring the next twelve months and the foreseeable future, we plan to fund capital expenditures for our continued development with cash flow from operations and, if needed, borrowings under our senior secured credit facility, and proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.
37
Cash used forprovided by financing activities was $163.1 million, $157.4$194.5 million and $191.9$100.1 million during the years ended December 31, 2016, 20172020 and 2018,2021, respectively. Cash used forThe decrease in cash provided by financing activities was primarily consistsdue to the issuance of notes and borrowings by certain of our international subsidiaries during 2020, discussed further below, partially offset by the decrease in dividends paid to our parent company, Cinemark Holdings, Inc..Inc. and a contribution from Cinemark 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.
30
Long-term debt consisted of the following as of December 31, 20172020 and 20182021 (in millions):
|
| December 31, |
| |||||
|
| 2020 |
|
| 2021 |
| ||
Cinemark USA, Inc. term loan due 2025 |
| $ | 639.7 |
|
| $ | 633.1 |
|
Cinemark USA, Inc. 8.750% senior secured notes due 2025 |
|
| 250.0 |
|
|
| 250.0 |
|
Cinemark USA, Inc. 5.875% senior notes due 2026 |
|
| — |
|
|
| 405.0 |
|
Cinemark USA, Inc. 5.250% senior notes due 2028 |
|
| — |
|
|
| 765.0 |
|
Cinemark USA, Inc. 5.125% senior notes due 2022 |
|
| 400.0 |
|
|
| — |
|
Cinemark USA, Inc. 4.875% senior notes due 2023 |
|
| 755.0 |
|
|
| — |
|
Other |
|
| 23.2 |
|
|
| 30.2 |
|
Total long-term debt |
| $ | 2,067.9 |
|
| $ | 2,083.3 |
|
Less current portion |
|
| 18.1 |
|
|
| 24.3 |
|
Subtotal long-term debt, less current portion |
| $ | 2,049.8 |
|
| $ | 2,059.0 |
|
Less: Debt issuance costs, net of accumulated amortization |
|
| 24.9 |
|
|
| 30.3 |
|
Long-term debt, less current portion, net of debt issuance costs |
| $ | 2,025.0 |
|
| $ | 2,028.7 |
|
|
| As of December 31, |
| |||||
|
| 2017 |
|
| 2018 |
| ||
Cinemark USA, Inc. term loan |
| $ | 659.5 |
|
| $ | 652.9 |
|
Cinemark USA, Inc. 5.125% senior notes due 2022 |
|
| 400.0 |
|
|
| 400.0 |
|
Cinemark USA, Inc. 4.875% senior notes due 2023 |
|
| 755.0 |
|
|
| 755.0 |
|
Other |
|
| 2.8 |
|
|
| 1.4 |
|
Total long-term debt |
| $ | 1,817.3 |
|
| $ | 1,809.3 |
|
Less current portion |
|
| 7.1 |
|
|
| 8.0 |
|
Subtotal long-term debt, less current portion |
| $ | 1,810.2 |
|
| $ | 1,801.3 |
|
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 |
| $ | 1,780.4 |
|
| $ | 1,772.6 |
|
As of December 31, 2018, after giving effect to a letter of credit outstanding,2021, we had $98.8$100 million in available borrowing capacity on our revolving credit line.line of credit.
As of December 31, 2018,2021, our long-term debt obligations, scheduled interest payments on long-term debt, future minimum lease obligations under non-cancelable operating and capitalfinance leases, deferred rent payments due as a result of amended lease terms, scheduled interest payments under capitalfinance leases and other obligations for each period indicated are summarized as follows:
|
| Payments Due by Period |
| |||||||||||||||||
|
| (in millions) |
| |||||||||||||||||
|
|
|
|
| Less Than |
|
|
|
|
|
|
|
| After |
| |||||
Contractual Obligations |
| Total |
|
| One Year |
|
| 1 - 3 Years |
|
| 3 - 5 Years |
|
| 5 Years |
| |||||
Long-term debt (1) |
| $ | 2,083.3 |
|
| $ | 24.3 |
|
| $ | 19.3 |
|
| $ | 1,268.5 |
|
| $ | 771.2 |
|
Scheduled interest payments on long-term debt (2) |
| $ | 511.7 |
|
|
| 109.1 |
|
|
| 214.4 |
|
|
| 127.9 |
|
|
| 60.3 |
|
Operating lease obligations (3) |
| $ | 1,544.9 |
|
|
| 274.0 |
|
|
| 473.2 |
|
|
| 349.9 |
|
|
| 447.8 |
|
Finance lease obligations (3) |
| $ | 144.1 |
|
|
| 19.8 |
|
|
| 37.2 |
|
|
| 28.4 |
|
|
| 58.7 |
|
Deferred rent (4) |
| $ | 31.9 |
|
|
| 31.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Purchase and other commitments (5) |
| $ | 6.7 |
|
|
| 4.3 |
|
|
| 1.0 |
|
|
| 1.0 |
|
|
| 0.4 |
|
Liability for uncertain tax positions (6) |
| $ | — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total obligations |
| $ | 4,322.6 |
|
| $ | 463.4 |
|
| $ | 745.1 |
|
| $ | 1,775.7 |
|
| $ | 1,338.4 |
|
|
| Payments Due by Period |
| |||||||||||||||||
|
| (in millions) |
| |||||||||||||||||
|
|
|
|
|
| Less Than |
|
|
|
|
|
|
|
|
|
| After |
| ||
Contractual Obligations |
| Total |
|
| One Year |
|
| 1 - 3 Years |
|
| 3 - 5 Years |
|
| 5 Years |
| |||||
Long-term debt (1) |
| $ | 1,809.3 |
|
| $ | 8.0 |
|
| $ | 13.2 |
|
| $ | 1,168.2 |
|
| $ | 619.9 |
|
Scheduled interest payments on long-term debt(2) |
| $ | 419.0 |
|
|
| 86.2 |
|
|
| 171.3 |
|
|
| 127.4 |
|
|
| 34.1 |
|
Operating lease obligations |
| $ | 1,784.5 |
|
|
| 253.3 |
|
|
| 472.7 |
|
|
| 381.4 |
|
|
| 677.1 |
|
Capital lease obligations |
| $ | 259.5 |
|
|
| 27.1 |
|
|
| 51.7 |
|
|
| 43.1 |
|
|
| 137.6 |
|
Scheduled interest payments on capital leases |
| $ | 86.4 |
|
|
| 15.4 |
|
|
| 24.4 |
|
|
| 17.9 |
|
|
| 28.7 |
|
Purchase and other commitments(3) |
| $ | 153.2 |
|
|
| 89.6 |
|
|
| 54.3 |
|
|
| 9.3 |
|
|
| — |
|
Current liability for uncertain tax positions(4) |
| $ | 0.6 |
|
|
| 0.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total obligations |
| $ | 4,512.5 |
|
| $ | 480.2 |
|
| $ | 787.6 |
|
| $ | 1,747.3 |
|
| $ | 1,497.4 |
|
|
|
|
|
|
|
|
|
38
Off-Balance Sheet Arrangements
Other than the operating leases and purchase and other commitments disclosed in the tables above, weWe 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 $700.0 million term loan and a $100.0 million revolving line of credit, line (the “Credit Agreement”).
On May 16, 2016, Cinemark USA, Inc. made a pre-payment of $13.5 million on its term loan usingor 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 |
|
|
|
|
|
Agreement. Under the amended Credit Agreement, quarterly principal payments of $1.6 million are due on the term loan through December 31, 2024, with a final principal payment of $613.4
31
$613.4 million due on March 29, 2025. Cinemark USA, Inc. had $100.0 million available borrowing capacity on the revolving line of credit as of December 31, 2021.
Subsequent to the March 29, 2018 amendment noted above, interestInterest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin of 0.75% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 1.75% per annum. Interest on the revolving credit line accrues, at our option, at: (A) a base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin that ranges from 0.50% to 1.25% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 1.50% to 2.25% per annum. The margin of the revolving credit line is determined by the consolidated net senior secured leverage ratio as defined in the Credit Agreement.
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 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 Credit Agreement are guaranteed by Cinemark Holdings, Inc. and certain of Cinemark USA, Inc.’s domestic subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of Cinemark USA, Inc.’s and the guarantors’ personal property, including, without limitation, pledges of all of Cinemark USA, Inc.’s capital stock, all of the capital stock of certain of Cinemark USA, Inc.’s domestic subsidiaries and 65% of the voting stock of certain of its foreign subsidiaries.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on Cinemark USA, Inc.’s ability, and in certain instances, its subsidiaries’ and our ability, to consolidate or merge or liquidate, wind up or dissolve; substantially change the nature of its business; sell, transfer or dispose of assets; create or incur indebtedness; create liens; pay dividends or repurchase stock; and make capital expenditures and investments. If Cinemark USA, Inc. has borrowings outstanding on the revolving credit line, it is required to satisfy a consolidated net senior secured leverage ratio covenant as defined in the Credit Agreement, not to exceed 5.04.25 to 1. AsSee below for discussion of December 31, 2018, Cinemark USA, Inc.’s actual ratio was 2.9 to 1.covenant waivers.
The dividend restriction contained in the Credit Agreement prevents the Company and any of its subsidiaries from paying a dividend or otherwise distributing cash to its stockholders unless (1) the Company is not in default, and the distribution would not cause Cinemark USA, Inc. to be in default, under the Credit Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Credit Agreement, and (c) certain other defined amounts.amounts, or collectively, the Applicable Amount. As of December 31, 2018,2021, Cinemark USA, Inc. could have distributed up to approximately $2,918.1 million$2.7 billion to its parent company and sole stockholder, Cinemark Holdings, Inc.
On April 17, 2020, in conjunction with the issuance of the 8.750% Secured Notes discussed below, we obtained a waiver of the leverage covenant from the majority of revolving lenders under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020. The waiver was subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.
On August 21, 2020, in conjunction with the issuance of Cinemark Holdings, Inc.'s 4.500% convertible senior notes, we further amended the Credit Agreement to extend the waiver of the leverage covenant through the fiscal quarter ending September 30, 2021. The amendment also (i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits us to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver and (iv) makes such other changes to permit the issuance of the Cinemark Holdings, Inc.'s 4.500% convertible senior notes. Under the modified calculation, the consolidated net senior secured leverage ratio was 1.1 to 1 as of December 31, 2021.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from November 28, 2022 to November 28, 2024.
32
We have threefour interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with the variable interest rates on the term loan outstanding under the Credit Agreement. See Note 9 of13 to our consolidationconsolidated financial statements for discussion of the interest rate swaps. See also discussion
At December 31, 2021, there was $633.1 million outstanding under the term loan and no borrowings were outstanding under the $100.0 million revolving line of credit. The average interest rate riskon outstanding term loan borrowings under the Credit Agreement at Item 7A. Quantitative and Qualitative Disclosures About Market Risk. December 31, 2021 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements.
4.875%5.875% Senior Notes
On May 24, 2013,March 16, 2021, Cinemark USA, Inc. issued $530.0$405 million aggregate principal amount of 4.875%5.875% senior notes due 2023,2026, at par value (the “4.875%“5.875% Senior Notes”). Interest on the 4.875% Senior Notes is payable on June 1 and December 1 of each 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 redemptionfund a cash tender offer to purchase any and all of Cinemark USA, Inc.’s previously outstanding $200.0 million 7.375% senior subordinated notes due 2021USA’s 5.125% Senior Notes (the “7.375%“5.125% 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 partto redeem any of the same series as Cinemark USA, Inc.’s existing 4.875%5.125% Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes.Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The aggregate principal amount of $755.0 million of 4.875%5.875% Senior Notes mature on June 1, 2023.March 15, 2026. The Company incurred debt issueissuance costs of approximately $3.7$6.0 million in connection with the issuance, of the additional notes, which along with the discount of $2.3 million, are reflectedrecorded as a reduction of long termlong-term debt net of accumulated amortization, on the consolidated balance sheet as of December 31, 2018.sheets.
The 4.875%5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 4.875%5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior unsecured debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantor’sguarantors’ existing and future senior subordinated debt. The 4.875%5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the assetscollateral securing such debt, including all borrowings under Cinemark USA, Inc.’s Credit Agreement.amended senior secured credit facility. The 4.875%5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 4.875%5.875% Senior Notes.
40Prior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of the 5.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.875% Senior Notes to the date of redemption. After March 15, 2023, Cinemark USA, Inc. may redeem the 5.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
5.250% Senior Notes
On June 15, 2021, Cinemark USA, Inc. issued $765 million aggregate principal amount of 5.25% senior notes due 2028, at par value (the “5.25% Senior Notes”). Proceeds, after payment of fees, were used to redeem all of Cinemark USA’s 4.875% $755 million aggregate principal amount of Senior Notes due 2023 (the “4.875% Senior Notes”). Interest on the 5.25% Senior Notes is payable on January 15 and July 15 of each year, beginning January 15, 2022. The 5.25% Senior Notes mature on July 15, 2028.
The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s 8.750% senior secured notes due 2025, in each case to the extent of the value of the collateral securing such debt, (iv) are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA’s non-guarantor subsidiaries, and (v) are structurally senior to Cinemark Holdings, Inc.'s 4.500% convertible senior notes.
33
Prior to July 15, 2024, Cinemark USA, Inc. may redeem all or any part of the 5.25% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.25% Senior Notes to the date of redemption. On or after July 15, 2024, Cinemark USA, Inc. may redeem the 5.25% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to July 15, 2024, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.25% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture, so long as at least 60% of the principal amount of the 5.25% Senior Notes remains outstanding immediately after each such redemption.
8.750% Secured Notes
On April 20, 2020, Cinemark USA, Inc. issued $250.0 million aggregate principal amount of 8.750% senior secured notes due 2025, or the 8.750% Secured Notes. The 8.750% Secured Notes will mature on May 1, 2025. Interest on the 8.750% Secured Notes is payable on May 1 and November 1 of each year.
The indenture togoverning the 4.875% Senior8.750% Secured 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, 2018, Cinemark USA, Inc. could have distributed up to approximately $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% Senior8.750% Secured Notes, Cinemark USA, Inc. would be required to make an offer to repurchase the 4.875% Senior8.750% Secured Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 4.875% Senior8.750% Secured Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies thea 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 28.750% Secured Notes are fully and unconditionally guaranteed on a joint and several senior basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or in any other manner become liable with respect to any of Cinemark USA, Inc.’s or its guarantors’ other debt. If Cinemark USA, Inc. cannot make payments on the 8.750% Secured Notes when they are due, Cinemark USA, Inc.’s guarantors must make them instead. Under certain circumstances, the guarantees may be released without action by, or the consent of, the holders of the 8.750% Secured Notes.
Prior to May 1, 2022, Cinemark USA, Inc. may redeem all or any part of the 8.750% Secured Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and our actual ratio asunpaid interest on the 8.750% Secured Notes to the date of December 31, 2018 was approximately 6.3to 1.
redemption. On or after May 1, 2022, Cinemark USA, Inc. may redeem the 4.875% Senior8.750% Secured Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to May 1, 2022, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 8.750% Secured Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture, so long as at least 60% of the principal amount of the 8.750% Secured Notes remains outstanding immediately after each such redemption.
5.125%4.875% Senior Notes
On December 18, 2012,May 21, 2021, Cinemark USA, Inc. issued $400.0a conditional notice of optional redemption to redeem the $755 million aggregateoutstanding principal amount of 5.125% senior notes due 2022, at par valuethe 4.875% Senior Notes. In connection therewith, Cinemark USA deposited with Wells Fargo Bank, N.A., as Trustee for the 4.875% Senior Notes (the “5.125%“Trustee”), funds sufficient to redeem all 4.875% Senior Notes”Notes remaining outstanding on June 21, 2021 (the “Redemption Date”). InterestThe redemption payment (the “Redemption Payment”) included $755 million of outstanding principal at the redemption price equal to 100.000% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on June 15, 2021, the indenture governing the 4.875% Senior Notes was fully satisfied and discharged.
34
5.125% Senior Notes
On March 16, 2021, Cinemark USA, Inc. completed a tender offer to purchase it’s previously outstanding 5.125% Senior Notes, of which $334 million was tendered at the expiration of the offer. On March 16, 2021, Cinemark USA, Inc. also issued a notice of optional redemption to redeem the remaining $66 million principal amount of the 5.125% Senior Notes. In connection therewith, on March 16, 2021, Cinemark USA deposited with Wells Fargo Bank, N.A., as trustee for the 5.125% Senior Notes is payable(the “Trustee”), funds sufficient to redeem all 5.125% Notes remaining outstanding on JuneApril 15, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included approximately $66 million of outstanding principal at the redemption price equal to 100% of the principal amount plus accrued and December 15unpaid interest thereon to the Redemption Date. Upon deposit of each year. Thethe Redemption Payment with the Trustee on March 16, 2021, the indenture governing the 5.125% Senior Notes mature onwas fully satisfied and discharged.
Additional Borrowings of International Subsidiaries
During the years ended December 15,31, 2020 and 2021, certain of our international subsidiaries borrowed an aggregate of $35.8 million under various local bank loans. Below is a summary of loans outstanding as of December 31, 2021:
|
| Loan Balances |
|
|
|
|
|
|
| |
|
| (USD millions) |
|
| Interest Rates as of |
|
|
|
| |
Loan Description(s) |
| December 31, 2021 |
|
| December 31, 2021 |
| Covenants |
| Maturity | |
Colombia loans |
| $ | 2.7 |
|
| 4.9% to 5.2% |
| Negative and maintenance covenants |
| June 2023 and |
Peru loans |
| $ | 4.9 |
|
| 1.0% to 4.8% |
| Negative covenants |
| June and December 2023 |
Brazil loans |
| $ | 18.4 |
|
| 4.0% to 8.7% |
| Negative covenants |
| November 2022, October 2023 and January 2029 |
Chile loans |
| $ | 4.2 |
|
| 3.5% |
| Negative and maintenance covenants |
| November 2023 |
Total |
| $ | 30.2 |
|
|
|
|
|
|
|
During the year ended December 31, 2021, we obtained a waiver of the maintenance covenant related to the bank loans in Chile through June 30, 2022.
Additionally, we deposited cash into a collateral account to support the issuance of letters of credit to the lenders for certain of the international loans noted above. The 5.125%total amount deposited as of December 31, 2021 was $25.8 million and is considered restricted cash.
Covenant Compliance
The indentures governing the 5.875% Senior Notes, are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.125%the 5.25% 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% Senior8.750% Secured 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 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 containsindentures") contain covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. As of December 31, 2018,2021, Cinemark USA, Inc. could have distributed up to approximately $2,985.8 million $3.0 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 5.125% Senior Notes,indentures, subject to its available cash and other borrowing restrictions outlined in the indenture. indentures. Upon a change of control, as defined in the indenture governing the 5.125% Senior Notes,indentures, Cinemark USA, Inc. would be required to make an offer to repurchase the 5.125%5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 5.125% Senior Notes allowsindentures allow Cinemark USA, Inc. to incur additional indebtedness if it satisfieswe satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of December 31, 20182021 was approximately 6.30.6 to 1.
See also discussion of dividend restrictions and the consolidated net senior secured leverage ratio under the Credit Agreement at Senior Secured Credit Facility above.
35
As of December 31, 2018,2021, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.
41
We are rated by nationally recognized rating agencies. The rating scales and methodologies used to derive individual ratings may vary from agency to agency. Credit ratings are issued by credit rating agencies based on evaluations of our ability to pay back our outstanding debt and the likelihood that we would default on that debt prior to its maturity. The credit ratings issued by the credit rating agencies represent the credit rating agency's evaluation of both qualitative and quantitative information for our company. The credit ratings that are issued are based on the credit rating agency’s judgment and experience in determining what information should be considered in giving a rating to a particular company. Ratings are always subject to change and there can be no assurance that our current ratings will continue for any given period of time. A downgrade of our debt ratings, depending on the extent, could increase the cost to borrow funds.
New Accounting Pronouncements
See Note 2 to our consolidated financial statements for a discussion of recently issued accounting pronouncements and their impact on our financial statements.
Seasonality
Our revenues have historically been seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, theThe most successful motion pictures have historically been released during summer months in the U.S., extending from May to July, and during the holiday season, extending from 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, quantity 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
We have exposure to financial market risks, including changes in interest rates and foreign currency exchange rates.
Interest Rate Risk
We are currently party tohave variable rate debt facilities.debt. An increase or decrease in interest rates would affect our interest expense relating to our variable rate debt facilities. At December 31, 2018,2021, there was an aggregate of approximately $202.9$63.3 million of variable rate debt outstanding, under these facilities, after giving effect to the interest rate swap agreements discussed below. Based on the interest rates in effect on the variable rate debt outstanding at December 31, 2018,2021, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $2.0$0.6 million.
The table below provides information about our fixed rate and variable rate long-term debt agreements as of December 31, 2018:2021:
|
| Expected Maturity for the Years Ending December 31, |
|
| Average |
| |||||||||||||||||||||||
|
| (in millions) |
|
| Interest |
| |||||||||||||||||||||||
|
| 2022 |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
| Thereafter |
| Total |
| Fair Value |
|
| Rate |
| |||||||||
Fixed rate |
| $ | — |
| $ | — |
| $ | — |
| $ | 850.0 |
| $ | 405.0 |
| $ | 765.0 |
| $ | 2,020.0 |
| $ | 1,996.0 |
|
|
| 5.3 | % |
Variable rate |
|
| 24.3 |
|
| 12.3 |
|
| 7.0 |
|
| 13.5 |
|
| — |
|
| 6.2 |
|
| 63.3 |
|
| 62.0 |
|
|
| 3.7 | % |
Total debt (1) |
| $ | 24.3 |
| $ | 12.3 |
| $ | 7.0 |
| $ | 863.5 |
| $ | 405.0 |
| $ | 771.2 |
| $ | 2,083.3 |
| $ | 2,058.0 |
|
|
|
|
|
| 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 |
|
|
|
|
|
|
|
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 sheetsheets as an asset or liability with the related gains or losses
36
reported as a component of accumulated other comprehensive loss. See Note 911 to theour 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, 2018:2021:
Notional | ||||||||||
Amount | Effective Date | Pay Rate | Receive Rate |
| Expiration Date | |||||
$ | December 31, 2018 |
| 1-Month LIBOR |
| December 31, | |||||
$ | December 31, 2018 |
| 1-Month LIBOR |
| December 31, | |||||
$137.5 million | December 31, 2018 |
| 1-Month LIBOR |
| December 31, | |||||
$ | March 31, 2020 | 0.570% | 1-Month LIBOR | March 31, 2022 | ||||||
$ 600.0 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, 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, 2018,2021, 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 $46.0$58.1 million and would decreaseincrease the aggregate net incomeloss of our international subsidiaries for the year ended December 31, 20182021 by $5.9$(3.6) 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
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 andFinancial Disclosure
None.
4337
Item 9A. ControlsControls and Procedures
Evaluation of the Effectiveness of Disclosure Controls and Procedures
As of December 31, 2018,2021, 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, 2018,2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 that occurred during the quarter ended December 31, 20182021 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, 20182021 based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control—Integrated Framework (2013). As a result of this assessment, management concluded that, as of December 31, 2018,2021, our internal control over financial reporting was effective.
Certifications of our Chief Executive Officer and our Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Annual Report. This "Controls and Procedures" section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
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.
None.
4438
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 23, 201919, 2022 and to be filed with the SEC within 120 days after December 31, 20182021.
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 23, 201919, 2022 and to be filed with the SEC within 120 days after December 31, 2018.2021.
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 23, 2019 and19, 2022 to be filed with the SEC within 120 days after December 31, 2018.2021.
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 23, 201919, 2022 and to be filed with the SEC within 120 days after December 31, 2018.2021.
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”) to be held on May 23, 201919, 2022 and to be filed with the SEC within 120 days after December 31, 2018.2021.
Item 15. Exhibits and Financial Statement Schedules
|
|
|
|
(b) Exhibits
See the accompanying Index beginning on page 46.40.
Schedule I – Condensed Financial Information of Registrant beginning on page S-1.
All schedulesSchedules 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.
4539
EXHIBIT INDEX
Number |
| Exhibit Title |
3.1 |
| |
3.2 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| ||
4.5(b) | ||
4.6 | ||
4.7 | ||
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) |
| |
10.1(c) |
| |
10.1(d) |
| |
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) |
40
10.3(a) |
| |
10.3(b) |
|
46
| ||
10.3(d) |
| |
10.3(e) |
| |
10.3(f) |
| |
10.3(g) | ||
10.3(h) | ||
10.3(i) | ||
10.3(j) | ||
10.3(k) | ||
|
| |
+ |
| |
+ |
| |
+ |
|
41
+10.4(d) | ||
+ | ||
+10.4(f) | ||
+ |
| |
+ |
| |
+ | ||
| ||
+10.4(k) | ||
10.5(a) | ||
| ||
10.6 | ||
|
|
47
| ||
|
| |
|
| |
|
| |
10.8(a) | ||
|
| |
|
|
42
|
| |
|
| |
|
| |
| ||
| ||
10.9(a) | ||
|
| |
|
| |
|
| |
|
|
48
| ||
10.9(h) | ||
10.9(i) | ||
10.10(a) |
43
|
| |
|
| |
|
| |
|
| |
|
| |
| ||
| ||
10.11(a) | ||
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
49
| ||
|
|
44
|
| |
|
| |
|
| |
|
| |
|
| |
| ||
10.13(a) | ||
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
50
|
45
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
51
| ||
|
|
46
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
52
| ||
|
|
47
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
10.22(b) | ||
10.22(c) | ||
10.22(d) | ||
10.22(e) | ||
10.22(f) | ||
10.22(g) |
48
10.22(h) | ||
10.23(a) | ||
| ||
| ||
| ||
|
53
10.23(g) | ||
10.24(a) | ||
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
49
|
| |
|
| |
|
| |
|
| |
|
| |
| ||
|
| |
|
| |
|
|
54
| ||
| ||
*21 |
| |
*31.1 |
| |
*31.2 |
| |
*32.1 |
| |
*32.2 |
| |
*101 |
| The following financial information from Cinemark USA, Inc.’s Annual Report on Form 10-K for the year ended December 31, |
*104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
|
|
|
|
|
|
55* Filed herewith.
50
+ Any management contract, compensatory plan or arrangement.
(P) Paper filing
51
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 | CINEMARK USA, INC | |||
BY: | /s/ | |||
| ||||
Chief Executive Officer |
BY: | /s/ | |||
| ||||
Chief Financial Officer | ||||
|
POWER OF ATTORNEY
Each person whose signature appears below hereby severally constitutes and appoints Mark ZoradiSean Gamble and Sean GambleMelissa Thomas 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 |
| Chairman of the Board of Directors and Director |
| March |
Lee Roy Mitchell |
|
|
| |
|
|
|
|
|
/s/ |
| Chief Executive Officer and Director |
| March |
|
| (principal executive officer) |
|
|
|
|
|
|
|
/s/ |
| Chief Financial Officer |
| March |
|
| (principal financial |
|
|
|
|
|
|
|
/s/ Caren Bedard | SVP — Global Controller and Treasury | March 9, 2022 | ||
Caren Bedard | (principal accounting officer) | |||
56
52
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.
53
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
CINEMARK USA, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS: | ||
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) | F-2 | |
Consolidated Balance Sheets, December 31, |
| |
| ||
| ||
Consolidated Statements of Equity for the Years Ended December 31, |
| |
| ||
|
UNAUDITED SUPPLEMENTAL SCHEDULES REQUIRED BY THE INDENTURES FOR THE SENIOR NOTES | S-1 |
Unaudited Condensed Consolidating Balance Sheet Information as of December 31, | S-2 |
S-3 | |
S-4 | |
S-5 |
REPORT OF INDEPENDENT REGISTEREDREGISTERED PUBLIC ACCOUNTING FIRM
To the stockholder and the Board of Directors of Cinemark USA, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cinemark USA, Inc. and subsidiaries (the "Company"), a wholly owned subsidiary of Cinemark Holdings, Inc., as of December 31, 20172021 and 2018,2020, the related consolidated statements of income (loss), comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, 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, 20172021 and 2018,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, 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'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 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, 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. As part of our audits, we are required to obtain an understanding of internal control over financial reporting 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.
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 regarding the amounts and disclosures in the financial statements. 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 statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Impairment of Long-Lived Assets – Refer to Notes 1 and 9 to the financial statements
Critical Audit Matter Description
The impairment evaluation of long-lived assets is an assessment that begins with the Company’s monitoring of indicators of impairment on an individual theatre basis, which the Company believes is the lowest applicable level for which there are identifiable cash flows. 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 performed long-lived asset impairment evaluations during each quarter during the year ended December 31, 2021, including full quantitative impairment assessments for the quarters ended September 30, 2021 and December 31, 2021. When performing a quantitative impairment assessment, the Company estimates undiscounted cash flows at the theatre level from continuing use through the remainder of the theatre’s useful life. 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. The
F-2
Company applies significant judgment in estimating the fair value of theatres, based on projected operating performance, recent market transactions and current industry trading multiples. When the estimated fair value is determined to be lower than the carrying value of the asset group, the asset group is written down to its estimated fair value. For its 2021 impairment assessments, significant management judgment was involved in estimating the continued impact the COVID-19 pandemic will have on both the Company and broader industry.
We identified the impairment of long-lived assets as a critical audit matter because of the significant judgment required by management to determine estimated undiscounted cash flows. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s cash flow analysis. Although the carrying value of an individual theatre asset group typically isn’t material, changes in asset life assumptions, including the likelihood of exercising lease renewal options, and expected future theatre-level cash flows in light of the uncertainty presented from the COVID-19 pandemic could have a significant impact on the amount of any long-lived asset impairment charge.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s undiscounted cash flow analysis, including the likelihood of exercising lease renewal options, include the following, among others:
Goodwill Impairment Evaluation – Refer to Notes 1, 8 and 9 to the financial statements
Critical Audit Matter Description
The Company evaluates goodwill for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of goodwill may not be fully recoverable. This evaluation is done at the reporting unit level, and the Company has allocated goodwill to the reporting unit based on an estimate of its relative fair value., and the evaluation is done at the reporting unit level.
The Company completed a quantitative analysis in its evaluation of goodwill for impairment in the fourth quarter of 2021. Fair value of each of the Company’s reporting units were estimated and compared with it their carrying value. Fair value is estimated using the market approach, which the Company believes is the most common valuation approach used in the movie exhibition industry, and the Company, and considers considered a multiple of cash flows for each reporting unit as the basis for fair value. Significant management judgement was involved in estimating
F-3
impacts of the COVID-19 pandemic and the timing of recovery for each of the Company's theatres based on projected box office.
We identified the impairment of goodwill as a critical audit matter because of significant judgments required by management to estimate the fair value of its reporting units. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s cash flow estimates and the selection of cash flow multiples used in the market approach.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of management’s estimates of future cash flows (“forecasts”) and the selection of cash flow multiples for the Company’s reporting units included the following, among others:
/s/ Deloitte & Touche LLP
Dallas, Texas
March 4, 20199, 2022
We have served as the Company’sCompany's auditor since 1988.
PART IV - FINANCIALFINANCIAL INFORMATION
CINEMARK USA, INC. AND SUBSIDIARIES
(in thousands, except share and per share data)
|
| December 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
|
| 260,538 |
|
|
| 442,677 |
|
Inventories |
|
| 12,593 |
|
|
| 15,451 |
|
Accounts receivable |
|
| 25,257 |
|
|
| 68,835 |
|
Current income tax receivable |
|
| 158,932 |
|
|
| 46,631 |
|
Prepaid expenses and other |
|
| 34,400 |
|
|
| 36,209 |
|
Accounts receivable from parent |
|
| 36,775 |
|
|
| 46,651 |
|
Total current assets |
|
| 528,495 |
|
|
| 656,454 |
|
Theatre properties and equipment |
|
|
|
|
|
| ||
Land |
|
| 104,190 |
|
|
| 102,625 |
|
Buildings |
|
| 535,780 |
|
|
| 536,984 |
|
Property under capital and finance leases |
|
| 147,156 |
|
|
| 138,291 |
|
Theatre furniture and equipment |
|
| 1,425,142 |
|
|
| 1,402,698 |
|
Leasehold interests and improvements |
|
| 1,190,835 |
|
|
| 1,188,175 |
|
Total |
|
| 3,403,103 |
|
|
| 3,368,773 |
|
Less: accumulated depreciation and amortization |
|
| 1,788,041 |
|
|
| 1,985,927 |
|
Theatre properties and equipment, net |
|
| 1,615,062 |
|
|
| 1,382,846 |
|
Operating lease right-of-use assets, net |
|
| 1,278,191 |
|
|
| 1,230,790 |
|
Other assets |
|
|
|
|
|
| ||
Goodwill |
|
| 1,253,840 |
|
|
| 1,248,791 |
|
Intangible assets, net |
|
| 314,195 |
|
|
| 310,843 |
|
Investment in NCM |
|
| 151,962 |
|
|
| 135,444 |
|
Investments in affiliates |
|
| 23,726 |
|
|
| 25,205 |
|
Deferred charges and other assets, net |
|
| 33,199 |
|
|
| 22,259 |
|
Total other assets |
|
| 1,776,922 |
|
|
| 1,742,542 |
|
Total assets |
| $ | 5,198,670 |
|
| $ | 5,012,632 |
|
Liabilities and equity |
|
|
|
|
|
| ||
Current liabilities |
|
|
|
|
|
| ||
Current portion of long-term debt |
| $ | 18,056 |
|
| $ | 24,254 |
|
Current portion of operating lease obligations |
|
| 208,593 |
|
|
| 217,092 |
|
Current portion of finance lease obligations |
|
| 16,407 |
|
|
| 14,605 |
|
Current income tax payable |
|
| 5,632 |
|
|
| 91 |
|
Accounts payable |
|
| 70,635 |
|
|
| 75,989 |
|
Accrued interest |
|
| 8,215 |
|
|
| 33,214 |
|
Accrued film rentals |
|
| 10,668 |
|
|
| 86,105 |
|
Accrued payroll |
|
| 23,388 |
|
|
| 54,912 |
|
Accrued property taxes |
|
| 35,586 |
|
|
| 29,970 |
|
Accrued other current liabilities (see Note 10) |
|
| 201,602 |
|
|
| 224,366 |
|
Total current liabilities |
|
| 598,782 |
|
|
| 760,598 |
|
Long-term liabilities |
|
|
|
|
|
| ||
Long-term debt, less current portion |
|
| 2,024,956 |
|
|
| 2,028,692 |
|
Operating lease obligations, less current portion |
|
| 1,138,142 |
|
|
| 1,078,260 |
|
Finance lease obligations, less current portion |
|
| 124,609 |
|
|
| 102,571 |
|
Long-term deferred tax liability |
|
| 89,961 |
|
|
| 57,768 |
|
Long-term liability for uncertain tax positions |
|
| 19,225 |
|
|
| 45,942 |
|
NCM screen advertising advances |
|
| 344,255 |
|
|
| 346,026 |
|
Other long-term liabilities |
|
| 73,746 |
|
|
| 37,929 |
|
Total long-term liabilities |
|
| 3,814,894 |
|
|
| 3,697,188 |
|
Commitments and contingencies (see Note 18) |
|
|
|
|
|
| ||
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 |
|
| 0 |
|
|
| 0 |
|
Class B common stock, 0 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 | ) |
Additional paid-in-capital |
|
| 1,310,625 |
|
|
| 1,458,973 |
|
Retained earnings (deficit) |
|
| (163,284 | ) |
|
| (543,950 | ) |
Accumulated other comprehensive loss |
|
| (398,653 | ) |
|
| (397,051 | ) |
Total Cinemark USA, Inc.'s stockholder's equity |
|
| 773,998 |
|
|
| 543,282 |
|
Noncontrolling interests |
|
| 10,996 |
|
|
| 11,564 |
|
Total equity |
|
| 784,994 |
|
|
| 554,846 |
|
Total liabilities and equity |
| $ | 5,198,670 |
|
| $ | 5,012,632 |
|
|
| December 31, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2018 |
| ||
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 522,415 |
|
|
| 426,216 |
|
Inventories |
|
| 17,507 |
|
|
| 19,319 |
|
Accounts receivable |
|
| 89,248 |
|
|
| 95,076 |
|
Current income tax receivable |
|
| 11,730 |
|
|
| 3,288 |
|
Prepaid expenses and other |
|
| 16,536 |
|
|
| 15,114 |
|
Accounts receivable from parent |
|
| 14,581 |
|
|
| 19,530 |
|
Total current assets |
|
| 672,017 |
|
|
| 578,543 |
|
Theatre properties and equipment |
|
|
|
|
|
|
|
|
Land |
|
| 104,207 |
|
|
| 103,739 |
|
Buildings |
|
| 490,394 |
|
|
| 522,355 |
|
Property under capital lease |
|
| 430,764 |
|
|
| 387,480 |
|
Theatre furniture and equipment |
|
| 1,199,702 |
|
|
| 1,239,122 |
|
Leasehold interests and improvements |
|
| 1,103,522 |
|
|
| 1,151,454 |
|
Total |
|
| 3,328,589 |
|
|
| 3,404,150 |
|
Less: accumulated depreciation and amortization |
|
| 1,500,535 |
|
|
| 1,571,017 |
|
Theatre properties and equipment, net |
|
| 1,828,054 |
|
|
| 1,833,133 |
|
Other assets |
|
|
|
|
|
|
|
|
Goodwill |
|
| 1,284,079 |
|
|
| 1,276,324 |
|
Intangible assets - net |
|
| 336,761 |
|
|
| 330,910 |
|
Investment in NCM |
|
| 200,550 |
|
|
| 275,592 |
|
Investments in and advances to affiliates |
|
| 120,045 |
|
|
| 156,766 |
|
Long-term deferred tax asset |
|
| 4,067 |
|
|
| 9,028 |
|
Deferred charges and other assets - net |
|
| 39,767 |
|
|
| 41,055 |
|
Total other assets |
|
| 1,985,269 |
|
|
| 2,089,675 |
|
Total assets |
| $ | 4,485,340 |
|
| $ | 4,501,351 |
|
Liabilities and equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
| $ | 7,099 |
|
| $ | 7,984 |
|
Current portion of capital lease obligations |
|
| 25,511 |
|
|
| 27,065 |
|
Current income tax payable |
|
| 5,509 |
|
|
| 12,179 |
|
Current liability for uncertain tax positions |
|
| 11,873 |
|
|
| 573 |
|
Accounts payable |
|
| 109,984 |
|
|
| 104,615 |
|
Accrued film rentals |
|
| 106,738 |
|
|
| 95,754 |
|
Accrued payroll |
|
| 50,349 |
|
|
| 46,500 |
|
Accrued property taxes |
|
| 31,353 |
|
|
| 31,154 |
|
Accrued other current liabilities |
|
| 119,870 |
|
|
| 148,229 |
|
Total current liabilities |
|
| 468,286 |
|
|
| 474,053 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
Long-term debt, less current portion |
|
| 1,780,381 |
|
|
| 1,772,627 |
|
Capital lease obligations, less current portion |
|
| 251,151 |
|
|
| 232,467 |
|
Long-term deferred tax liability |
|
| 121,787 |
|
|
| 155,626 |
|
Long-term liability for uncertain tax positions |
|
| 8,358 |
|
|
| 13,380 |
|
Deferred lease expenses |
|
| 40,929 |
|
|
| 39,235 |
|
Deferred revenue - NCM |
|
| 351,706 |
|
|
| 287,349 |
|
Other long-term liabilities |
|
| 41,247 |
|
|
| 49,431 |
|
Total long-term liabilities |
|
| 2,595,559 |
|
|
| 2,550,115 |
|
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 |
|
Treasury stock, 57,245 Class B shares at cost |
|
| (24,233 | ) |
|
| (24,233 | ) |
Additional paid-in-capital |
|
| 1,264,505 |
|
|
| 1,277,921 |
|
Retained earnings |
|
| 373,069 |
|
|
| 480,580 |
|
Accumulated other comprehensive loss |
|
| (253,282 | ) |
|
| (319,007 | ) |
Total Cinemark USA, Inc.'s stockholder's equity |
|
| 1,409,602 |
|
|
| 1,464,804 |
|
Noncontrolling interests |
|
| 11,893 |
|
|
| 12,379 |
|
Total equity |
|
| 1,421,495 |
|
|
| 1,477,183 |
|
Total liabilities and equity |
| $ | 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 (LOSS)
YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018
(in thousands)
|
| Years Ended December 31, |
| |||||||||||||||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Admissions |
| $ | 1,789,137 |
|
| $ | 1,794,982 |
|
| $ | 1,834,173 |
|
| $ | 1,805,321 |
| $ | 356,508 |
| $ | 780,040 |
| ||
Concession |
|
| 990,103 |
|
|
| 1,038,788 |
|
|
| 1,108,793 |
|
| 1,161,083 |
| 231,046 |
| 561,652 |
| |||||
Other |
|
| 139,525 |
|
|
| 157,777 |
|
|
| 278,769 |
|
|
| 316,695 |
|
|
| 98,756 |
|
|
| 168,772 |
|
Total revenues |
|
| 2,918,765 |
|
|
| 2,991,547 |
|
|
| 3,221,735 |
|
| 3,283,099 |
| 686,310 |
| 1,510,464 |
| |||||
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Film rentals and advertising |
|
| 962,655 |
|
|
| 966,510 | �� |
|
| 999,755 |
|
| 1,003,832 |
| 186,810 |
| 414,988 |
| |||||
Concession supplies |
|
| 154,469 |
|
|
| 166,320 |
|
|
| 180,974 |
|
| 206,441 |
| 48,647 |
| 97,875 |
| |||||
Salaries and wages |
|
| 325,765 |
|
|
| 354,510 |
|
|
| 383,860 |
|
| 410,086 |
| 145,031 |
| 232,844 |
| |||||
Facility lease expense |
|
| 321,294 |
|
|
| 328,197 |
|
|
| 323,316 |
|
| 346,094 |
| 279,764 |
| 280,032 |
| |||||
Utilities and other |
|
| 355,926 |
|
|
| 355,041 |
|
|
| 448,070 |
|
| 474,711 |
| 229,505 |
| 282,889 |
| |||||
General and administrative expenses |
|
| 140,637 |
|
|
| 150,911 |
|
|
| 162,640 |
|
| 170,828 |
| 125,363 |
| 158,490 |
| |||||
Depreciation and amortization |
|
| 209,071 |
|
|
| 237,513 |
|
|
| 261,162 |
|
| 261,155 |
| 259,776 |
| 265,363 |
| |||||
Impairment of long-lived assets |
|
| 2,836 |
|
|
| 15,084 |
|
|
| 32,372 |
| ||||||||||||
Loss on disposal of assets and other |
|
| 20,459 |
|
|
| 22,812 |
|
|
| 38,702 |
| ||||||||||||
Impairment of long-lived and other assets |
| 57,001 |
| 152,706 |
| 20,845 |
| |||||||||||||||||
Restructuring costs |
| 0 |
| 20,369 |
| (1,001 | ) | |||||||||||||||||
(Gain) loss on disposal of assets and other |
|
| 12,008 |
|
|
| (8,923 | ) |
|
| 8,025 |
| ||||||||||||
Total cost of operations |
|
| 2,493,112 |
|
|
| 2,596,898 |
|
|
| 2,830,851 |
|
|
| 2,942,156 |
|
|
| 1,439,048 |
|
|
| 1,760,350 |
|
Operating income |
|
| 425,653 |
|
|
| 394,649 |
|
|
| 390,884 |
| ||||||||||||
Operating income (loss) |
| 340,943 |
| (752,738 | ) |
| (249,886 | ) | ||||||||||||||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense |
|
| (108,313 | ) |
|
| (105,918 | ) |
|
| (109,994 | ) |
| (99,941 | ) |
| (115,651 | ) |
| (125,569 | ) | |||
Loss on debt amendments and refinancing |
|
| (13,445 | ) |
|
| (521 | ) |
|
| (1,484 | ) | ||||||||||||
Interest income |
|
| 6,396 |
|
|
| 6,243 |
|
|
| 10,592 |
|
| 12,570 |
| 4,780 |
| 6,316 |
| |||||
Foreign currency exchange gain (loss) |
|
| 6,455 |
|
|
| 893 |
|
|
| (11,660 | ) | ||||||||||||
Loss on extinguishment of debt |
| 0 |
| 0 |
| (6,527 | ) | |||||||||||||||||
Foreign currency exchange gain loss |
| (3,394 | ) |
| (4,865 | ) |
| (1,271 | ) | |||||||||||||||
Distributions from NCM |
|
| 14,656 |
|
|
| 16,407 |
|
|
| 15,389 |
|
| 12,873 |
| 6,975 |
| 77 |
| |||||
Cash distributions from DCIP |
| 0 |
| 0 |
| 13,139 |
| |||||||||||||||||
Non-cash distribution from DCIP |
| 0 |
| 12,915 |
| 0 |
| |||||||||||||||||
Interest expense - NCM |
|
| — |
|
|
| — |
|
|
| (19,724 | ) |
| (28,624 | ) |
| (23,595 | ) |
| (23,612 | ) | |||
Equity in income of affiliates |
|
| 31,962 |
|
|
| 35,985 |
|
|
| 39,242 |
| ||||||||||||
Equity in income (loss) of affiliates |
|
| 41,870 |
|
|
| (38,745 | ) |
|
| (25,045 | ) | ||||||||||||
Total other expense |
|
| (62,289 | ) |
|
| (46,911 | ) |
|
| (77,639 | ) |
|
| (64,646 | ) |
|
| (158,186 | ) |
|
| (162,492 | ) |
Income before income taxes |
|
| 363,364 |
|
|
| 347,738 |
|
|
| 313,245 |
| ||||||||||||
Income (loss) before income taxes |
| 276,297 |
| (910,924 | ) |
| (412,378 | ) | ||||||||||||||||
Income taxes |
|
| 104,851 |
|
|
| 80,256 |
|
|
| 96,032 |
|
|
| 80,520 |
|
|
| (303,637 | ) |
|
| (32,280 | ) |
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 |
| ||||||||||||
Net income (loss) |
| $ | 195,777 |
| $ | (607,287 | ) |
| $ | (380,098 | ) | |||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
|
| 2,462 |
|
|
| (1,120 | ) |
|
| 568 |
| ||||||||||||
Net income (loss) attributable to Cinemark USA, Inc. |
| $ | 193,315 |
|
| $ | (606,167 | ) |
| $ | (380,666 | ) |
The accompanying notes are an integral part of the consolidated financial statements.
CINEMARK USA,, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in thousands)
(In thousands)
|
| Years Ended December 31, |
| |||||||||
|
| 2019 |
|
| 2020 |
|
| 2021 |
| |||
Net income (loss) |
| $ | 195,777 |
|
| $ | (607,287 | ) |
| $ | (380,098 | ) |
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
| |||
Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $2,692, $3,532 and $(3,278), net of settlements |
|
| (8,210 | ) |
|
| (14,320 | ) |
|
| 15,944 |
|
Other comprehensive loss in equity method investments |
|
| (142 | ) |
|
| 0 |
|
|
| 0 |
|
Foreign currency translation adjustments |
|
| (12,753 | ) |
|
| (47,592 | ) |
|
| (18,837 | ) |
Total other comprehensive loss, net of tax |
|
| (21,105 | ) |
|
| (61,912 | ) |
|
| (2,893 | ) |
Total comprehensive income (loss), net of tax |
|
| 174,672 |
|
|
| (669,199 | ) |
|
| (382,991 | ) |
Comprehensive (income) loss attributable to noncontrolling interests |
|
| (2,462 | ) |
|
| 1,120 |
|
|
| (568 | ) |
Comprehensive income (loss) attributable to Cinemark USA, Inc. |
| $ | 172,210 |
|
| $ | (668,079 | ) |
| $ | (383,559 | ) |
|
| 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, 20172019, 2020 AND 20182021
(in thousands)thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
. |
| Class A |
| Class B |
|
|
|
|
|
|
|
|
| Accumulated |
| Cinemark |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
| Common Stock |
|
| Common Stock |
|
| Treasury Stock |
|
| Additional |
| Retained |
| Other |
| USA, Inc.'s |
|
|
|
|
| |||||||||||||||||||||||||||
|
| Class A |
|
| Class B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| Cinemark |
|
|
|
|
|
|
|
|
|
| Shares |
|
|
| Shares |
|
|
| Shares |
|
|
| Paid-in- |
| Earnings |
| Comprehensive |
| Stockholder's |
| Noncontrolling |
| Total |
| |||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
| Common Stock |
|
| Treasury Stock |
|
| Additional |
|
|
|
|
|
| Other |
|
| USA, Inc.'s |
|
|
|
|
|
|
|
|
|
| Issued |
|
| Amount |
|
| Issued |
|
| Amount |
|
| Acquired |
|
| Amount |
|
| Capital |
|
| (Deficit) |
|
| Loss |
|
| Equity |
|
| Interests |
|
| Equity |
| ||||||||||||||||||||||||||||||
|
| 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 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2019 |
| 2 |
| $ | 0 |
| 240 |
| $ | 49,543 |
| (57 | ) |
| $ | (24,233 | ) |
| $ | 1,277,921 |
| $ | 433,033 |
| $ | (319,007 | ) |
| $ | 1,417,257 |
| $ | 12,379 |
| $ | 1,429,636 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of change in accounting principle, net of taxes of $6,054 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 16,985 |
| — |
| 16,985 |
| — |
| 16,985 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share based awards compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,413 |
|
|
| — |
|
|
| — |
|
|
| 12,413 |
|
|
| — |
|
|
| 12,413 |
|
| — |
| — |
| — |
| — |
| — |
| — |
| 13,697 |
| — |
| — |
| 13,697 |
| — |
| 13,697 |
| |||||||||||||||||||||||
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 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (158,450 | ) |
| — |
| (158,450 | ) |
| — |
| (158,450 | ) | |||||||||||||||||||||
Dividends paid to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,088 | ) |
|
| (1,088 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (2,333 | ) |
| (2,333 | ) | ||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 265,643 |
|
|
| — |
|
|
| 265,643 |
|
|
| 1,839 |
|
|
| 267,482 |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 193,315 |
| — |
| 193,315 |
| 2,462 |
| 195,777 |
| |||||||||||||||||||||||
Reclassification of cumulative translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,551 | ) |
|
| (1,551 | ) |
|
| — |
|
|
| (1,551 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,718 | ) |
|
| (4,718 | ) |
|
| — |
|
|
| (4,718 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21,105 | ) |
|
| (21,105 | ) |
|
| — |
|
|
| (21,105 | ) |
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 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
| 2 |
| $ | 0 |
| 240 |
| $ | 49,543 |
| (57 | ) |
| $ | (24,233 | ) |
| $ | 1,291,618 |
| $ | 484,883 |
| $ | (340,112 | ) |
| $ | 1,461,699 |
| $ | 12,508 |
| $ | 1,474,207 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share based awards compensation expense ($521 recorded as restructuring costs) |
| — |
| — |
| — |
| — |
| — |
| — |
| 19,007 |
| — |
| — |
| 19,007 |
| — |
| 19,007 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to parent |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (148,750 | ) |
|
| — |
|
|
| (148,750 | ) |
|
| — |
|
|
| (148,750 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (42,000 | ) |
| — |
| (42,000 | ) |
| — |
| (42,000 | ) | |||||||||||||||||||||
Dividends paid to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (992 | ) |
|
| (992 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (392 | ) |
| (392 | ) | ||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 215,735 |
|
|
| — |
|
|
| 215,735 |
|
|
| 1,478 |
|
|
| 217,213 |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (606,167 | ) |
| — |
| (606,167 | ) |
| (1,120 | ) |
| (607,287 | ) | ||||||||||||||||||||
Reclassification of cumulative translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 518 |
|
|
| 518 |
|
|
| — |
|
|
| 518 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of accumulated losses for amended swap agreements |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 3,371 |
| 3,371 |
| — |
| 3,371 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (66,243 | ) |
|
| (66,243 | ) |
|
| — |
|
|
| (66,243 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (61,912 | ) |
|
| (61,912 | ) |
|
| 0 |
|
|
| (61,912 | ) |
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 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 |
| 2 |
| $ | 0 |
| 240 |
| $ | 49,543 |
| (57 | ) |
| $ | (24,233 | ) |
| $ | 1,310,625 |
| $ | (163,284 | ) |
| $ | (398,653 | ) |
| $ | 773,998 |
| $ | 10,996 |
| $ | 784,994 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share based awards compensation expense |
| — |
| — |
| — |
| — |
| — |
| — |
| 28,348 |
| — |
| — |
| 28,348 |
| — |
| 28,348 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contributions received from parent |
| — |
| — |
| — |
| — |
| — |
| — |
| 120,000 |
| — |
| — |
| 120,000 |
| — |
| 120,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (380,666 | ) |
| — |
| (380,666 | ) |
| 568 |
| (380,098 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of accumulated losses for amended swap agreements |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 4,495 |
| 4,495 |
| — |
| 4,495 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,893 | ) |
|
| (2,893 | ) |
|
| 0 |
|
|
| (2,893 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 |
|
| 2 |
|
| $ | 0 |
|
|
| 240 |
|
| $ | 49,543 |
|
|
| (57 | ) |
| $ | (24,233 | ) |
| $ | 1,458,973 |
|
| $ | (543,950 | ) |
| $ | (397,051 | ) |
| $ | 543,282 |
|
| $ | 11,564 |
|
| $ | 554,846 |
|
The accompanying notes are an integral part of the consolidated financial statements.
F-8
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in thousands)
(In thousands)
|
| Years Ended December 31, |
| |||||||||
|
| 2019 |
|
| 2020 |
|
| 2021 |
| |||
Operating activities |
|
|
|
|
|
|
|
|
| |||
Net income (loss) |
| $ | 195,777 |
|
| $ | (607,287 | ) |
| $ | (380,098 | ) |
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: |
|
|
|
|
|
|
|
|
| |||
Depreciation |
|
| 256,118 |
|
|
| 254,987 |
|
|
| 262,681 |
|
Amortization of intangible and other assets |
|
| 5,037 |
|
|
| 4,789 |
|
|
| 2,682 |
|
Amortization of debt issuance costs |
|
| 5,311 |
|
|
| 6,359 |
|
|
| 7,282 |
|
Interest accrued on NCM screen advertising advances |
|
| 0 |
|
|
| 23,595 |
|
|
| 23,612 |
|
Amortization of NCM screen advertising advances and other deferred revenue |
|
| (13,665 | ) |
|
| (31,679 | ) |
|
| (32,411 | ) |
Amortization of accumulated losses for amended swap agreements |
|
| 0 |
|
|
| 3,371 |
|
|
| 4,495 |
|
Impairment of long-lived and other assets |
|
| 57,001 |
|
|
| 152,706 |
|
|
| 20,845 |
|
Share based awards compensation expense |
|
| 13,697 |
|
|
| 18,486 |
|
|
| 28,348 |
|
(Gain) loss on disposal of assets and other |
|
| 12,008 |
|
|
| (8,923 | ) |
|
| 8,025 |
|
Loss on extinguishment of debt |
|
| 0 |
|
|
| 0 |
|
|
| 6,527 |
|
Non-cash rent expense |
|
| (4,360 | ) |
|
| 2,357 |
|
|
| (3,451 | ) |
Equity in (income) loss of affiliates |
|
| (41,870 | ) |
|
| 38,745 |
|
|
| 25,045 |
|
Deferred income tax expenses |
|
| (1,843 | ) |
|
| (39,379 | ) |
|
| (38,108 | ) |
Distributions from equity investees |
|
| 53,366 |
|
|
| 25,430 |
|
|
| 156 |
|
Non-cash distributions from equity investees |
|
| 0 |
|
|
| (12,915 | ) |
|
| 0 |
|
Changes in other assets and liabilities |
|
|
|
|
|
|
|
|
| |||
Inventories |
|
| (2,367 | ) |
|
| 9,093 |
|
|
| (2,858 | ) |
Accounts receivable |
|
| 8,873 |
|
|
| 51,446 |
|
|
| (49,352 | ) |
Income tax receivable |
|
| (794 | ) |
|
| (154,850 | ) |
|
| 112,301 |
|
Prepaid expenses and other |
|
| (24,016 | ) |
|
| 2,787 |
|
|
| (1,809 | ) |
Deferred charges and other assets, net |
|
| (8,495 | ) |
|
| 9,904 |
|
|
| 805 |
|
Accounts payable and accrued expenses |
|
| 36,639 |
|
|
| (104,269 | ) |
|
| 175,228 |
|
Income tax payable |
|
| (6,998 | ) |
|
| 2,289 |
|
|
| (5,877 | ) |
Liabilities for uncertain tax positions |
|
| 341 |
|
|
| 4,931 |
|
|
| 30,183 |
|
Other long-term liabilities |
|
| 21,312 |
|
|
| 13,124 |
|
|
| (17,894 | ) |
Net cash provided by (used for) operating activities |
|
| 561,072 |
|
|
| (334,903 | ) |
|
| 176,357 |
|
Investing activities |
|
|
|
|
|
|
|
|
| |||
Additions to theatre properties and equipment and other |
|
| (303,627 | ) |
|
| (83,930 | ) |
|
| (95,542 | ) |
Proceeds from sale of assets and other |
|
| 3,155 |
|
|
| 614 |
|
|
| 6,246 |
|
Acquisitions of theatres in the U.S. and international markets, net of cash acquired |
|
| (10,170 | ) |
|
| 0 |
|
|
| 0 |
|
Investment in joint ventures and other, net |
|
| 0 |
|
|
| (50 | ) |
|
| 0 |
|
Net cash used for investing activities |
|
| (310,642 | ) |
|
| (83,366 | ) |
|
| (89,296 | ) |
Financing activities |
|
|
|
|
|
|
|
|
| |||
Dividends paid to parent |
|
| (158,450 | ) |
|
| (42,000 | ) |
|
| 0 |
|
Contributions received from parent |
|
| 0 |
|
|
| 0 |
|
|
| 120,000 |
|
Payroll taxes paid as a result of restricted stock withholdings |
|
| (2,308 | ) |
|
| (5,437 | ) |
|
| (4,102 | ) |
Proceeds from issuance of senior notes |
|
| 0 |
|
|
| 250,000 |
|
|
| 1,170,000 |
|
Proceeds from other borrowings |
|
| 0 |
|
|
| 22,322 |
|
|
| 13,475 |
|
Redemption of senior notes |
|
| 0 |
|
|
| 0 |
|
|
| (1,155,000 | ) |
Repayments of long-term debt |
|
| (7,984 | ) |
|
| (6,691 | ) |
|
| (10,284 | ) |
Payment of debt issuance costs |
|
| 0 |
|
|
| (7,859 | ) |
|
| (17,272 | ) |
Fees paid related to debt refinancing |
|
| 0 |
|
|
| 0 |
|
|
| (2,058 | ) |
Payments on finance leases |
|
| (14,600 | ) |
|
| (15,432 | ) |
|
| (14,689 | ) |
Other |
|
| (2,333 | ) |
|
| (392 | ) |
|
| 0 |
|
Net cash provided by (used for) financing activities |
|
| (185,675 | ) |
|
| 194,511 |
|
|
| 100,070 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (2,756 | ) |
|
| (3,919 | ) |
|
| (4,992 | ) |
Increase (decrease) in cash and cash equivalents |
|
| 61,999 |
|
|
| (227,677 | ) |
|
| 182,139 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
| |||
Beginning of period |
|
| 426,216 |
|
|
| 488,215 |
|
|
| 260,538 |
|
End of period |
| $ | 488,215 |
|
| $ | 260,538 |
|
| $ | 442,677 |
|
|
| 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)16)
The accompanying notes are an integral part of the consolidated financial statements.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In(in thousands, except share and per share datadata)
| 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Business — Cinemark USA, Inc. and subsidiaries (the “Company”), a wholly-owned subsidiary of Cinemark Holdings, Inc., operatesand its subsidiaries (the “Company”) operate in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curaçao and Paraguay.in 15 countries in Latin America.
Principles of Consolidation — The consolidated financial statements include the accounts of Cinemark USA, Inc. and its subsidiaries. Majority-owned subsidiaries that the Company has control of are consolidated while those affiliates of which the Company owns between 20%20% and 50%50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 20%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 equity method investees are included in the consolidated financial statements effective withfrom their date of 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 arepurchased and restricted cash. The Company invests its cash primarily in money market funds, certificates of deposit, commercial paper or other similar funds. The Company maintains cash deposits required to support bank letters of credit issued for bank loans of certain of the Company’s international subsidiaries that totaled $25,767 as of December 31, 2021 and are considered restricted cash. See Note 11 for further discussion.
Accounts Receivable – Accounts receivable, which are recorded at net realizable value, consist primarily of receivables related to screen advertising, screen rental, receivables related to discounted tickets and gift cards sold to third party to retail locations, receivables from landlords related to theatre construction and remodels,projects, rebates earned from the Company’s 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.net realizable value.
Theatre Properties and Equipment — Theatre properties and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is providedrecorded 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 finance leases (1) | Lease term |
Theatre furniture and equipment | 3 to 15 years |
Leasehold improvements | Lesser of lease term or useful life |
|
|
|
|
|
|
The Company reviewsevaluates 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.recoverable (qualitative evaluation). The Company also performs a full quantitative impairment evaluation on an annual basis.
These qualitative and quantitative evaluations are described below:
F-8
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
are evaluated for impairment on a theatre basis, which the Company believes is the lowest applicable level for which there are identifiable cash flows. The impairment evaluation is based on theusing 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 remaining lease period, which includes the probability of the exercise of available renewal periods or extensions, for leased properties, and the lesser of
F-10
CINEMARK USA, INC.
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 we havehas 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 twenty regions in the U.S. and seveneach of its international countries with Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala considered one reporting 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 assessment or a quantitative impairment assessment of our goodwill. goodwill which are described below:
A
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 performed a quantitative goodwill assessment for three new domestic reporting units and a qualitative assessment for all other reporting units. 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. 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 comparingassets as described below:
F-9F-11
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 current carrying values to estimated fair values from our most recent quantitative assessment.
During the year ended December 31, 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 impairment analysis for all of its tradename assets. As a result of the analysis performed during each year, no impairment charges were recorded related to tradename intangible assets 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 |
|
|
|
|
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 |
Lease Accounting — See Note 4 for discussion of the Company’s lease accounting policies.
Deferred Charges and Other Assets — Deferred charges and other assets consist of long-term prepaid rents, construction, lease 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, 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 seventeen 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. For some newly built theatres, the landlord is responsible for constructing the theatre using guidelines and specifications agreed to by the Company and assumes substantially all of the risks 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 considers itself the owner of the 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 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.
F-10
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 — In the U.S., the Company is self-insured for general liability claims subject to an annual cap.claims. For each of the years ended December 31, 2016, 20172019, 2020 and 2018,2021, general liability claims were capped at $100, $250 and $250, respectively,$500 per occurrence with 0aggregate annual caps of approximately $3,350, $3,900 and $4,750, respectively.cap. For its international locations, the Company is fully insured for general liability claims with little or no deductibles per occurrence. In the U.S., theThe Company was fully insured for workers compensation claims during the year ended December 31, 2016. During 2017, the Company implementedhas 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$250 per occurrence, with an annual cap of $5,000$5,000 for the years ended December 31, 20172019, 2020 and 2018.2021. The Company wasis also self-insured for domestic medical claims up to $150, $250 and $250with a cap of $250 per occurrence for the years ended December 31, 2016, 20172019, 2020 and 2018, respectively.2021. As of December 31, 20172020 and 2018,2021, the Company’s insuranceself-insurance reserves were $8,252$9,034 and $10,827,$6,810, respectively, and are reflected in accrued other current liabilities on the consolidated balance sheets.
Revenue and Expense Recognition — See Note 35 for discussion of revenue recognition. recognition and deferred revenue.
Expenses — Film rental costs are subject to the film licensing arrangement and accrued based on the applicable box office receipts and either firm terms oreither; 1) a sliding scale formula, which areis generally established with the studio prior to the opening of the film, 2) a firm terms formula as negotiated prior to a film's theatrical run or 3) estimates of the final settlement rate, which occurs at the conclusion of the film run, subject torun. Under a sliding scale formula, the Company pays a percentage of box office revenues using a pre-determined scale that is based upon box office performance of the film licensing arrangement.for its full run. Under a firm terms formula, the Company pays the distributor a percentage of box office receipts which reflectsthat can either be an aggregate rate for the life of the filmfull theatrical run or rates that decline over the term of the theatrical 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 filmfilm's theatrical run based upon how the film performs. Estimates are based on the expected success of a film. The success of a film can typicallygenerally be determined a few weeks after a film is released when the 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 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. time.
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.based on Cinemark Holdings, Inc.'s stock price on the grant date. 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 awards that will ultimately be forfeited. See Note 1315 for discussion of the Company’s share based awards and related compensation expense.
F-11F-12
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Income Taxes — The Company participates in the consolidated 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. See further discussion in Note 17.
Segments — For the years ended December 31, 2016, 20172019, 2020 and 2018,2021, the Company managed its business under two2 reportable operating segments, U.S. markets and international markets. See Note 17.19.
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 1113 for a summary of the translation adjustments recorded in accumulated other comprehensive loss for the years ended December 31, 2016, 20172019, 2020 and 2018.2021. 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.
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. See further discussion in Note 13.
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. See Note 1012 for a discussion of our fair value measurements for the yearyears ended December 31, 2018.2019, 2020 and 2021.
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 certain 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 valuesvalue of the assets acquired and liabilities assumed involves a number of estimates and assumptions that could differ materially from the actual amounts realized. The
F-13
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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 partiesparty 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.
Interest Rate Swaps – The Company evaluates its interest rate swap agreements, which are designated as cash flow hedges, to determine whether they are effective on a quarterly basis in accordance with ASC Topic 815, Derivatives and Hedging. The fair values of the interest rate swaps are estimated based on future estimated net cash flows considering forecasted interest rates for the terms of the interest rate swap agreements as compared to the fixed interest rates paid under the agreements. If deemed to be effective, fair value estimates are recorded on the consolidated balance sheets as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. If the swaps are determined to not be effective, the gains or losses are recorded in interest expense on the consolidated income statement. See further discussion at Note 11.
Restructuring Charges – During the year ended December 31, 2020, the Company recorded restructuring charges based on an approved and announced restructuring plan, specifically related to headcount reductions, the permanent closure of underperforming theatres and the write-down of related theatre assets. The costs of the restructuring actions were accrued based on estimates at the time the plan was formalized. Adjustments made to restructuring charges based on actual costs incurred were recorded during the year ended December 31, 2021. See further discussion in Note 3.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”) and ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”). The purpose of ASU 2020-04 is to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. More specifically, the amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2022. The Company does not expect ASU 2020-04 and ASU 2021-01 to have a material impact on its consolidated financial statements.
F-12ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, (“ASU 2021-10”). The purpose of ASU 2021-10 is to provide annual disclosure guidance about transactions with a government that are by applying a grant or contribution accounting model by analogy. More specifically, the amendments in ASU 2021-10 require disclosure of a) the nature of the transactions and the related accounting policy used to account for the transactions, b) the line items on the balance sheet and income statement, including the amounts applicable to each line item, that are affected by the transactions and b) significant terms and conditions of the transactions, including commitments and contingencies. The amendments in ASU 2021-10 are effective for annual periods beginning after December 15, 2021. The amendments in ASU 2021-10 should be applied either a) prospectively to all transactions at the date of initial application and new transactions that are entered into after the date of initial application or b) retrospectively to those transactions. The Company does not expect ASU 2021-10 to have a material impact on its consolidated financial statements.
The COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread. The Company temporarily closed its theatres in the U.S. and Latin America during March of 2020 at the onset of the COVID-19 outbreak. Additionally, the Company implemented various cash preservation strategies, including, but not limited to, temporary personnel and salary reductions, halting non-essential operating and capital expenditures, negotiating modified timing and/or abatement of contractual payments with landlords and other major suppliers, and the suspension of dividends to Cinemark Holdings, Inc.
F-14
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Throughout 2020 and 2021 the Company reopened theatres as soon as local restrictions and the status of the COVID-19 pandemic would allow. As of December 31, 2021, all of the Company's domestic and international theatres were open. The industry’s recovery to historical levels of new film content, both in terms of the number of new films and box office performance, is still underway, as the industry also continues to adjust to evolving theatrical release windows, competition from streaming and other delivery platforms, supply chain delays, inflationary pressures, labor shortages, wage rate pressures and other economic factors.
Based on the Company’s current estimates of recovery, it believes it has, and will generate, sufficient cash to sustain operations. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on the Company’s business, results of operations, cash flows and financial condition.
Restructuring Charges
During June 2020, Company management announced a restructuring plan to realign its operations to create a more efficient cost structure (referred to herein as the “Restructuring Plan”) in response to the COVID-19 pandemic. The Restructuring Plan primarily included a headcount reduction at its domestic corporate office and the permanent closure of certain domestic and international theatres.
|
The following table summarized activity recorded during the years ended December 31, 2020 and 2021:
|
| U.S. Operating Segment |
|
| International Operating Segment |
|
| Consolidated |
| |||||||||||||||||||||
|
| Employee-related Costs |
| Facility Closure Costs |
| Total Charges |
|
| Employee-related Costs |
| Facility Closure Costs |
| Total Charges |
|
| Employee-related Costs |
| Facility Closure Costs |
| Total Charges |
| |||||||||
Restructuring charges recorded during the year ended December 31, 2020 |
| $ | 8,964 |
| $ | 7,645 |
| $ | 16,609 |
|
| $ | 814 |
| $ | 2,946 |
| $ | 3,760 |
|
| $ | 9,778 |
| $ | 10,591 |
| $ | 20,369 |
|
Amounts paid |
|
| (7,603 | ) |
| (1,649 | ) |
| (9,252 | ) |
|
| (814 | ) |
| (590 | ) |
| (1,404 | ) |
|
| (8,417 | ) |
| (2,239 | ) |
| (10,656 | ) |
Noncash write-offs |
|
| (521 | ) |
| (256 | ) |
| (777 | ) |
|
| 0 |
|
| (2,195 | ) |
| (2,195 | ) |
|
| (521 | ) |
| (2,451 | ) |
| (2,972 | ) |
Reserve balance at December 31, 2020 |
|
| 840 |
|
| 5,740 |
|
| 6,580 |
|
|
| 0 |
|
| 161 |
|
| 161 |
|
|
| 840 |
|
| 5,901 |
|
| 6,741 |
|
Amounts paid |
|
| (350 | ) |
| (3,930 | ) |
| (4,280 | ) |
|
| 0 |
|
| (27 | ) |
| (27 | ) |
|
| (350 | ) |
| (3,957 | ) |
| (4,307 | ) |
Reserve adjustments (1) |
|
| (94 | ) |
| (887 | ) |
| (981 | ) |
|
| 0 |
|
| (20 | ) |
| (20 | ) |
|
| (94 | ) |
| (907 | ) |
| (1,001 | ) |
Reserve balance at December 31, 2021 |
| $ | 396 |
| $ | 923 |
| $ | 1,319 |
|
| $ | 0 |
| $ | 114 |
| $ | 114 |
|
| $ | 396 |
| $ | 1,037 |
| $ | 1,433 |
|
ImpactThe unpaid and accrued restructuring costs of New Revenue Recognition Standard$1,433 are reflected in accrued other current liabilities on the consolidated balance sheet as of December 31, 2021.
Real Estate Leases — The Company conducts a significant part of its theatre operations in leased properties under noncancelable operating and finance leases with base terms generally ranging from 10 to 25 years. In May 2014,addition to fixed lease payments, some of the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC Topic 606”),leases provide for variable lease payments and some require the payment of taxes, insurance and other costs applicable to the property. Variable lease payments include payments based on a percentage of retail sales or a percentage of retail sales over defined thresholds. Other variable lease payments include payments adjusted periodically for inflation, changes in attendance or changes in average ticket price. The Company can renew, at its option, many of its leases at defined or then market rental rates for various renewal periods. Some leases also provide for escalating rent payments throughout the lease term. The Company also leases certain office and warehouse facilities in the U.S. and in international locations, which requires an entity to recognize the amount of revenue to which it expects to be entitledgenerally only include fixed payments. The Company recognizes fixed lease expense for the transfer of promised goodsoperating leases on a straight-line basis over the lease term. The Company’s real estate lease agreements do not contain any residual value guarantees 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.restrictive covenants.
Equipment Leases — 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,leases certain equipment under operating leases, including trash compactors and uncertainty of cash flows arising from leases. The adoption of ASC Topic 842 will result in the recognition of a right-of-use asset and a 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. ASC Topic 842 is effective for fiscal years beginning after December 15, 2018. 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 required to initially apply the transition requirements outlined in ASC Topic 842; it does not change how those requirements are applied. The Company used 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, and expects the most significant impacts to be as follows:
|
|
|
|
|
|
|
|
Other Accounting Pronouncements
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments – a consensus of the FASB Emerging Issues Task Force, (“ASU 2016-15”). The purpose of ASU 2016-15 is to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. A retrospective transition method should bevarious other equipment used in the applicationday-to-day operation of its theatres. Certain of the amendments within ASU 2016-15. Early adoption is permitted.leases require fixed lease payments to be made over the duration of the lease term, while others are variable in nature based on usage or sales. Certain of these leases are month-to-month, while others have noncancelable terms ranging from 5 to 6 years. The
F-13F-15
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Company’s equipment lease agreements do not contain any residual value guarantees or restrictive covenants. The Company adopted ASU 2016-15leased digital projectors through October 2020. See further discussion of the leased projectors in Note 9.
Lease Deferrals and Abatements —Upon the temporary closure of theatres in March 2020, the Company began negotiating the deferral of rent and other lease-related payments with its landlords while theatres remained closed. These discussions and negotiations have remained ongoing as the Company continues to be impacted by the COVID-19 pandemic. These negotiations resulted in amendments to the leases that involve varying concessions, including the abatement of rent payments during closure, deferral of all or a portion of rent payments to later periods and deferrals of rent payments combined with an early exercise of an existing renewal option or extension of the lease term. In certain locations, the Company is entitled to rent-free periods while theatres remain closed in accordance with local regulations. Total payments deferred as of December 31, 2020 were approximately $66,178, $48,366 of which is included in accrued other current liabilities and $17,812 of which is included in other long term liabilities on the consolidated balance sheet. Total payments deferred as of December 31, 2021 were $31,903, all of which is included in accrued other current liabilities on the consolidated balance sheet.
In April 2020, the FASB staff released guidance indicating that in response to the COVID-19 pandemic, an entity would not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the first quartercontract and could elect to apply or not apply the lease modification guidance in ASC Topic 842, Leases to those contracts. The election is available for concessions related to the effects of 2018. Upon adoption,the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
The Company elected to not remeasure the lease liabilities and right-of-use assets for those leases where the concessions and deferrals did not result in a significant change in total payments under the lease and where the remaining lease term did not significantly change as a result of the negotiation. For those leases that were extended as a result of the negotiation to defer rent payments, the Company reclassified $11,076recalculated the related lease liability and $521right-of-use asset based on the new terms.
The following table represents the operating and finance right-of-use assets and lease liabilities as of cashthe periods indicated.
|
|
| As of |
|
| As of |
| ||
Leases | Classification |
| December 31, 2020 |
|
| December 31, 2021 |
| ||
Assets (1) |
|
|
|
|
|
|
| ||
Operating lease assets | Operating lease assets |
| $ | 1,278,191 |
|
| $ | 1,230,790 |
|
Finance lease assets | Theatre properties and equipment, net of accumulated depreciation (2) |
|
| 99,195 |
|
|
| 80,513 |
|
Total lease assets |
|
| $ | 1,377,386 |
|
| $ | 1,311,303 |
|
|
|
|
|
|
|
|
| ||
Liabilities (1) |
|
|
|
|
|
|
| ||
Current |
|
|
|
|
|
|
| ||
Operating | Current portion of operating lease obligations |
| $ | 208,593 |
|
| $ | 217,092 |
|
Finance | Current portion of finance lease obligations |
|
| 16,407 |
|
|
| 14,605 |
|
Noncurrent |
|
|
|
|
|
|
| ||
Operating | Operating lease obligations, less current portion |
|
| 1,138,142 |
|
|
| 1,078,260 |
|
Finance | Finance lease obligations, less current portion |
|
| 124,609 |
|
|
| 102,571 |
|
Total lease liabilities |
|
| $ | 1,487,751 |
|
| $ | 1,412,528 |
|
F-16
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of December 31, 2021, the Company had signed lease agreements with total noncancelable lease payments recordedof approximately $90,032 related to theatre leases that had not yet commenced. The timing of lease commencement is dependent on the completion of construction of the related theatre facility. Additionally, these amounts are based on estimated square footage and costs to construct each facility and may be subject to adjustment upon final completion of each construction project. In accordance with ASC Topic 842, fixed minimum lease payments related to these theatres are not included in loss on debt amendmentsthe right-of-use assets and refinancing from operating activities to financing activitieslease liabilities as of December 31, 2021.
The following table represents the Company’s aggregate lease costs, by lease classification, for the periods indicated.
|
| Year Ended |
| Year Ended |
| Year Ended |
| |||
Lease Cost | Classification | December 31, 2019 |
| December 31, 2020 |
| December 31, 2021 |
| |||
Operating lease costs |
|
|
|
|
|
|
| |||
Equipment (1) | Utilities and other | $ | 9,172 |
| $ | 3,324 |
| $ | 2,342 |
|
Real Estate (2)(3) | Facility lease expense |
| 346,222 |
|
| 275,056 |
|
| 280,968 |
|
Total operating lease costs |
| $ | 355,394 |
| $ | 278,380 |
| $ | 283,310 |
|
|
|
|
|
|
|
|
| |||
Finance lease costs |
|
|
|
|
|
|
| |||
Depreciation of leased assets | Depreciation and amortization | $ | 14,734 |
| $ | 14,662 |
| $ | 12,634 |
|
Interest on lease liabilities | Interest expense |
| 7,786 |
|
| 7,014 |
|
| 5,916 |
|
Total finance lease costs |
| $ | 22,520 |
| $ | 21,676 |
| $ | 18,550 |
|
In May 2017,recalculated in accordance with the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope Modification Accountingguidance discussed above, which resulted in variable rent credits in the amount of the rent abatements.
In August 2017,accordance with the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, (“ASU 2017-12”). The amendmentsguidance discussed above, which resulted 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 measurementsvariable rent credits in the financial statements. The improvementsamount of the rent abatements.
The following table represents the maturity of lease liabilities, by lease classification, as of December 31, 2021.
|
| Operating |
| Finance |
|
|
| |||
Years Ending |
| Leases |
| Leases |
| Total |
| |||
2022 (1) |
| $ | 274,005 |
| $ | 19,820 |
| $ | 293,825 |
|
2023 |
|
| 252,772 |
|
| 19,131 |
|
| 271,903 |
|
2024 |
|
| 220,455 |
|
| 18,050 |
|
| 238,505 |
|
2025 |
|
| 193,375 |
|
| 16,453 |
|
| 209,828 |
|
2026 |
|
| 156,573 |
|
| 11,984 |
|
| 168,557 |
|
After 2026 |
|
| 447,815 |
|
| 58,694 |
|
| 506,509 |
|
Total lease payments |
| $ | 1,544,995 |
| $ | 144,132 |
| $ | 1,689,127 |
|
Less: Interest |
|
| 249,643 |
|
| 26,956 |
|
| 276,599 |
|
Present value of lease liabilities |
| $ | 1,295,352 |
| $ | 117,176 |
| $ | 1,412,528 |
|
F-17
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table represents the weighted-average remaining lease term and discount rate, disaggregated by lease classification, as of December 31, 2021.
As of | ||||
Lease Term and Discount Rate | December 31, 2021 | |||
Weighted-average remaining lease term (years) (1) | ||||
Operating leases - equipment | 2.9 | |||
Operating leases - real estate | 7.3 | |||
Finance leases - equipment | 3.4 | |||
Finance leases - real estate | 8.9 | |||
Weighted-average discount rate (2) | ||||
Operating leases - equipment | 3.8 | % | ||
Operating leases - real estate | 4.9 | % | ||
Finance leases - equipment | 4.7 | % | ||
Finance leases - real estate | 4.9 | % |
The following table represents the minimum cash lease payments included in the measurement of lease liabilities and the non-cash addition of right-of-use assets for the periods presented.
|
| Year Ended |
|
| Year Ended |
|
| Year Ended |
| |||
Other Information |
| December 31, 2019 |
|
| December 31, 2020 |
|
| December 31, 2021 |
| |||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
| |||
Cash outflows for operating leases |
| $ | 281,895 |
|
| $ | 271,787 |
|
| $ | 269,677 |
|
Cash outflows for finance leases - operating activities |
| $ | 7,576 |
|
| $ | 6,985 |
|
| $ | 5,910 |
|
Cash outflows for finance leases - financing activities |
| $ | 14,600 |
|
| $ | 15,432 |
|
| $ | 14,689 |
|
Non-cash amount of leased assets obtained in exchange for: |
|
|
|
|
|
|
|
|
| |||
Operating lease liabilities |
| $ | 114,113 |
|
| $ | 132,717 |
|
| $ | 180,055 |
|
Finance lease liabilities |
| $ | 21,535 |
|
| $ | — |
|
| $ | 725 |
|
Lessor Arrangements
Under the Company’s Exhibitor Services Agreement (“ESA”) with National CineMedia, LLC (“NCM”), the nonconsecutive periods of use of the theatre screens by NCM qualify as a lease in accordance with ASC Topic 842. See further discussion in Note 6.
The Company rents its theatre auditoriums for corporate meetings, screenings, education and training sessions and other private events. These rentals, which are not significant impactto the Company, are generally one-time events and the related revenue is reflected as other revenue 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. federalstatements of 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 our reassessment of valuation allowances. See further discussion at Note 15.(loss).
|
|
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 revenuesrevenue when the showtime for a purchased movie ticket has passed. Concession revenues arerevenue is recognized when salesproducts are made atsold to the registers.consumer. Other revenues primarily consist of screen
F-18
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
advertising and screen rental revenues, promotional income, studio trailer placements and transactional fees. ScreenExcept for NCM screen advertising advances discussed below in Note 9, these revenues are generally recognized overwhen the period thatCompany has performed the related advertising is delivered on-screen or in-theatre.services. The Company sells gift cards and discount ticket vouchers called Supersavers, the proceeds from which are recorded as current liabilities. Revenuesdeferred revenue. Deferred revenue for gift cards and discount ticket vouchers areis recognized when they are redeemed for concession items or, if redeemed for movie tickets, or concession items.when the showtime has passed. The Company generally records breakage revenue on gift cards and discount ticket vouchers based on redemption activity and historical experience with unused balances. The Company offers a subscription program in the U.S. whereby patrons can pay a monthly or annual fee to receive a monthly credit for use towards a future movie ticket purchase. The Company records the monthly subscription program fees as current liabilitiesdeferred revenue and
F-14
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
records admissions revenues asrevenue when the credits are redeemedshowtime for a movie tickets.ticket purchased with a credit has passed. The Company also has loyalty programs in the U.S. and many of its international locations that either have a prepaid annual membership fee or award points to customers as purchases are made. For those loyalty programs that have ana prepaid annual membership fee, the Company recognizes the fee collected as other revenuesrevenue on a straight-line basis over the term of the membership.program. For those loyalty programs that award points to customers based on their purchases, the Company records a portion of the original transaction proceeds as liabilitiesdeferred revenue based on the number of reward points issued to customers and recognizes revenuesthe deferred revenue when the customer redeems such points. Screen advertising revenues areThe value of loyalty points issued is based on the estimated fair value of the rewards offered. The Company records breakage revenue generally recognized overupon the period that the related advertising is delivered on-screen or in-theatre.expiration of loyalty points and subscription credits. 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 areand recognized during the period in which the Company satisfies the related performance obligations, which may differ from the period in which the advances are collected. These advances are recognized on either a straight-line basis over the term
Accounts receivable included approximately $6,232 and $23,453 of the contracts or as the Company has met its 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 onlyreceivables related to contracts that had not been completed as of January 1, 2018.
Changes to the way in which the Company recognizes revenue resulted in the following impacts to the consolidated statements of income:
|
|
|
|
|
|
|
|
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, 2018:
|
| 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 |
|
|
|
2020 and 2021, respectively. The Company applieddid 0t record any assets related to the practical expedientcosts to exclude sales and other similar taxes collected fromobtain or fulfill a contract with customers from its transaction price for purposes of recording revenues. As such, revenues are presented net of such taxes.during the years ended December 31, 2020 or 2021.
Disaggregation of Revenue
The following table presentstables present revenues for the year ended December 31, 2018,periods indicated, 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 |
|
|
|
|
| Year Ended December 31, 2021 |
| |||||||||
|
| U.S. |
|
| International |
|
|
|
| |||
|
| Operating |
|
| Operating |
|
|
|
| |||
Major Goods/Services |
| Segment (1) |
|
| Segment |
|
| Consolidated |
| |||
Admissions revenues |
| $ | 671,750 |
|
| $ | 108,290 |
|
| $ | 780,040 |
|
Concession revenues |
|
| 482,750 |
|
|
| 78,902 |
|
|
| 561,652 |
|
Screen advertising, screen rental and promotional revenues |
|
| 66,192 |
|
|
| 17,892 |
|
|
| 84,084 |
|
Other revenues |
|
| 72,930 |
|
|
| 11,758 |
|
|
| 84,688 |
|
Total revenues |
| $ | 1,293,622 |
|
| $ | 216,842 |
|
| $ | 1,510,464 |
|
F-16
|
| Year Ended December 31, 2020 |
| |||||||||
|
| U.S. |
|
| International |
|
|
|
| |||
|
| Operating |
|
| Operating |
|
|
|
| |||
Major Goods/Services |
| Segment (1) |
|
| Segment |
|
| Consolidated |
| |||
Admissions revenues |
| $ | 291,636 |
|
| $ | 64,872 |
|
| $ | 356,508 |
|
Concession revenues |
|
| 189,561 |
|
|
| 41,485 |
|
|
| 231,046 |
|
Screen advertising, screen rental and promotional revenues |
|
| 46,199 |
|
|
| 16,332 |
|
|
| 62,531 |
|
Other revenues |
|
| 29,513 |
|
|
| 6,712 |
|
|
| 36,225 |
|
Total revenues |
| $ | 556,909 |
|
| $ | 129,401 |
|
| $ | 686,310 |
|
|
| Year Ended December 31, 2019 |
| |||||||||
|
| U.S. |
|
| International |
|
|
|
| |||
|
| Operating |
|
| Operating |
|
|
|
| |||
Major Goods/Services |
| Segment (1) |
|
| Segment |
|
| Consolidated |
| |||
Admissions revenues |
| $ | 1,431,790 |
|
| $ | 373,531 |
|
| $ | 1,805,321 |
|
Concession revenues |
|
| 936,241 |
|
|
| 224,842 |
|
|
| 1,161,083 |
|
Screen advertising, screen rental and promotional revenues |
|
| 128,839 |
|
|
| 35,888 |
|
|
| 164,727 |
|
Other revenues |
|
| 84,033 |
|
|
| 67,935 |
|
|
| 151,968 |
|
Total revenues |
| $ | 2,580,903 |
|
| $ | 702,196 |
|
| $ | 3,283,099 |
|
F-19
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table presentstables present revenues for the year ended December 31, 2018,periods indicated, disaggregated based on timing of revenue recognition (as discussed above).
|
| Year Ended December 31, 2021 |
| |||||||||
|
| U.S. |
|
| International |
|
|
|
| |||
|
| Operating |
|
| Operating |
|
|
|
| |||
|
| Segment (1) |
|
| Segment |
|
| Consolidated |
| |||
Goods and services transferred at a point in time |
| $ | 1,201,206 |
|
| $ | 193,658 |
|
| $ | 1,394,864 |
|
Goods and services transferred over time |
|
| 92,416 |
|
|
| 23,184 |
|
|
| 115,600 |
|
Total |
| $ | 1,293,622 |
|
| $ | 216,842 |
|
| $ | 1,510,464 |
|
|
| Year Ended December 31, 2020 |
| |||||||||
|
| U.S. |
|
| International |
|
|
|
| |||
|
| Operating |
|
| Operating |
|
|
|
| |||
|
| Segment (1) |
|
| Segment |
|
| Consolidated |
| |||
Goods and services transferred at a point in time |
| $ | 497,338 |
|
| $ | 109,997 |
|
| $ | 607,335 |
|
Goods and services transferred over time |
|
| 59,571 |
|
|
| 19,404 |
|
|
| 78,975 |
|
Total |
| $ | 556,909 |
|
| $ | 129,401 |
|
| $ | 686,310 |
|
|
| Year Ended December 31, 2019 |
| |||||||||
|
| U.S. |
|
| International |
|
|
|
| |||
|
| Operating |
|
| Operating |
|
|
|
| |||
|
| Segment (1) |
|
| Segment |
|
| Consolidated |
| |||
Goods and services transferred at a point in time |
| $ | 2,488,716 |
|
| $ | 621,785 |
|
| $ | 3,110,501 |
|
Goods and services transferred over time |
|
| 92,187 |
|
|
| 80,411 |
|
|
| 172,598 |
|
Total |
| $ | 2,580,903 |
|
| $ | 702,196 |
|
| $ | 3,283,099 |
|
Screen Advertising Advances and Other Deferred Revenue
|
| 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 |
|
|
|
Deferred Revenues
The following table presents changes in the Company’s deferred revenuesrevenue for the yearyears ended December 31, 2018. 2020 and 2021:
Deferred Revenue |
| NCM Screen |
|
| Other Deferred |
| ||
Balance at January 1, 2020 |
| $ | 348,354 |
|
| $ | 138,426 |
|
Amounts recognized as accounts receivable |
|
| 0 |
|
|
| 2,915 |
|
Cash received from customers in advance |
|
| 0 |
|
|
| 56,772 |
|
Common units received from NCM (see Note 8) |
|
| 3,620 |
|
|
| — |
|
Interest accrued related to significant financing component |
|
| 23,595 |
|
|
| — |
|
Revenue recognized during period |
|
| (31,314 | ) |
|
| (57,625 | ) |
Foreign currency translation adjustments |
|
| 0 |
|
|
| (1,658 | ) |
Balance at December 31, 2020 |
|
| 344,255 |
|
|
| 138,830 |
|
Amounts recognized as accounts receivable |
|
| 0 |
|
|
| 2,170 |
|
Cash received from customers in advance |
|
| 0 |
|
|
| 132,179 |
|
Common units received from NCM (see Note 8) |
|
| 10,237 |
|
|
| — |
|
Interest accrued related to significant financing component |
|
| 23,612 |
|
|
| — |
|
Revenue recognized during period |
|
| (32,078 | ) |
|
| (111,228 | ) |
Foreign currency translation adjustments |
|
| 0 |
|
|
| (1,693 | ) |
Balance at December 31, 2021 |
| $ | 346,026 |
|
| $ | 160,258 |
|
F-20
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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 |
|
|
|
The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied for other deferred revenue in the table above as of December 31, 20182021 and when the Company expects to recognize this revenue.
|
| Year Ended December 31, |
|
|
|
|
|
|
| |||||||
Remaining Performance Obligations |
| 2022 |
|
| 2023 |
|
| Thereafter |
|
| Total |
| ||||
Other deferred revenue |
| $ | 138,945 |
|
|
| 21,313 |
|
|
| — |
|
| $ | 160,258 |
|
|
| 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 |
|
Summary of Activity with NCM
AccountsBelow is a summary of activity with NCM included in the Company’s consolidated financial statements for the periods indicated. See Note 5 for discussion of related revenue recognition.
|
| Investment in NCM |
|
| NCM Screen Advertising Advances |
|
| Distributions from NCM (3) |
|
| Equity |
|
| Other Revenue |
|
| Interest Expense |
|
| Cash Received |
| |||||||
Balance as of January 1, 2019 |
| $ | 275,592 |
|
| $ | (350,242 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Receipt of common units due to annual common unit adjustment |
|
| 1,552 |
|
|
| (1,552 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Revenues earned under ESA (1) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (13,782 | ) |
|
| 0 |
|
|
| 13,782 |
|
Interest accrued related to significant financing component |
|
| 0 |
|
|
| (28,624 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 28,624 |
|
|
| 0 |
|
Receipt of excess cash distributions |
|
| (23,452 | ) |
|
| 0 |
|
|
| (11,631 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 35,083 |
|
Receipt under tax receivable agreement |
|
| (2,492 | ) |
|
| 0 |
|
|
| (1,242 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,734 |
|
Equity in earnings |
|
| 14,592 |
|
|
| 0 |
|
|
| 0 |
|
|
| (14,592 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Amortization of screen advertising advances |
|
| 0 |
|
|
| 32,064 |
|
|
| 0 |
|
|
| 0 |
|
|
| (32,064 | ) |
|
| 0 |
|
|
| 0 |
|
Balance as of and for the year ended December 31, 2019 |
| $ | 265,792 |
|
| $ | (348,354 | ) |
| $ | (12,873 | ) |
| $ | (14,592 | ) |
| $ | (45,846 | ) |
| $ | 28,624.00 |
|
| $ | 52,599 |
|
Receipt of common units due to annual common unit adjustment |
|
| 3,620 |
|
|
| (3,620 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Revenues earned under ESA (1) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (4,689 | ) |
|
| 0 |
|
|
| 4,689 |
|
Interest accrued related to significant financing component |
|
| 0 |
|
|
| (23,595 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 23,595 |
|
|
| 0 |
|
Receipt of excess cash distributions |
|
| (12,022 | ) |
|
| 0 |
|
|
| (5,914 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 17,936 |
|
Receipt under tax receivable agreement |
|
| (2,146 | ) |
|
| 0 |
|
|
| (1,061 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,207 |
|
Equity in loss |
|
| (10,627 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 10,627 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Impairment of investment in NCM (2) |
|
| (92,655 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Amortization of screen advertising advances |
|
| 0 |
|
|
| 31,314 |
|
|
| 0 |
|
|
| 0 |
|
|
| (31,314 | ) |
|
| 0 |
|
|
| 0 |
|
Balance as of and for the year ended December 31, 2020 |
| $ | 151,962 |
|
| $ | (344,255 | ) |
| $ | (6,975 | ) |
| $ | 10,627 |
|
| $ | (36,003 | ) |
| $ | 23,595 |
|
| $ | 25,832 |
|
Receipt of common units due to annual common unit adjustment |
|
| 10,237 |
|
|
| (10,237 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Revenues earned under ESA (1) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (12,001 | ) |
|
| 0 |
|
|
| 12,001 |
|
Interest accrued related to significant financing component |
|
| 0 |
|
|
| (23,612 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 23,612 |
|
|
| 0 |
|
Receipt under tax receivable agreement |
|
| (156 | ) |
|
| 0 |
|
|
| (77 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 233 |
|
Equity in loss |
|
| (26,599 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 26,599 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Amortization of screen advertising advances |
|
| 0 |
|
|
| 32,078 |
|
|
| 0 |
|
|
| 0 |
|
|
| (32,078 | ) |
|
| 0 |
|
|
| 0 |
|
Balance as of and for the year ended December 31, 2021 |
| $ | 135,444 |
|
| $ | (346,026 | ) |
| $ | (77 | ) |
| $ | 26,599 |
|
| $ | (44,079 | ) |
| $ | 23,612 |
|
| $ | 12,234 |
|
F-21
CINEMARK USA, INC.
Significant Financing ComponentNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As discussed furtherIn thousands, except share and per share data
In addition to the activity in Note 4,the table above, the Company made payments to NCM of approximately $61, $9 and $8 during the years ended December 31, 2019, 2020 and 2021, respectively, related to certain equipment used for digital advertising, which is included in theatre furniture and equipment on the consolidated balance sheets.
Investment in National CineMedia
NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company entered into an ESA with NCM, pursuant to which NCM primarily provides advertising to our theatres. On February 13, 2007, National Cinemedia, Inc. (“NCMI”), an entity that serves as the sole manager of NCM, completed an initial public offering (“IPO”) of its common stock. In connection with the completion of the NCM, Inc. (“NCMI”)NCMI initial public offering, the Company amended its operating agreement and restated itsthe ESA. At the time of the NCMI IPO and as a result of amending the ESA, with NCM andthe Company received approximately $174,000$174,000 in cash consideration from NCM. The proceeds were recorded as deferred revenue or NCM screen advertising advances and arewere being amortized over the term of the modifiedAmended and Restated ESA, or through February 2037. 2041. Following the NCMI IPO, the Company does not recognize undistributed equity in the earnings on its original NCM membership units (referred to herein as the Company’s Tranche 1 Investment) until NCM’s future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company recognizes cash distributions it receives from NCM on its Tranche 1 Investment as a component of earnings as Distributions from NCM. The Company believes that the accounting model provided by ASC Topic 323-10-35-22 for recognition of equity investee losses in excess of an investor’s basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.
Common Unit Adjustments
In addition to the consideration received upon the NCMI IPO and ESA modification duringin 2007, the Company also periodically receives consideration in the form of common units from NCM. Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCMI and the Company, 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. As discussed in Note 6 to the Company’s financial statements as included in its 2018 Annual Report on Form 10-K, the common units received (collectively referred to as the Company’s “Tranche 2 Investment”) are recorded at estimated fair value as an increase in the Company’s investment in NCM at eachwith an offset to deferred revenue or NCM screen advertising advances. The Company’s 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 earnings in equity in income of affiliates and distributions received related to its Tranche 2 Investment are recorded as a reduction of investment basis.
During March 2021, NCM performed its annual common unit adjustment settlement,calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company received an additional 2,311,482 common units of NCM, on April 14, 2021. The Company recorded these additional common units at an estimated fair value of $10,237 with a corresponding adjustment to NCM screen advertising advances. The fair value of the common units received was estimated based on the market price of NCMI common stock (Level 1 input as defined in FASB ASC Topic 820) at the time the common units were determined, adjusted for volatility associated with the estimated time period it would take to convert the common units and register the respective shares.
Below is a summary of common units received by the Company under the Common Unit Adjustment (“CUA”) Agreement during the years ended December 31, 2019, 2020 and 2021:
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
Event |
| Date Common Units Received |
| Number of Common Units Received |
|
| Fair Value of Common Units Received |
| ||
2019 annual common unit adjustment |
| 3/31/2019 |
|
| 219,056 |
|
| $ | 1,552 |
|
2020 annual common unit adjustment |
| 3/31/2020 |
|
| 1,112,368 |
|
| $ | 3,620 |
|
2021 annual common unit adjustment |
| 4/14/2021 |
|
| 2,311,482 |
|
| $ | 10,237 |
|
Fair Value of Investment in NCM
F-22
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of December 31, 2021, the Company owned a total of 43,161,550 common units of NCM, which represented an interest of approximately 26%. The estimated fair value of the Company’s investment in NCM was approximately $121,284 based on NCMI’s stock price as of December 31, 2021 of $2.81 per share (Level 1 input as defined in FASB ASC Topic 820), which was below the Company's carrying value of $135,444. NCM, Inc.’s stock price may vary due to the performance of the business, industry trends, general and economic conditions and other factors, including those resulting from the impact of the COVID-19 pandemic (see Note 3). The Company does not believe that the decline in NCM, Inc.’s stock price is other than temporary as the share price was only below the Company's carrying value of NCM for less than one month at the end of 2021. Therefore, 0 impairment of the Company’s investment in NCM was recorded during the year ended December 31, 2021.
During the year ended December 31, 2020, the Company's investment in NCM was written down by $92,655, with a corresponding charge to impairment expense, in accordance with ASC 323-10-35 based on the NCM, Inc's stock price as of December 31, 2020. The write-down was due to the prolonged period of time, approximately ten months, which the share price of NCM, Inc.'s stock was below the Company’s carrying value per common unit of its investment in NCM through December 31, 2020.
Exhibitor Services Agreement
As previously discussed, the Company’s domestic theatres are part of the in-theatre digital network operated by NCM, the terms of which are defined in the ESA. NCM provides advertising to its theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres. The Company receives a monthly theatre access fee for participation in the NCM network and also earns screen advertising or screen rental revenue on a per patron basis. Prior to September 17, 2019, the ESA was accounted for under ASC Topic 606, Revenue from Contracts with Customers. Effective September 17, 2019, the Company signed an amendment to the ESA, under which the Company will provide incremental advertising time to NCM and has extended the term through February 2041. Since the agreement was amended, the Company was required to evaluate the revised contract under ASC Topic 842, Leases, and as a result, determined that the ESA met the definition of a lease. The Company leases nonconsecutive periods of use of its domestic theatre screens to NCM for purposes of showing third party advertising content. The lease, which is classified as an operating lease, generally requires variable lease payments based on the number of patrons attending the showtimes during which such advertising is shown. The lease agreement is considered short-term due to the fact that the nonconsecutive periods of use, or advertising time slots, are set on a weekly basis. The revenues earned under the ESA, both before and after the amendment, are reflected in other revenue on the consolidated income statement.
The recognition of revenue related to the deferred revenue or NCM screen advertising advances will continue to be recorded on a straight-line basis over the new term of the amended ESA through February 2041.
|
| Year Ended December 31, |
|
|
|
|
|
|
| |||||||||||||||||||
Remaining Maturity |
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
| |||||||
NCM screen advertising advances (1) |
| $ | 9,119 |
|
|
| 9,749 |
|
|
| 10,424 |
|
|
| 11,147 |
|
|
| 11,922 |
|
|
| 293,665 |
|
| $ | 346,026 |
|
Significant Financing Component
As noted above, the Company received approximately $174,000 in cash consideration from NCM at the time of NCMI's IPO and also periodically receives consideration in the form of common units (discussed at Common Unit Adjustments above) from NCM 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%4.4% to 8.0%.
|
|
The Company has an investment in National CineMedia, LLC (“NCM”)8.3%. NCM operates a digital in-theatre network inEffective September 17, 2019, upon the U.S. for providing cinema advertisingCompany’s evaluation and non-film events. Upon joining NCM,determination that ASC Topic 842 applies to the amended ESA, the Company entered into an Exhibitor Services Agreement (“ESA”) with NCM, pursuantdetermined it acceptable to which NCM provides advertising, promotion and event services to our theatres. On February 13, 2007, National CineMedia, Inc. (“NCMI”), an entity that servesapply the significant financing component guidance from ASC Topic 606 by analogy 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. 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 2016, 2017 and 2018, the annual payment per digital screen was one thousand two hundred forty-one dollars, one thousand three hundred three dollars and one thousand three hundred sixty-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 expires in February 2037.
As a resulteconomic substance of the application ofagreement represents 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'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's basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.financing arrangement.
Common Unit Adjustments
Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCMI and the Company, AMC and Regal, whom we refer to collectively as the Founding Members, adjustments are made annually to the common membership units 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 for Subsequent Investments in an Investee after Suspension
F-18F-23
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. The Company concluded that adding theatres to the Company’s domestic circuit, which has led to the common unit adjustments, equates to making additional investments in NCM. We evaluated the receipt of the additional common units inSummary Financial Information for 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. Our Tranche 2 Investment is accounted for following the equity method, with undistributed equity earnings related to our Tranche 2 Investment included as equity in income of affiliates on the consolidated statements of income and distributions received related to our Tranche 2 Investment recorded as a reduction of the Company’s 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, 2016, 2017 and 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 |
|
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, 2018, the Company owned a total of 39,518,644 common units of NCM, which represented an interest of approximately 25%. The estimated fair value of the Company’s investment in NCM was approximately $256,081 based on NCMI’s stock price as of December 31, 2018 of $6.48 per 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is a summary of activity with NCM included in the Company’s consolidated financial statements for the periods 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) |
| |||||||
Balance as of January 1, 2016 |
| $ | 183,755 |
|
| $ | (342,134 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receipt of common units due to annual common unit adjustment |
|
| 11,111 |
|
|
| (11,111 | ) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Revenues earned under ESA (1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11,048 | ) |
|
| — |
|
|
| 11,048 |
|
Receipt of excess cash distributions |
|
| (11,233 | ) |
|
| — |
|
|
| (11,483 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,716 |
|
Receipt under tax receivable agreement |
|
| (2,985 | ) |
|
| — |
|
|
| (3,173 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,158 |
|
Equity in earnings |
|
| 9,347 |
|
|
| — |
|
|
| — |
|
|
| (9,347 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Amortization of deferred revenue |
|
| — |
|
|
| 9,317 |
|
|
| — |
|
|
| — |
|
|
| (9,317 | ) |
|
| — |
|
|
| — |
|
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 |
|
| 18,363 |
|
|
| (18,363 | ) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Revenues earned under ESA (1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11,274 | ) |
|
| — |
|
|
| 11,274 |
|
Receipt of excess cash distributions |
|
| (15,093 | ) |
|
| — |
|
|
| (14,158 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29,251 |
|
Receipt under tax receivable agreement |
|
| (2,265 | ) |
|
| — |
|
|
| (2,249 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,514 |
|
Equity in earnings |
|
| 9,550 |
|
|
| — |
|
|
| — |
|
|
| (9,550 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Amortization of deferred revenue |
|
| — |
|
|
| 10,585 |
|
|
| — |
|
|
| — |
|
|
| (10,585 | ) |
|
| — |
|
|
| — |
|
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 |
|
|
|
|
|
|
|
The Company made payments to NCM of approximately $49, $102 and $74 during the years ended December 31, 2016, 2017 and 2018, respectively, related to certain equipment used for digital advertising, which is included in theatre furniture and equipment on the consolidated balance sheets.
F-20
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The tables below present summary financial information for NCM for theits fiscal periods indicated:
|
| Year Ended |
|
| Year Ended |
|
| Year Ended |
| |||
|
| December 26, 2019 |
|
| December 31, 2020 |
|
| December 30, 2021 |
| |||
Revenues |
| $ | 444,800 |
|
| $ | 89,887 |
|
| $ | 114,639 |
|
Operating income (loss) |
| $ | 155,700 |
|
| $ | (59,671 | ) |
| $ | (68,576 | ) |
Net income (loss) |
| $ | 98,800 |
|
| $ | (115,753 | ) |
| $ | (134,562 | ) |
|
| As of |
|
| As of |
| ||
|
| December 31, 2020 |
|
| December 30, 2021 |
| ||
Current assets |
| $ | 142,566 |
|
| $ | 114,620 |
|
Noncurrent assets |
| $ | 685,643 |
|
| $ | 658,438 |
|
Current liabilities |
| $ | 46,872 |
|
| $ | 66,806 |
|
Noncurrent liabilities |
| $ | 1,072,207 |
|
| $ | 1,114,712 |
|
Members' deficit |
| $ | (290,870 | ) |
| $ | (408,460 | ) |
|
| 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 | ) |
|
|
Below is a summary of activity for each of the Company’s other investments for the periods indicated:
|
| DCIP |
|
| AC JV, |
|
| DCDC |
|
| FE Concepts |
|
| Other |
|
| Total |
| ||||||
Balance at January 1, 2019 |
| $ | 125,252 |
|
| $ | 5,266 |
|
| $ | 2,255 |
|
| $ | 19,918 |
|
| $ | 4,075 |
|
| $ | 156,766 |
|
Equity in income (loss) |
|
| 23,281 |
|
|
| 3,276 |
|
|
| 1,120 |
|
|
| (399 | ) |
|
| — |
|
|
| 27,278 |
|
Equity in comprehensive loss |
|
| (141 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (141 | ) |
Cash distributions received |
|
| (23,696 | ) |
|
| (3,520 | ) |
|
| (206 | ) |
|
| — |
|
|
| — |
|
|
| (27,422 | ) |
Other (1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,196 | ) |
|
| (1,196 | ) |
Balance at December 31, 2019 |
| $ | 124,696 |
|
| $ | 5,022 |
|
| $ | 3,169 |
|
| $ | 19,519 |
|
| $ | 2,879 |
|
| $ | 155,285 |
|
Equity in loss |
|
| (24,559 | ) |
|
| (1,277 | ) |
|
| (1,036 | ) |
|
| (1,246 | ) |
|
| — |
|
|
| (28,118 | ) |
Cash contributions |
|
| 50 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 50 |
|
Cash distributions received |
|
| (10,383 | ) |
|
| — |
|
|
| (878 | ) |
|
| — |
|
|
| — |
|
|
| (11,261 | ) |
Non-cash distribution received (2) |
|
| (89,804 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (89,804 | ) |
Other (3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,426 | ) |
|
| (2,426 | ) |
Balance at December 31, 2020 |
| $ | — |
|
| $ | 3,745 |
|
| $ | 1,255 |
|
| $ | 18,273 |
|
| $ | 453 |
|
| $ | 23,726 |
|
Equity in income (loss) |
|
| — |
|
|
| (34 | ) |
|
| 583 |
|
|
| 1,005 |
|
|
| — |
|
|
| 1,554 |
|
Other (1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (75 | ) |
|
| (75 | ) |
Balance at December 31, 2021 |
| $ | — |
|
| $ | 3,711 |
|
| $ | 1,838 |
|
| $ | 19,278 |
|
| $ | 378 |
|
| $ | 25,205 |
|
|
| 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 |
|
|
|
|
|
Digital Cinema Implementation Partners LLC (“DCIP”)
On February 12, 2007, the Company, AMC and Regal (the “Exhibitors”) entered into a joint venture known as DCIP to facilitate the implementation of digital cinema in the Company’s theatres and to establish agreements with major motion picture studios for the financing of digital cinema. On March 10, 2010, DCIP and its subsidiaries completed an initial financing transaction to enable the purchase, deployment and leasing of digital projection systems to the Exhibitors under equipment lease and installation agreements. On March 31, 2011, DCIP obtained incremental financing necessary to complete the deployment of digital projection systems. DCIP also entered into long-term Digital Cinema Deployment Agreements (“DCDAs”) with 6 major motion picture studios pursuant to which Kasima LLC, one of DCIP’s subsidiaries, receives a virtual print fee ("VPF") each time the studio books a film or certain other content on the leased digital projection systems. Other content distributors entered into similar DCDAs that provide for the payment of VPFs for bookings of the distributor's content on a leased digital projection system. The DCDAs end on the earlier to occur of (i) the tenth anniversary of the "mean deployment date" for all digital projection systems scheduled to be deployed over a period of up to five years, or (ii) the date DCIP achieves "cost recoupment", each as defined in the DCDAs. Cost recoupment occurs when revenues attributable to the digital projection systems exceed the financing, deployment, administration and other costs associated with the purchase of the digital projection
F-24
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
systems. The DCDA’s expired in October 2021. Pursuant to the operating agreement between the Exhibitors and DCIP, DCIP began to distribute excess cash generated from their operations to the Exhibitors during 2019. As the DCDA’s have expired and the MELA between the Company and Kasima has been terminated, as discussed below, DCIP and its subsidiaries no longer have regular operations, and final distributions are expected to be made to the Company during the first half of 2022.
Below is summary financial information for DCIP as of and for the periods indicated:
|
| Year ended December 31, |
| |||||||||
|
| 2019 |
|
| 2020 |
|
| 2021 |
| |||
Revenues |
| $ | 171,531 |
|
| $ | 30,561 |
|
| $ | 54,383 |
|
Operating income (loss) |
| $ | 99,812 |
|
| $ | (105,691 | ) |
| $ | 43,062 |
|
Net income (loss) |
| $ | 95,820 |
|
| $ | (114,243 | ) |
| $ | 45,323 |
|
|
| As of |
| |||||
|
| December 31, 2020 |
|
| December 31, 2021 |
| ||
Current assets |
| $ | 36,372 |
|
| $ | 22,947 |
|
Noncurrent assets |
| $ | 205 |
|
| $ | 0 |
|
Current liabilities |
| $ | 39,844 |
|
| $ | 11,631 |
|
Noncurrent liabilities |
| $ | 687 |
|
| $ | 0 |
|
Members' equity (deficit) |
| $ | (3,954 | ) |
| $ | 11,316 |
|
As of December 31, 2018,2021, the Company had a 33%33% voting interest in DCIP and a 24.3%24.3% economic interest in DCIP. ThePrior to the distribution received during November 2020, as discussed below, the Company accountsaccounted for its investment in DCIP and its subsidiaries under the equity method of accounting.
F-21
CINEMARK USA, INC.Distribution of Digital Projectors from DCIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is summary financial information for DCIP as of and forThrough October 31, 2020, the years ended December 31, 2016, 2017 and 2018:
|
| Year ended December 31, |
| |||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
| |||
Revenues |
| $ | 178,836 |
|
| $ | 177,382 |
|
| $ | 172,534 |
|
Operating income |
| $ | 107,919 |
|
| $ | 106,687 |
|
| $ | 102,236 |
|
Net income |
| $ | 89,152 |
|
| $ | 93,103 |
|
| $ | 94,757 |
|
|
| 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 |
|
TheCompany leased digital projection systems are being leased fromunder a master equipment lease agreement with 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.Company. 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, 2018, the Company had 3,837 digital projection systems being leased underamended the master equipment lease agreement (“MELA”) with Kasima.Kasima effective November 1, 2020, which resulted in the termination of the MELA and a lease termination fee to be paid by the Company on a monthly basis until a) cost recoupment is met or b) the DCDA agreements between DCIP and the major studios have been terminated. Upon termination of the MELA, DCIP distributed the digital projection equipment to the Company. The Company hadpaid the following transactionsmonthly lease termination fee through October 2021.
The Company accounted for the lease termination and projector distribution during the year ended December 31, 2020 as follows:
In accordance with ASC 323-10-35, since the non-cash distribution exceeded the book value of its investment in DCIP, the Company suspended equity method accounting. The Company will resume equity method accounting if the value of its investment in DCIP exceeds the sum of the excess noncash distribution noted above and any future excess cash distributions.
Cash distributions prior to the suspension of equity method accounting were recorded as a reduction of the Company's investment in DCIP during the years ended December 31, 2016, 20172019 and 2018:
|
| Year Ended December 31, |
| |||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
| |||
Equipment lease payments |
| $ | 5,217 |
|
| $ | 5,743 |
|
| $ | 4,862 |
|
Warranty reimbursements from DCIP |
| $ | (6,091 | ) |
| $ | (8,511 | ) |
| $ | (10,800 | ) |
Management services fees |
| $ | 825 |
|
| $ | 823 |
|
| $ | 730 |
|
RealD, Inc. (“RealD”)
The Company licenses 3-D systems2020. Additional distributions received after the suspension of equity method accounting were recorded as cash distributions 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 owned 1,222,780 shares of RealD and accounted for its investment in RealD as a marketable security, specifically an available-for-sale security, in accordance with ASC Topic 320-10-35-1, therefore unrealized holding gains and losses were 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 otherDCIP on the consolidated statement of income for the year ended December 31, 2016. The2021.
Summary of DCIP Transactions
In addition to the activity presented in the other investments table above, the Company usedhad the proceeds to makefollowing transactions with DCIP during the periods indicated:
F-25
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| Year Ended December 31, |
| |||||||||
|
| 2019 |
|
| 2020 |
|
| 2021 |
| |||
Equipment lease payments (1)(2) |
| $ | 4,399 |
|
| $ | 1,729 |
|
| $ | 0 |
|
Warranty reimbursements from DCIP (2) |
| $ | (11,800 | ) |
| $ | (6,997 | ) |
| $ | (798 | ) |
Management services fees (2) |
| $ | 596 |
|
| $ | 208 |
|
| $ | 49 |
|
Cash distributions from DCIP (3) |
| $ | 23,696 |
|
| $ | 10,383 |
|
| $ | 13,139 |
|
Non-cash distributions from DCIP (4) |
| $ | 0 |
|
| $ | 12,915 |
|
| $ | 0 |
|
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 joint venture that 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 Company paid event fees to AC of $10,871, $13,950$15,376, $3,740 and $12,481$6,161 for the years ended December 31, 2016, 20172019, 2020 and 2018,2021, respectively, which are included in film rentals and advertising costs on the consolidated statements of income.income (loss). 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 contributed the assets associated with its Fathom Events division to AC. Each of the Founding Members contributed cash of approximately $268 and a six-year promissory note in the amount of $8,333 in exchange for 32% of Class A Units in AC. Each of the Founding Members’ Promissory Notes bear interest at 5% per annum and require annual principal and interest payments. The remaining outstanding balance of the note payable from the Company to NCM as of December 31, 2018 was $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%14.6% ownership in DCDC. The Company paid approximately $939, $848$896, $428 and $927$574 to DCDC during the years ended December 31, 2016, 20172019, 2020 and 2018,2021, respectively, related to content delivery services, which is included in film rentals and advertising costs on the consolidated statements of income.income (loss). 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. In December of 2019, FE Concepts will develop and operateopened a family entertainment center that offers bowling, gaming, movies and other amenities. The Company and AWSR each invested approximately $20,000$20,000 and each have a 50%50% voting interest in FE Concepts. The Company accounts for its investment in FE Concepts under the equity method of accounting.
|
|
The Company’s goodwill wasCompany has a theatre services agreement with FE Concepts under which it receives service fees for providing film booking and equipment monitoring services for the facility. The Company recorded $64, $34 and $62 of related service fees during the years ended December 31, 2019, 2020 and 2021, respectively.
Additional Considerations
Each of the investments above have been adversely impacted by the COVID-19 pandemic (see Note 3). The Company does not believe that any resulting decline in value of the underlying investments is other than temporary as follows:the Company and other industry participants, who also have equity ownership interests in certain of the above investments, have reopened theatres and new film content has been released on a more consistent basis and theatre attendance has improved. The Company expects the industry to recover gradually over time. The Company performed
|
| 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 |
|
|
|
|
|
|
|
F-23F-26
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Asa qualitative impairment analysis for its equity investments during the fourth quarter of 2021. Based on the analysis performed, no impairment was recorded for the year ended December 31, intangible assets-net,2021.
The Company’s goodwill was as follows:
|
| U.S. |
|
| International |
|
| Total |
| |||
Balance at December 31, 2019 (1) |
| $ | 1,182,853 |
|
| $ | 100,518 |
|
| $ | 1,283,371 |
|
Impairment (2) |
|
| — |
|
|
| (16,128 | ) |
|
| (16,128 | ) |
Foreign currency translation adjustments |
|
| — |
|
|
| (13,403 | ) |
|
| (13,403 | ) |
Balance at December 31, 2020 (3) |
| $ | 1,182,853 |
|
| $ | 70,987 |
|
| $ | 1,253,840 |
|
Foreign currency translation adjustments |
|
| — |
|
|
| (5,049 | ) |
|
| (5,049 | ) |
Balance at December 31, 2021 (3) |
| $ | 1,182,853 |
|
| $ | 65,938 |
|
| $ | 1,248,791 |
|
Intangible assets activity and balances consisted of the following:following for the periods indicated:
|
| Balance at January 1, 2020 |
|
| Amortization |
|
| Other (1) |
|
| Balance at December 31, 2020 |
| ||||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross carrying amount |
| $ | 84,953 |
|
| $ | — |
|
| $ | (2,521 | ) |
| $ | 82,432 |
|
Accumulated amortization |
|
| (63,870 | ) |
|
| (4,746 | ) |
|
| 200 |
|
|
| (68,416 | ) |
Total intangible assets with finite lives, net |
| $ | 21,083 |
|
| $ | (4,746 | ) |
| $ | (2,321 | ) |
| $ | 14,016 |
|
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Tradename and other |
|
| 300,686 |
|
|
| — |
|
|
| (507 | ) |
|
| 300,179 |
|
Total intangible assets, net |
| $ | 321,769 |
|
| $ | (4,746 | ) |
| $ | (2,828 | ) |
| $ | 314,195 |
|
|
| Balance at January 1, 2021 |
|
| Additions (2) |
|
| Amortization |
|
| Other (3) |
|
| Balance at December 31, 2021 |
| |||||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross carrying amount |
| $ | 82,432 |
|
| $ | — |
|
| $ | — |
|
| $ | (665 | ) |
| $ | 81,767 |
|
Accumulated amortization |
|
| (68,416 | ) |
|
| — |
|
|
| (2,639 | ) |
|
| — |
|
|
| (71,055 | ) |
Total net intangible assets with finite lives |
| $ | 14,016 |
|
| $ | — |
|
| $ | (2,639 | ) |
| $ | (665 | ) |
| $ | 10,712 |
|
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Tradename and other |
|
| 300,179 |
|
|
| 146 |
|
|
| — |
|
|
| (194 | ) |
|
| 300,131 |
|
Total intangible assets, net |
| $ | 314,195 |
|
| $ | 146 |
|
| $ | (2,639 | ) |
| $ | (859 | ) |
| $ | 310,843 |
|
F-27
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at |
| ||
|
| January 1, |
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
| ||
|
| 2017 |
|
| Additions (1) |
|
| Amortization |
|
| Other (2) |
|
| 2017 |
| |||||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount |
| $ | 99,796 |
|
| $ | 11,584 |
|
| $ | — |
|
| $ | (5,485 | ) |
| $ | 105,895 |
|
Accumulated amortization |
|
| (64,606 | ) |
|
| — |
|
|
| (5,563 | ) |
|
| 1,300 |
|
|
| (68,869 | ) |
Total net intangible assets with finite lives |
| $ | 35,190 |
|
| $ | 11,584 |
|
| $ | (5,563 | ) |
| $ | (4,185 | ) |
| $ | 37,026 |
|
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradename |
|
| 299,709 |
|
|
| — |
|
|
| — |
|
|
| 26 |
|
|
| 299,735 |
|
Total intangible assets — net |
| $ | 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 |
|
|
|
|
|
|
|
Estimated aggregate future amortization expense for intangible assets is as follows(1):follows:
Year ended December 31, 2022 |
| $ | 2,468 |
|
Year ended December 31, 2023 |
|
| 2,416 |
|
Year ended December 31, 2024 |
|
| 2,416 |
|
Year ended December 31, 2025 |
|
| 1,898 |
|
Year ended December 31, 2026 |
|
| 1,514 |
|
Total |
| $ | 10,712 |
|
For the year ended December 31, 2019 |
| $ | 4,785 |
|
For the year ended December 31, 2020 |
|
| 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 |
|
| 11,938 |
|
Total |
| $ | 30,653 |
|
(1) Represents amounts before the adoption of ASC Topic 842 – Leases. See Note 2 for discussion of the expected impact of adoption.
|
|
The Company reviews long-lived assets for impairment indicators related to its long-lived assets on a quarterly basis and goodwill on an annual basis or whenever events or changes in circumstances indicate the carrying amount of thethose assets may not be fully recoverable. Due to the continuing impacts of the COVID-19 pandemic (see Note 3), the Company performed asset impairment evaluations during each quarter during the year ended December 31, 2021. The following table is a summary of the evaluations performed for each quarter by asset classification.
Asset | Impairment | Valuation | Valuation | ||||
Category | Test | Approach | Multiple | ||||
First and second quarters | |||||||
Goodwill | Qualitative | N/A | N/A | ||||
Tradename intangible assets | Qualitative | N/A | N/A | ||||
Other long-lived assets | Qualitative | N/A | N/A | ||||
Third quarter | |||||||
Goodwill | Qualitative | N/A | N/A | ||||
Tradename intangible assets | Qualitative | N/A | N/A | ||||
Other long-lived assets | Quantitative | Market | 3.1 to 6 times | ||||
Fourth quarter | |||||||
Goodwill | Quantitative | Market | 3.7 to 7 times | ||||
Tradename intangible assets | Quantitative | Income | N/A | ||||
Other long-lived assets | Quantitative | Market | 3.7 to 6 times |
See Note 1 for a discussion of the Company’s impairment policy.policy and a description of qualitative and quantitative impairment assessments.
F-24The Company’s impairment charges were as follows for the periods indicated:
|
| Year Ended | ||||
|
| December 31, | ||||
|
| 2019 |
| 2020 |
| 2021 |
U.S. segment |
|
|
|
|
|
|
Theatre properties |
| $36,005 |
| $12,398 |
| $6,371 |
Theatre operating lease right-of-use assets |
| 10,457 |
| 13,216 |
| 6,804 |
Investment in NCM (1) |
| 0 |
| 92,655 |
| 0 |
Cost method investment |
| 0 |
| 2,500 |
| 0 |
U.S. total |
| 46,462 |
| 120,769 |
| 13,175 |
|
|
|
|
|
|
|
International segment |
|
|
|
|
|
|
Theatre properties |
| 8,821 |
| 9,951 |
| 4,002 |
Theatre operating lease right-of-use assets |
| 1,718 |
| 5,025 |
| 3,210 |
Goodwill |
| 0 |
| 16,128 |
| 0 |
Intangible assets, net |
| 0 |
| 833 |
| 458 |
International total |
| 10,539 |
| 31,937 |
| 7,670 |
|
|
|
|
|
|
|
Total impairment |
| $57,001 |
| $152,706 |
| $20,845 |
F-28
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 inFor the following table:
|
| 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 |
|
Theyear ended December 31, 2019, the long-lived asset impairment charges recorded during each of the yearsperiods presented are specific towere for certain new concept theatres being developed and tested by the Company and other 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 ofFor the years ended December 31, 2018,2020 and 2021, impairment charges were primarily due to the estimated aggregate remaining fair valueprolonged impact of the long-lived assets impaired duringCOVID-19 pandemic, as discussed in Note 3. Additionally, impairment charges recorded for the year ended December 31, 2018 was approximately $16,295.
|
|
As2021 reflected the continued uncertainty of December 31, deferred chargesindustry recovery levels and the impact on estimated cash flows for specific assets.
Accrued other assets — netcurrent liabilities consisted of the following:
|
| December 31, |
| |||||
|
| 2017 |
|
| 2018 |
| ||
Long-term prepaid rents (1) |
| $ | 7,762 |
|
| $ | 15,943 |
|
Construction and other deposits |
|
| 12,167 |
|
|
| 8,183 |
|
Equipment to be placed in service |
|
| 13,868 |
|
|
| 10,466 |
|
Other |
|
| 5,970 |
|
|
| 6,463 |
|
Total |
| $ | 39,767 |
|
| $ | 41,055 |
|
(1) See Note 2 for discussionfollowing as of the expected impact of the adoption of new lease accounting pronouncements.periods presented:
|
| December 31, |
| |||||
|
| 2020 |
|
| 2021 |
| ||
Gift card liability (1) |
| $ | 43,448 |
|
| $ | 54,521 |
|
Discount vouchers (SuperSavers) liability (1) |
|
| 38,882 |
|
|
| 34,836 |
|
Accrued lease payable (2) |
|
| 48,366 |
|
|
| 31,903 |
|
Other |
|
| 70,906 |
|
|
| 103,106 |
|
Total |
| $ | 201,602 |
|
| $ | 224,366 |
|
|
|
As of December 31, long-termLong-term debt consisted of the following:following for the periods presented:
|
| December 31, |
| |||||
|
| 2020 |
|
| 2021 |
| ||
Cinemark USA, Inc. term loan due 2025 |
| $ | 639,731 |
|
| $ | 633,136 |
|
Cinemark USA, Inc. 8.750% senior secured notes due 2025 |
|
| 250,000 |
|
|
| 250,000 |
|
Cinemark USA, Inc. 5.875% senior notes due 2026 |
|
| 0 |
|
|
| 405,000 |
|
Cinemark USA, Inc. 5.250% senior notes due 2028 |
|
| 0 |
|
|
| 765,000 |
|
Cinemark USA, Inc. 5.125% senior notes due 2022 |
|
| 400,000 |
|
|
| 0 |
|
Cinemark USA, Inc. 4.875% senior notes due 2023 |
|
| 755,000 |
|
|
| 0 |
|
Other |
|
| 23,169 |
|
|
| 30,200 |
|
Total long-term debt carrying value |
|
| 2,067,900 |
|
|
| 2,083,336 |
|
Less: Current portion |
|
| 18,056 |
|
|
| 24,254 |
|
Less: Debt debt issuance costs, net of accumulated amortization |
|
| 24,888 |
|
|
| 30,390 |
|
Long-term debt, less current portion, net of unamortized debt issuance costs |
| $ | 2,024,956 |
|
| $ | 2,028,692 |
|
Fair Value of Long Term Debt
|
| December 31, |
| |||||
|
| 2017 |
|
| 2018 |
| ||
Cinemark USA, Inc. term loan |
| $ | 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 |
|
| 755,000 |
|
|
| 755,000 |
|
Other (1) |
|
| 2,778 |
|
|
| 1,389 |
|
Total long-term debt |
|
| 1,817,295 |
|
|
| 1,809,311 |
|
Less current portion |
|
| 7,099 |
|
|
| 7,984 |
|
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 |
| $ | 1,780,381 |
|
| $ | 1,772,627 |
|
|
|
F-25
CINEMARK USA, INC.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 as of December 31, 2020 and 2021 is shown in the table above. The fair value of the Company’s total long term debt was $1,978,322 and $2,057,957 as of December 31, 2020 and 2021, respectively.
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 $700,000$700,000 term loan and a $100,000$100,000 revolving line of credit line (the “Credit Agreement”).
Cinemark USA, Inc. 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 |
|
|
|
|
|
Under the amended Credit Agreement, quarterly principal payments of $1,649$1,649 are due on the term loan through December 31, 2024, with a final principal payment of $613,351$613,351 due on March 29, 2025.2025.
Subsequent to the March 29, 2018 amendment noted above, interestInterest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%0.50%, and (3) a one-month Eurodollar-based rate
F-29
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
plus 1.0%1.0%, plus, in each case, a margin of 0.75%0.75% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 1.75%1.75% per annum.
Interest on the revolving line of credit line accrues, at our option, at: (A) a base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin that ranges from 0.50% to 1.25%1.25% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 1.50%1.50% to 2.25%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 As of December 31 2018,2021, the applicable margin was 2.25%, however, there were 0 borrowing outstanding under the revolving line of credit.
As of December 31, 2021, there was $652,922633,136 outstanding under the term loan and no borrowings outstanding under the revolving credit 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.loan. The average interest rate on outstanding term loan borrowings under the Credit Agreement at December 31, 20182021 was approximately 4.4%3.4% per annum.annum, after giving effect to the interest rate swaps discussed below.
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 Credit Agreement are guaranteed by Cinemark Holdings, Inc. and certain of Cinemark USA, Inc.’s domestic subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of Cinemark USA, Inc.’s and the guarantors’ personal property, including, without limitation, pledges of all of Cinemark USA, Inc.’s capital stock, all of the capital stock of certain of Cinemark USA, Inc.’s domestic subsidiaries and 65%65% of the voting stock of certain of its foreign subsidiaries.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on Cinemark USA, Inc.’s ability, and in certain instances, its subsidiaries’ and our ability, to consolidate or merge or liquidate, wind up or dissolve; substantially change the nature of its business; sell, transfer or dispose of assets; create or incur indebtedness; create liens; pay dividends or repurchase stock; and make capital expenditures and investments. If Cinemark USA, Inc. has borrowings outstanding on the revolving line of credit, line, it is required to keep a consolidated net senior secured leverage ratio, as defined in the Credit Agreement, not to exceed 5.04.25 to 1. As of December 31, 2018, the Company’s actual ratio was 2.9 to 1.See discussion below regarding recent covenant waivers.
The dividend restriction contained in the Credit Agreement prevents the Company and any of its subsidiaries from paying a dividend or otherwise distributing cash to its stockholders unless (1) the Company is not in default, and the distribution would not cause Cinemark USA, Inc. to be in default, under the Credit Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Credit Agreement, and (c) certain other defined amounts.amounts (collectively the “Applicable Amount”). The covenant waiver described below further limits, and the covenant waiver amendment described below may further limit, Cinemark USA's and its subsidiaries' ability to pay a dividend or otherwise distribute cash to its stockholders. As of December 31, 2018,2021, Cinemark USA, Inc. could have distributed up to approximately $2,918,142$2,700,000 to its parent company and sole stockholder, Cinemark Holdings, Inc.
4.875%On April 17, 2020, in conjunction with the issuance of the 8.750% Secured Notes discussed below, the Company obtained a waiver of the leverage covenant, which applies when amounts are outstanding under the revolving line of credit, from the majority of revolving lenders under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020. The waiver was subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.
On August 21, 2020, in conjunction with the issuance of Cinemark Holdings, Inc.'s 4.500% convertible senior notes, the Company further amended the waiver of the leverage covenant to extend through the fiscal quarter ending September 30, 2021. The amendment also i) modifies the maintenance covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits the Company to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver, and (iv) makes such other changes to permit the issuance of Cinemark Holdings, Inc.'s 4.500%
F-30
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
convertible senior notes. Under the modified calculation, the consolidated net senior secured leverage ratio was 1.1 to 1 as of December 31, 2021.
On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from November 28, 2022 to November 28, 2024. The Company incurred debt issuance costs of approximately $500 in connection with the extension of the revolving line of credit, which are recorded as a reduction of long-term debt on the consolidated balance sheet.
5.875% Senior Notes
On May 24, 2013,March 16, 2021, Cinemark USA, Inc. issued $530,000$405,000 aggregate principal amount of 4.875%5.875% senior notes due 2023,2026, at par value (the “4.875%“5.875% Senior Notes”). Interest on the 4.875% Senior Notes is payable on June 1 and December 1 of each 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 redemptionfund a cash tender offer to purchase any and all of Cinemark USA, Inc.’s previously outstanding $200,000 7.375% senior subordinated notes due 2021USA’s 5.125% Senior Notes (the “7.375%“5.125% 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 partto redeem any of the same series as Cinemark USA, Inc.’s existing 4.875%5.125% Senior Notes.Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year. The aggregate principal amount of $755,000 of 4.875%5.875% Senior Notes mature on June 1, 2023.March 15, 2026. The Company incurred debt issueissuance costs of approximately $3,702$6,021 in connection with the issuance, of the additional notes, which along with the discount of $2,250, are reflectedrecorded as a reduction of long termlong-term debt net of accumulated amortization, on the consolidated balance sheets as of December 31, 2017 and 2018.sheet.
The 4.875%5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 4.875%5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior unsecured debt and are senior in right of payment to all of Cinemark USA, Inc.’s and its guarantor’sguarantors’ existing and future senior subordinated debt. The 4.875%5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the assetscollateral securing such debt, including all borrowings under Cinemark USA, Inc.’s Credit Agreement.amended senior secured credit facility. The 4.875%5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 4.875%5.875% 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, 2018, Cinemark USA, Inc. could have distributed up to approximately $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 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, 2018 was approximately 6.3to 1.
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”). Interest on the 5.125% Senior Notes is payable on June 15 and December 15 of each 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 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%5.875% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. As of December 31, 2018, Cinemark USA, Inc. could have distributed up to approximately $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.Company would be required to make an offer to repurchase the 5.125%5.875% Senior Notes at a price equal to 101%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%5.875% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfieswe satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.
Prior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of the 5.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.875% Senior Notes to the date of redemption. After March 15, 2023, Cinemark USA, Inc. may redeem the 5.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.
5.250% Senior Notes
On June 15, 2021, Cinemark USA, Inc. issued $765,000 aggregate principal amount of 5.25% senior notes due 2028, at par value (the “5.25% Senior Notes”). Proceeds, after payment of fees, were used to redeem all of Cinemark USA’s 4.875% $755,000 aggregate principal amount of Senior Notes due 2023 (the “4.875% Senior Notes”). Interest on the 5.25% Senior Notes is payable on January 15 and July 15 of each year, beginning January 15, 2022. The 5.25% Senior Notes mature on July 15, 2028. The Company incurred debt issuance costs of approximately $10,684 in connection with the issuance, which are recorded as a reduction of long-term debt on the consolidated balance sheet.
F-31
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s 8.750% senior secured notes due 2025, in each case to the extent of the value of the collateral securing such debt, (iv) are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA’s non-guarantor subsidiaries, and (v) are structurally senior to Cinemark Holdings, Inc.'s 4.500% convertible senior notes.
The indenture to the 5.25% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. Upon a change of control, as defined in the indenture, the Company would be required to make an offer to repurchase the 5.25% Senior Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 5.25% Senior Notes allows Cinemark USA, Inc. to incur additional indebtedness if we satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.
Prior to July 15, 2024, Cinemark USA, Inc. may redeem all or any part of the 5.25% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.25% Senior Notes to the date of redemption. On or after July 15, 2024, Cinemark USA, Inc. may redeem the 5.25% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to July 15, 2024, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.25% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture, so long as at least 60% of the principal amount of the 5.25% Senior Notes remains outstanding immediately after each such redemption.
8.750% Secured Notes
On April 20, 2020, Cinemark USA, Inc. issued $250,000 aggregate principal amount of 8.750% senior secured notes due 2025 (the “8.750% Secured Notes”). The 8.750% Secured Notes will mature on May 1, 2025. Interest on the 8.750% Secured Notes is payable on May 1 and November 1 of each year.
The 8.750% Secured Notes are fully and unconditionally guaranteed on a joint and several senior basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or in any other manner become liable with respect to any of Cinemark USA, Inc.’s or its guarantors’ other debt. If Cinemark USA, Inc. cannot make payments on the 8.750% Secured Notes when they are due, Cinemark USA, Inc.’s guarantors must make them instead. Under certain circumstances, the guarantees may be released without action by, or the consent of, the holders of the 8.750% Secured Notes.
The indenture governing the 8.750% Secured Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. Upon a change of control, as defined in the indenture governing the 8.750% Secured Notes, Cinemark USA, Inc. would be required to make an offer to repurchase the 8.750% Secured Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 8.750% Secured Notes allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies a coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.
Prior to May 1, 2022, Cinemark USA, Inc. may redeem all or any part of the 8.750% Secured Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 8.750% Secured
F-32
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Notes to the date of redemption. On or after May 1, 2022, Cinemark USA, Inc. may redeem the 8.750% Secured Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to May 1, 2022, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 8.750% Secured Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture, so long as at least 60% of the principal amount of the 8.750% Secured Notes remains outstanding immediately after each such redemption.
4.875% Senior Notes
On May 21, 2021, Cinemark USA, Inc. issued a conditional notice of optional redemption to redeem the $755,000 outstanding principal amount of the 4.875% Senior Notes. In connection therewith, Cinemark USA deposited with Wells Fargo Bank, N.A., as Trustee for the 4.875% Senior Notes (the “Trustee”), funds sufficient to redeem all 4.875% Senior Notes remaining outstanding on June 21, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included $755,000 of outstanding principal at the redemption price equal to 100.000% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on June 15, 2021, the indenture governing the 4.875% Senior Notes was fully satisfied and discharged.
The Company recorded a loss on extinguishment of debt of $3,919, which included the write-off of $3,301 of unamortized debt issuance costs and the payment of $618 in legal fees during the year ended December 31, 2021.
5.125% Senior Notes
On March 16, 2021, Cinemark USA, Inc. completed a tender offer to purchase its previously outstanding 5.125% Senior Notes, of which $333,990 was tendered at the expiration of the offer. On March 16, 2021, Cinemark USA, Inc. also issued a notice of optional redemption to redeem the remaining $66,010 principal amount of the 5.125% Senior Notes. In connection therewith, Cinemark USA deposited with Wells Fargo Bank, N.A., as Trustee for the 5.125% Senior Notes (the “Trustee”), funds sufficient to redeem all 5.125% Notes remaining outstanding on April 15, 2021 (the “Redemption Date”). The redemption payment (the “Redemption Payment”) included $66,010 of outstanding principal at the redemption price equal to 100.000% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee on March 16, 2021, the indenture governing the 5.125% Senior Notes was fully satisfied and discharged.
The Company recorded a loss on extinguishment of debt of $2,603 during the year ended December 31, 2021, which included the write-off of $1,168 of unamortized debt issuance costs and the payment of $1,435 in tender and legal fees
Additional Borrowings of International Subsidiaries
During the years ended December 31, 2020 and 2021, certain of the Company’s international subsidiaries borrowed an aggregate of $35,797 under various local loans. Below is a summary of loans outstanding as of December 31, 2021:
|
| Loan Balances as of |
|
| Interest Rates as of |
|
|
|
| |
Loan Description(s) |
| December 31, 2021 |
|
| December 31, 2021 |
| Covenants |
| Maturity | |
Colombia loans |
| $ | 2,741 |
|
| 4.9% to 5.2% |
| Negative and maintenance covenants |
| June 2023 and |
Peru loans |
| $ | 4,879 |
|
| 1.0% to 4.8% |
| Negative covenants |
| June and December 2023 |
Brazil loans |
| $ | 18,376 |
|
| 4.0% to 8.7% |
| Negative covenants |
| November 2022, October 2023 and January 2029 |
Chile loans |
| $ | 4,204 |
|
| 3.5% |
| Negative and maintenance covenants |
| November 2023 |
Total |
| $ | 30,200 |
|
|
|
|
|
|
|
F-33
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
During the year ended December 31, 2021, the Company obtained a waiver of the maintenance covenant related to the bank loans in Chile through June 30, 2022.
Additionally, the Company deposited cash into a collateral account to support the issuance of letters of credit to the lenders for certain of the international loans noted above. The total amount deposited as of December 31, 2021 was $25,767 and is considered restricted cash.
Covenant Compliance
The indentures governing the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes ("the indentures") contain covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. As of December 31, 2021, Cinemark USA, Inc. could have distributed up to approximately $3,000,000 to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indentures, subject to its available cash and other borrowing restrictions outlined in the indentures. Upon a change of control, as defined in the indentures, Cinemark USA, Inc. would be required to make an offer to repurchase the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indentures allow Cinemark USA, Inc. to incur additional indebtedness if we satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of December 31, 20182021 was approximately 6.30.6 to 1.1.
7.375% See also discussion of dividend restrictions and the consolidated net senior secured leverage ratio under the Credit Agreement at Senior Subordinated NotesSecured Credit Facility above.
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”).
On March 21, 2016, Cinemark USA, Inc. redeemed its Senior Subordinated Notes at a make-whole premium of approximately 104% plus accrued and unpaid interest, utilizing the proceeds from the issuance of the additional $225,000 Cinemark USA, Inc. 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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 $1,817,295 and $1,809,311 as of December 31, 2017 and 2018, respectively, excluding debt issuance costs of $29,815 and $28,700, respectively. The fair value of the Company’s long term debt was $1,840,918 and $1,774,066 as of December 31, 2017 and 2018, respectively.
Covenant Compliance and Debt Maturity
As of December 31, 2018,2021, the Company believes it was in full financial compliance with all agreements, including related covenants, governing its outstanding debt.
Debt Maturity
The Company’s long-term debt, excluding unamortized debt issuance costs, at December 31, 20182021 matures as follows:
2019 |
| $ | 7,984 |
| ||||
2020 |
|
| 6,595 |
| ||||
2021 |
|
| 6,595 |
| ||||
2022 |
|
| 406,595 |
|
| $ | 24,254 |
|
2023 |
|
| 761,595 |
|
| 12,285 |
| |
2024 |
| 6,983 |
| |||||
2025 |
| 863,538 |
| |||||
2026 |
| 405,000 |
| |||||
Thereafter |
|
| 619,947 |
|
|
| 771,276 |
|
Total |
| $ | 1,809,311 |
|
| $ | 2,083,336 |
|
Interest Rate Swap Agreements
TheEffective March 31, 2020, the Company is currently a party to threeamended and extended its 3 then existing interest rate swap agreements thatand entered into a fourth interest rate swap agreement, all of which are used to hedge a portion of the interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualify for cash flow hedge accounting. Upon amending the interest rate swap agreements effective March 31,2020, the Company determined that the interest payments hedged with the agreements are still probable to occur, therefore the loss that accumulated on the swaps prior to the amendments of $29,359 is being amortized to interest expense through December 31, 2022, the original maturity dates of the swaps. Approximately $3,371 and $4,495 was recorded in amortization of accumulated losses for amended swaps in the consolidated income statement for the years ended December 31, 2020 and 2021, respectively.
F-34
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The fair values of the interest rate swaps are recorded on the Company’s consolidated balance sheetsheets as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. The changes in fair value are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged items affect earnings.
The valuation technique used to determine fair value is the income approach 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 32 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35. The Company is assessing the impact of reference rate reform, as well as the impact of ASU 2020-04 and ASU 2021-01, on the Company's interest rate swaps. See further discussion at Note 2.
Below is a summary of the Company’s interest rate swap agreements designated as cash flow hedges as of December 31, 2018:2021:
|
|
|
|
|
|
|
|
|
|
| Estimated |
| ||
|
|
|
|
|
|
|
|
|
|
| Fair Value at |
| ||
Notional |
|
|
|
|
|
|
|
|
|
| December 31, |
| ||
Amount |
|
| Effective Date |
| Pay Rate |
| Receive Rate |
| Expiration Date |
| 2021 (1) |
| ||
$ | 137,500 |
|
| December 31, 2018 |
| 2.12% |
| 1-Month LIBOR |
| December 31, 2024 |
| $ | 4,313 |
|
$ | 175,000 |
|
| December 31, 2018 |
| 2.12% |
| 1-Month LIBOR |
| December 31, 2024 |
|
| 5,537 |
|
$ | 137,500 |
|
| December 31, 2018 |
| 2.19% |
| 1-Month LIBOR |
| December 31, 2024 |
|
| 4,611 |
|
$ | 150,000 |
|
| March 31, 2020 |
| 0.57% |
| 1-Month LIBOR |
| March 31, 2022 |
|
| 164 |
|
|
|
|
|
|
|
|
|
| Total |
| $ | 14,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
|
The total 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 for the year ended December 31, 2018.
F-29
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
The Company determines fair value measurements in accordance with FASB ASC Topic 820, which establishes a fair value hierarchy under which an asset or liability is categorized based on the lowest level of input significant to its fair value measurement. The levels of input defined by FASB ASC Topic 820 are as follows:
Level 1 – quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date;
Level 2 – other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3 – unobservable and should be used to measure fair value to the extent that observable inputs are not available.
Below is a summary of liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of December 31, 2018:the periods presented:
|
| Carrying |
|
| Fair Value |
|
| As of |
| Carrying |
| Fair Value |
| |||||||||||||||||||||
Description |
| Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| December 31, |
| Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
Interest rate swap liabilities |
| $ | (5,093 | ) |
| $ | — |
|
| $ | — |
|
| $ | (5,093 | ) |
| 2020 |
| $ | 33,847 |
|
| $ | — |
|
| $ | 33,847 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Interest rate swap liabilities |
| 2021 |
| $ | 14,625 |
|
| $ | — |
|
| $ | 14,625 |
|
| $ | — |
|
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 (1) |
| |
|
| 2018 |
| |
Beginning balance - January 1 |
| $ | — |
|
Interest rate swaps effective December 31, 2018 |
|
| 5,093 |
|
Ending balance - December 31 |
| $ | 5,093 |
|
|
|
The Company also uses the market and income approach for fair value measurements on a nonrecurring basis in the impairment evaluations of its long-lived assets (see Note 1 and Note 9). Additionally, the Company uses the market approach to estimate the fair value of its long-term debt (see Note 11). There were no changes in valuation techniques during the period. There were no0 transfers in or out of Level 1, Level 2 or Level 3 during the years ended December 31, 2016, 20172019, 2020 and 2018.2021.
|
|
The accumulated other comprehensive loss account in stockholder’sstockholders’ equity of $253,282$398,653 and $319,007$397,051 at December 31, 20172020 and 2018,2021, respectively, includes the cumulative foreign currency losses of $253,565$375,644 and $315,300,
F-35
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
$394,481, 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 designated as hedges.
As of December 31, 2018,2021, all foreign countries where the Company has operations, other than Argentina, are non-highly inflationary, and the local currency is the same as the functional currency in all of the locations. Thus, any fluctuation in the currency results in a cumulative foreign currency translation adjustment recorded to accumulated other comprehensive loss. The Company deemed Argentina to be highly inflationary beginning July 1, 2018. A highly inflationary economy is defined as an economy with a cumulative inflation rate of approximately 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 andwhose functional currency is other than the US dollar, for the years ended December 31, 2016, 2017 and 2018.periods presented.
|
|
|
|
|
|
|
|
| Other Comprehensive |
| ||||||||||||
|
|
|
|
|
|
|
|
| Income (Loss) |
| ||||||||||||
|
| Exchange Rate as of December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||
Country |
| 2019 |
| 2020 |
| 2021 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
| ||||||
Brazil |
|
| 4.02 |
|
| 5.20 |
|
| 5.57 |
|
| $ | (8,140 | ) |
| $ | (42,698 | ) |
| $ | (4,696 | ) |
Colombia |
|
| 3,277.14 |
|
| 3,432.50 |
|
| 3,981.16 |
|
|
| (362 | ) |
|
| (2,183 | ) |
|
| (140 | ) |
Chile |
|
| 736.86 |
|
| 714.14 |
|
| 852.02 |
|
|
| (5,158 | ) |
|
| 1,228 |
|
|
| (10,890 | ) |
Peru |
|
| 3.37 |
|
| 3.65 |
|
| 4.02 |
|
|
| 257 |
|
|
| (3,403 | ) |
|
| (2,785 | ) |
All other |
|
|
|
|
|
|
|
|
| 650 |
|
|
| (536 | ) |
|
| (326 | ) | |||
|
|
|
|
|
|
|
|
| $ | (12,753 | ) |
| $ | (47,592 | ) |
| $ | (18,837 | ) |
|
|
|
|
|
|
|
|
|
|
|
| Other Comprehensive |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| Income (Loss) |
| |||||||||
|
| Exchange Rate as of December 31, |
|
| For the Year Ended December 31, |
| ||||||||||||||||
Country |
| 2016 |
| 2017 |
| 2018 |
|
| 2016 |
|
| 2017 |
|
| 2018 |
| ||||||
Brazil |
|
| 3.26 |
|
| 3.31 |
|
| 3.88 |
|
| $ | 37,286 |
|
| $ | (4,567 | ) |
| $ | (34,086 | ) |
Argentina (1) |
|
| 16.04 |
|
| 18.65 |
|
| 37.68 |
|
|
| (13,362 | ) |
|
| (8,200 | ) |
|
| (14,357 | ) |
Colombia |
|
| 3,000.71 |
|
| 2,936.67 |
|
| 3,249.75 |
|
|
| 1,278 |
|
|
| 246 |
|
|
| (1,795 | ) |
Chile |
|
| 679.09 |
|
| 615.97 |
|
| 694.74 |
|
|
| 1,855 |
|
|
| 5,672 |
|
|
| (8,924 | ) |
Peru |
|
| 3.45 |
|
| 3.24 |
|
| 3.39 |
|
|
| 87 |
|
|
| 2,752 |
|
|
| (2,136 | ) |
All other |
|
|
|
|
|
|
|
|
|
|
|
| (783 | ) |
|
| (869 | ) |
|
| (955 | ) |
|
|
|
|
|
|
|
|
|
|
|
| $ | 26,361 |
|
| $ | (4,966 | ) |
| $ | (62,253 | ) |
|
|
During the year ended December 31, 2017, the Company reclassified $1,551 of cumulative foreign currency translation adjustments, related to a Canadian subsidiary that was liquidated, from accumulated other comprehensive loss to foreign currency exchange gain (loss) on the Company’s consolidated statementstatements of income.
Duringincome (loss). A gain of $1,243 and $195 were recorded for the yearyears ended December 31, 2018, the Company reclassified $518 of cumulative foreign currency translation adjustments, related to the settlement of an intercompany note between a domestic2020 and an international subsidiary, from accumulated other comprehensive loss to foreign currency exchange gain (loss) on the consolidated statement of income.2021, respectively.
| 14. NONCONTROLLING INTERESTS IN SUBSIDIARIES |
Noncontrolling interests in subsidiaries of the Company were as follows at December 31:
|
| December 31, |
| |||||
|
| 2017 |
|
| 2018 |
| ||
Cinemark Partners II — 24.6% interest (in one theatre) |
| $ | 8,795 |
|
| $ | 8,152 |
|
Laredo Theatres – 25% interest (in two theatres) |
|
| 1,746 |
|
|
| 2,308 |
|
Greeley Ltd. — 49% interest (in one theatre) |
|
| 843 |
|
|
| 1,411 |
|
Other |
|
| 509 |
|
|
| 508 |
|
Total |
| $ | 11,893 |
|
| $ | 12,379 |
|
During December 2016 the Company purchased the remaining 25% noncontrolling interest of one of its Chilean subsidiaries, Flix Impirica S.A. (“Flix Impirica”), for approximately $450 in cash. The increase in the Company’s ownership interest in the Chilean subsidiary was accounted for as an equity transaction in accordance with ASC Topic 810-10-45-23. The Company recorded a decrease in additional paid-in-capital of approximately $27, which represented the difference between the cash paid and the book value of the Chilean subsidiary’s noncontrolling interest account, which was approximately $423. As a result of this transaction, the Company now owns 100% of the shares in Flix Impirica.periods presented:
|
| December 31, |
| |||||
|
| 2020 |
|
| 2021 |
| ||
Cinemark Partners II — 49.2% interest |
| $ | 7,706 |
|
| $ | 7,989 |
|
Laredo Theatres – 25% interest |
|
| 1,681 |
|
|
| 2,018 |
|
Greeley Ltd. — 49% interest |
|
| 1,101 |
|
|
| 1,048 |
|
Other |
|
| 508 |
|
|
| 509 |
|
Total |
| $ | 10,996 |
|
| $ | 11,564 |
|
F-31
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is a summary of the impact ofThere were 0 changes in the Company’s ownership interest in its subsidiaries on its equity:during the years ended December 31, 2019, 2020 and 2021.
F-36
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| Year ended December 31, |
| |||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
| |||
Net income attributable to Cinemark USA, Inc. |
| $ | 256,777 |
|
| $ | 265,643 |
|
| $ | 215,735 |
|
Transfers from noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
| (27 | ) |
|
| — |
|
|
| — |
|
Change from net income attributable to Cinemark USA, Inc. and transfers from noncontrolling interests |
| $ | 256,750 |
|
| $ | 265,643 |
|
| $ | 215,735 |
|
|
|
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 are 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$1.00 par value, authorized with none0ne 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 indentures 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 911 for a discussion of restrictions contained within the debt agreements.
Restricted Stock — Below is a summary of restricted stock activity for Cinemark Holdings, Inc. for the years ended December 31, 2016, 20172019, 2020 and 2018:
2021.
|
| Year Ended |
|
| Year Ended |
|
| Year Ended |
|
| Year Ended |
| Year Ended |
| Year Ended |
| ||||||||||||||||||||||||||||||||
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2018 |
|
| December 31, 2019 |
|
| December 31, 2020 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||||||
|
| 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 |
|
| Shares of |
|
| Weighted |
|
| Shares of |
|
| Weighted |
|
| Shares of |
|
| Weighted |
| ||||||||||||
Outstanding at January 1 |
|
| 757,775 |
|
| $ | 30.73 |
|
|
| 606,618 |
|
| $ | 33.51 |
|
|
| 650,581 |
|
| $ | 35.81 |
|
|
| 704,353 |
| $ | 38.68 |
| 783,823 |
| $ | 37.53 |
| 1,431,975 |
| $ | 21.11 |
| |||||||
Granted |
|
| 335,707 |
|
| $ | 30.98 |
|
|
| 246,534 |
|
| $ | 41.70 |
|
|
| 328,734 |
|
| $ | 38.72 |
|
|
| 315,899 |
| $ | 37.34 |
| 1,555,361 |
| $ | 17.68 |
| 1,241,742 |
| $ | 21.91 |
| |||||||
Vested |
|
| (430,056 | ) |
| $ | 26.60 |
|
|
| (192,230 | ) |
| $ | 36.26 |
|
|
| (250,442 | ) |
| $ | 31.27 |
|
|
| (209,821 | ) |
| $ | 41.10 |
| (832,609 | ) |
| $ | 29.30 |
| (617,607 | ) |
| $ | 20.92 |
| ||||
Forfeited |
|
| (56,808 | ) |
| $ | 33.81 |
|
|
| (10,341 | ) |
| $ | 33.48 |
|
|
| (24,520 | ) |
| $ | 38.62 |
|
|
| (26,608 | ) |
| $ | 37.69 |
|
| (74,600 | ) |
| $ | 30.72 |
|
| (61,714 | ) |
| $ | 18.96 |
| ||
Outstanding at December 31 |
|
| 606,618 |
|
| $ | 33.51 |
|
|
| 650,581 |
|
| $ | 35.81 |
|
|
| 704,353 |
|
| $ | 38.68 |
|
|
| 783,823 |
|
| $ | 37.53 |
|
| 1,431,975 |
|
| $ | 21.11 |
|
| 1,994,396 |
|
| $ | 21.73 |
|
F-32
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
During the year ended December 31, 2018,2021, Cinemark Holdings, Inc. granted 328,7341,241,742 shares of restricted stock to its directors and 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 dates of grant, which ranged from $35.80$16.09 to $39.26$24.48 per share. The Company assumed forfeiture rates ranging from 0%0% to 10%10% for the restricted stock awards. Restricted stock grantedgrants to directors vestsvest over a one-year period. Restricted stock grantedgrants to employees vestsvest over periods ranging from one year to four years based on continued service. The recipients of restricted stock are entitled to receive dividends to the extent they are declared by Cinemark Holdings, Inc. and to vote their respective shares, however, the sale and transfer of the restricted sharesstock is prohibited during the restriction period.
Below is a summary of restricted stock award activity recorded for the periods indicated.
|
| Year Ended December 31, |
| |||||||||
|
| 2019 |
|
| 2020 |
|
| 2021 |
| |||
Compensation expense recognized by the Company during the |
| $ | 9,266 |
|
| $ | 14,555 |
|
| $ | 21,923 |
|
Additional compensation expense recognized by Cinemark |
| $ | 919 |
|
| $ | 918 |
|
| $ | 923 |
|
Fair value of restricted shares held by Company employees that |
| $ | 7,044 |
|
| $ | 16,493 |
|
| $ | 9,669 |
|
Fair value of restricted shares held by Cinemark Holdings, Inc.’s |
| $ | 980 |
|
| $ | 377 |
|
| $ | 1,329 |
|
Income tax benefit recognized upon vesting of restricted stock |
| $ | 1,271 |
|
| $ | 5,475 |
|
| $ | 769 |
|
Additional income tax benefit recognized upon vesting of |
| $ | 245 |
|
| $ | 145 |
|
| $ | 279 |
|
F-37
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
| 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 |
|
As of December 31, 2018,2021, the remaining unrecognized compensation expense related to these restricted stock awards was approximately $15,174,$23,234, of which $14,758$22,568 will be recognized by the Company and $416$648 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.years.
Restricted Stock Units — During the years ended December 31, 2016, 20172019 and 2018,2020, Cinemark Holdings, Inc. granted restricted stock units representing 253,661, 175,634306,651 and 228,194436,681 of hypothetical shares of Cinemark Holdings, Inc.’s common stock, respectively, to employees of the Company. The grant date fair value for units issued during the year ended December 31, 2019 was $36.77 per unit. The grant date fair value for the units issued during the year ended December 31, 2020 was $32.12 per unit. Based upon the terms of the award agreements, 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 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. As an example, if the Company achieves an IRR equal to 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 if the participant continues to provide services through the fourth anniversary of the grant date.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 target 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 target IRR level will be achieved, the Company adjusts compensation expense on a prospective basis over the remaining service period. The Company assumed a forfeiture rate of 5%rates ranging from 0% to 5% for the restricted stock unit awards granted during 2018.2019 and 2020. 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 summarizingDuring the potential numberyear ended December 31, 2021, the Compensation Committee of units that could vest underCinemark Holdings, Inc.'s Board of Directors ("Compensation Committee") evaluated the impact of the COVID-19 pandemic on the performance metric used for the restricted stock unit awards granted during 2019 and 2020 and determined that the yearsCOVID-19 pandemic significantly impacted the Company’s ability to meet the performance metric. The Compensation Committee made a discretionary decision to certify the vest of the 2019 and 2020 restricted stock unit awards at target based upon the unforeseen, external circumstances that were beyond management’s control, the projected macroeconomic conditions through 2021 and beyond, and the uncertain timing as to the recovery of the Company’s industry. The requirement to satisfy the applicable service period under the restricted stock unit awards was not changed. In addition, the Compensation Committee determined that it would not be appropriate to issue restricted stock units during the year ended December 31, 2016, 20172021 due to the aforementioned macroeconomic conditions and 2018 at eachindustry recovery. In lieu of restricted stock units, the three levelsCompensation Committee granted restricted stock with a four-year vest period. See Restricted Stock discussion above for other relevant terms of financial performance (excluding forfeitures):
such awards.
|
| 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 |
|
|
|
Below is a summary of activity for restricted stock unit awards for Cinemark Holdings, Inc. for the periods indicated:
|
| Year Ended December 31, |
| |||||||||
|
| 2019 |
|
| 2020 |
|
| 2021 |
| |||
Number of restricted stock unit awards that vested during the period |
|
| 90,895 |
|
|
| 208,204 |
|
|
| 232,200 |
|
Fair value of restricted stock unit awards that vested during the period |
| $ | 3,658 |
|
| $ | 5,050 |
|
| $ | 4,095 |
|
Accumulated dividends paid upon vesting of restricted stock unit awards (1) |
| $ | 386 |
|
| $ | 942 |
|
| $ | 62 |
|
Compensation expense recognized during the period (2) |
| $ | 4,430 |
|
| $ | 3,931 |
|
| $ | 6,425 |
|
Income tax benefit related to stock unit awards |
| $ | 397 |
|
| $ | 788 |
|
| $ | 691 |
|
|
| Year Ended December 31, |
| |||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
| |||
Number of restricted stock unit awards that vested during the period |
|
| 213,984 |
|
|
| 97,115 |
|
|
| 127,084 |
|
Fair value of restricted stock unit awards that vested during the period |
| $ | 7,260 |
|
| $ | 4,155 |
|
| $ | 4,846 |
|
Accumulated dividends paid upon vesting of restricted stock unit awards |
| $ | 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 |
| $ | 3,049 |
|
| $ | 1,745 |
|
| $ | 708 |
|
F-34F-38
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of December 31, As of December 31, The following is provided as supplemental information to the consolidated statements of cash flows: Year Ended December 31, 2019 2020 2021 Cash paid for interest $ 93,907 $ 102,859 $ 87,797 Cash paid (refunds received) for income taxes, net $ 88,670 $ (116,916 ) $ (136,512 ) Cash deposited in restricted accounts (1) $ — $ 13,847 $ 11,920 Noncash operating activities: Interest expense - NCM (see Note 6) $ (28,624 ) $ (23,595 ) $ (23,612 ) Noncash investing activities: Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment (2) $ 22,013 $ (13,259 ) $ 20,100 Theatre properties acquired under finance leases $ 21,535 $ — $ 725 Theatre properties acquired as distribution from equity investee (see Note 7) $ — $ 102,719 $ — Investment in NCM – receipt of common units (see Note 6) $ 1,552 $ 3,620 $ 10,237 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 ) (2) On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted in response to the global COVID-19 pandemic. The CARES Act allowed corporate taxpayers to carry back operating losses generated in 2018, The Company’s provision for federal and foreign income tax expense for continuing operations consisted of the following: Year Ended December 31, 2019 2020 2021 Income (loss) before income taxes: U.S. $ 238,108 $ (767,767 ) $ (362,537 ) Foreign 38,189 (143,157 ) (49,841 ) Total $ 276,297 $ (910,924 ) $ (412,378 ) F-39 CINEMARK USA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In thousands, except share and per share data 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, 2019 2020 2021 Current: Federal $ 45,758 $ (264,944 ) $ 4,026 Foreign 24,022 397 794 State 12,583 289 1,008 Total current expense $ 82,363 $ (264,258 ) $ 5,828 Deferred: Federal $ (298 ) $ (50,924 ) $ (36,666 ) Foreign 5 13,266 409 State (1,550 ) (1,721 ) (1,851 ) Total deferred taxes $ (1,843 ) $ (39,379 ) $ (38,108 ) Income taxes $ 80,520 $ (303,637 ) $ (32,280 ) 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 A reconciliation between income tax expense and taxes computed by applying the applicable statutory federal income tax rate to income before income taxes is as follows: Year Ended December 31, 2019 2020 2021 Computed statutory tax expense $ 58,022 $ (191,295 ) $ (86,599 ) State and local income taxes, net of federal income tax impact 8,555 (1,153 ) (689 ) Changes in valuation allowance 2,532 46,731 54,306 Foreign tax rate differential 4,646 (6,633 ) (4,466 ) Foreign tax credits 4,143 0 0 Impacts related to COVID-19 pandemic (1) 0 (185,220 ) — Changes in uncertain tax positions 197 24,879 5,658 Other, net 2,425 9,054 (490 ) Income taxes $ 80,520 $ (303,637 ) $ (32,280 ) Year Ended December 31, 2016 2017 2018 Computed statutory tax expense $ 127,176 $ 121,708 $ 65,781 Foreign inflation adjustments (281 ) — — State and local income taxes, net of federal income tax impact 12,081 12,857 12,686 Foreign losses not benefited and changes in valuation allowance (34,757 ) 249 822 Foreign tax rate differential (942 ) (245 ) 2,235 Foreign dividends 68,684 13,662 — 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 921 983 (6,139 ) Other — net (5,216 ) (2,422 ) (2,460 ) Income taxes $ 104,851 $ 80,256 $ 96,032 As of December 31, CINEMARK USA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In thousands, except share and per share data 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, December 31, 2017 2018 2020 2021 Deferred liabilities: Theatre properties and equipment $ 147,208 $ 158,797 $ 118,051 $ 100,547 Intangible asset — other 30,770 33,561 Intangible asset — tradenames 72,967 73,261 Finance lease assets 24,202 19,564 Operating lease right-of-use assets 297,452 288,205 Intangible asset – other 41,297 45,587 Intangible asset – tradenames 72,268 71,877 Investment in partnerships 67,449 63,217 20,402 16,128 Total deferred liabilities 318,394 328,836 573,672 541,908 Deferred assets: Deferred lease expenses 14,714 13,464 Exchange loss 220 1,306 Deferred revenue - NCM 85,816 70,688 Capital lease obligations 67,369 63,895 Tax impact of items in accumulated other comprehensive income — 2,237 Deferred revenue – NCM 83,998 84,084 Deferred revenue – Other 6,208 3,661 Prepaid rent 5,255 3,365 Gift Cards 9,265 8,354 Operating lease obligations 313,552 304,462 Finance lease obligations 31,284 25,611 Tax impact of items in accumulated other comprehensive income and additional paid-in-capital 9,916 4,391 Restricted stock 2,489 5,376 Accrued expenses 3,552 4,326 Other tax loss carryforwards 15,564 15,608 89,320 121,631 Other tax credit carryforwards 38,436 42,989 Other tax credit and attribute carryforwards 121,698 145,449 Other expenses, not currently deductible for tax purposes 13,801 26,776 10,780 14,277 Total deferred assets 235,920 236,963 687,317 724,987 Net deferred income tax liability before valuation allowance 82,474 91,873 Net deferred income tax (asset) liability before valuation allowance (113,645 ) (183,079 ) Valuation allowance against deferred assets – non-current 35,246 54,725 203,606 240,847 Net deferred income tax liability $ 117,720 $ 146,598 $ 89,961 $ 57,768 Net deferred tax (asset) liability — Foreign $ 3,073 $ (5,449 ) Net deferred tax liability — U.S. 114,647 152,047 Net deferred tax (asset) liability – Foreign $ 7,280 $ 6,737 Net deferred tax liability – U.S. 82,681 51,031 Total $ 117,720 $ 146,598 $ 89,961 $ 57,768 The Company continued to generate net operating losses in 2021 as a result of COVID-19 and such losses will be carried forward. As noted previously, net operating losses generated in 2020 were carried back to earlier years. Most of the state and all foreign jurisdictions in which the Company operates, however, only allow for net operating losses to be carried forward with varying expiration dates. A The Company assesses the likelihood that it will be The Company has established a valuation allowance against certain deferred tax assets for which the CINEMARK USA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In thousands, except share and per share data The Company’s valuation allowance changed from $203,606 as of December 31, 2020 to $240,847 as of December 31, 2021 (see Note 21). The increase relates to foreign tax credits and other deferred tax assets for which ultimate realization is uncertain. The valuation allowance associated with these deferred tax assets is primarily a result of not having sufficient income from deferred tax liability reversals in future periods to support the realization of the deferred tax assets. When the Company begins to generate taxable income at a normal level, the Company expects to reverse the valuation allowances with an offsetting increase to reported earnings. Uncertain Tax PositionsDuring2016, the Compensation Committee of the Board of Directors approved a modification to the 2015 restricted stock unit grants. The modification 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 the Company’s stock price at the date of modification, which was $37.98. The modifications resulted in incremental compensation expense of approximately $562 for the year ended December 31, 2016. 2021.2018,2021, the Company had restricted stock units outstanding that represented a total 594,266of 344,071 of hypothetical shares of common stock, net of actual cumulative forfeitures of 18,667 units, assumingwhich is the maximum IRR is achieved for allnumber of shares that could vest related to the outstanding restricted stock unit awards.units.2018,2021, the remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $8,416, which reflects the maximum IRR level that was achieved for the 2015 grant, an IRR level of 7.2% that was achieved for the 2016 grant, an IRR level of 11.2% that is estimated for the 2017 grant and an IRR level of 9.5% that is estimated for the 2018 grants.$3,616. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.one year.14.(1)(1) of December 31, 2017 and 2018 were $31,276 and $37,004, respectively.F-35CINEMARK USA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except share and per share dataOn 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, 2020 and 2021 were $28,250 and $8,150, respectively.the amounts recorded for the Tax Act are final for the 2017 transition tax, the re-measurement of deferred taxes,2019 and the Company’s reassessment of valuation allowances. The Company recorded a net additional charge as2020. As a result of the Tax Act and its recently issued guidance of $19,180, all non-cash, including a true upimpact of the re-measurementCOVID-19 pandemic on the Company’s business, it generated significant net operating losses during the years ended December 31, 2020 and December 31, 2021. The Company carried back 2020 losses and recorded tax benefits of deferred tax liabilities using$185,220 related to the lower U.S. corporate income tax rateNOL carryback provision. Losses incurred in 2021 are not available for carryback and a reduction in a deferred tax asset with regard to foreign tax creditare reported as net operating loss carryforwards.F-36CINEMARK USA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except share and per share data(1)(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 $20,433.2018, all earnings invested offshore subject to the Tax Act have been included in the transition tax. As of December 31, 2018,2021, the Company had approximately $415,323$94,107 of accumulated undistributed earnings and profits, approximately $373,768$168,307 of which was subject to the one-time transition tax pursuant to the 2017 Tax Cuts and Jobs Act. Any additionalAdditional tax due on the repatriation of previously taxedpreviously-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 recorded any deferred taxes on such earnings. The Company considers 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 liabilities on this amount is not practicable.F-37F-40December 31, 2017 and 2018the periods presented consisted of the following:significant portionmajority of our foreign tax credit carryforwards expire in 2023. Some foreign2023, 2026 and 2027, with the remainder expiring in 2028. Federal net operating losses expired in 2018; however, some losses may be carried forward indefinitely. Statehave an indefinite carryforward period. Foreign net operating losses mayhave varying carryforward periods with some being indefinite. Similarly, state net operating losses have varying carryforward periods with some being indefinite.carried forward for periodsable to recover its deferred tax assets against future sources of between fivetaxable income and twenty years withreduces the last expiring year being 2037.The Company’scarrying amounts of deferred tax assets by recording a valuation allowance, changed from $35,246 atif, based on all available evidence, the Company believes it is more likely than not that all or a portion of such assets will not be realized. During the year ended December 31, 20172021 the Company continued to $54,725 atgenerate significant pre-tax losses and remained in a three-year cumulative pre-tax loss. Consistent with December 31, 2018 (see Note 19). The increase was2020, this is heavily weighted as objectively verifiable negative evidence. As a result, the Company is unable to include future projected earnings in assessing the recoverability of recently issued guidanceits deferred tax assets.Tax Actultimate realization of future benefits is uncertain. Expiring carryforwards and the impact onrequired valuation allowances are adjusted annually. After application of the estimated usagevaluation allowances described above, the Company anticipates that no limitations will apply with respect to utilization of foreignany of the other deferred tax credit carryforwards before their expiration. assets described above.F-38F-41
The following is a reconciliation of the total amounts of unrecognized tax benefits excluding interest and penalties for the years ended December 31, 2016, 2017 and 2018:periods presented:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
| ||||||
Balance at January 1, |
| $ | 17,133 |
|
| $ | 17,403 |
|
| $ | 18,266 |
|
| $ | 10,561 |
| $ | 10,235 |
| $ | 46,528 |
| ||
Gross increases - tax positions in prior periods |
|
| 13 |
|
|
| 92 |
|
| — |
|
| 1 |
|
| 32,417 |
| 5,790 |
| |||||
Gross decreases - tax positions in prior periods |
| — |
|
|
| (12 | ) |
|
| (143 | ) |
| 0 |
| (88 | ) |
| (1,611 | ) | |||||
Gross increases - current period tax positions |
|
| 923 |
|
|
| 265 |
|
|
| 424 |
|
| 202 |
| 4,010 |
| 3,465 |
| |||||
Settlements |
|
| (924 | ) |
|
| (177 | ) |
|
| (7,191 | ) |
| (522 | ) |
| 0 |
| (122 | ) | ||||
Foreign currency translation adjustments |
|
| 258 |
|
|
| 695 |
|
|
| (795 | ) |
|
| (7 | ) |
|
| (46 | ) |
|
| (11 | ) |
Balance at December 31, |
| $ | 17,403 |
|
| $ | 18,266 |
|
| $ | 10,561 |
|
| $ | 10,235 |
|
| $ | 46,528 |
|
| $ | 54,039 |
|
The Company had $20,231$51,643 and $13,953$60,601 of unrecognized tax benefits, including interest and penalties, as of December 31, 20172020 and 2018,2021, respectively. Of these amounts, $20,231$51,643 and $13,953$60,601 represent the amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate for the years ended December 31, 20172020 and 2018,2021, respectively. The Company had $5,288$5,114 and $3,390$6,561 accrued for interest and penalties as of December 31, 20172020 and 2018,2021, respectively.
The Company prepares and its subsidiaries filefiles income tax returns based upon its interpretation of tax laws and regulations and record estimates based upon these judgments and interpretations. In the normal course of business, the Company’s income tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law resulting from legislation, regulation, and/or as concluded through the U.S. federal jurisdictionvarious jurisdictions' tax court systems. Significant judgment is exercised in applying complex tax laws and in certain state and foreignregulations across multiple global jurisdictions and are routinely under audit by many different tax authorities.where we conduct our operations. The Company believesrecognizes the tax benefit from an uncertain tax position only if it is more likely than not that its accrual forthe tax liabilities is adequate for all open audit yearsposition will be sustained upon examination by the taxing authorities, including resolutions of any related appeals or litigation processes, based on its assessmentupon the technical merits 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 position.
The Company is no longer subject to income tax audits from the Internal Revenue Service for years before 2015. Additionally, the Company began and concluded an audit from the Internal Revenue Service for the year 2016, with no changes.2018. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2014.2017. 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 2005.2006.
The Company is currently under audit in California for tax years 2017 and 2018 and is under audit in the non-U.S. tax jurisdiction of Brazil. The Company concluded an audit in Chile in 2018 and recorded a tax benefit of $6,802.
|
|
Leases — The Company conducts a significant part of its theatre operations in leased properties under noncancelable 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 some 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 $40,929 and $39,235 at December 31, 2017 and 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, |
| |||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
| |||
Fixed rent expense |
| $ | 242,927 |
|
| $ | 247,908 |
|
| $ | 248,543 |
|
Contingent rent and other facility lease expenses |
|
| 78,367 |
|
|
| 80,289 |
|
|
| 74,773 |
|
Total facility lease expense |
| $ | 321,294 |
|
| $ | 328,197 |
|
| $ | 323,316 |
|
F-39
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Future minimum lease payments under noncancelable operating and capital leases at December 31, 2018 are as follows(1):
|
| Operating |
|
| Capital |
| ||
|
| Leases |
|
| Leases |
| ||
2019 |
| $ | 253,323 |
|
| $ | 42,434 |
|
2020 |
|
| 242,336 |
|
|
| 41,502 |
|
2021 |
|
| 230,396 |
|
|
| 34,589 |
|
2022 |
|
| 204,628 |
|
|
| 32,462 |
|
2023 |
|
| 176,802 |
|
|
| 28,534 |
|
Thereafter |
|
| 677,091 |
|
|
| 166,375 |
|
Total |
| $ | 1,784,576 |
|
|
| 345,896 |
|
Amounts representing interest payments |
|
|
|
|
|
| (86,364 | ) |
Present value of future minimum payments |
|
|
|
|
|
| 259,532 |
|
Current portion of capital lease obligations |
|
|
|
|
|
| (27,065 | ) |
Capital lease obligations, less current portion |
|
|
|
|
| $ | 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 Agreements —As of December 31, 2018,2021, the Company had employment agreements with Lee Roy Mitchell, Mark Zoradi, Sean Gamble, Melissa Thomas, Valmir Fernandes and Michael Cavalier. TheThese employment agreements are subject to automatic extensions for a one year period, unless the employment agreements are terminated. 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 the Company’s Compensation Committee. Management personnel subject to these employment agreements are eligible to receive annual cash incentive bonuses upon the Company meeting certain performance targets established by the Compensation Committee within the first 90 days of the fiscal year.Committee.
Effective February 20, 2018, the CompanyF-42
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and Mr. Zoradi amended his employment agreement extending the term to December 31, 2019.per share data
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 discretionary matching contributions as determined annually in accordance with the 401(k) Plan. Employer matching contribution payments of $6,380$1,562 and $5,076$2,123 were made during 2017the years ended December 31, 2020 and 2018,2021, respectively. A liability of approximately $1,374$3,728 was recorded atas of December 31, 20182021 for employer contribution payments to be made in 20192022 for the remaining amounts owed for plan year 2018.2021.
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. The case presents putative class action claims for penalties and attorney's fees arising from alleged violations of the California wage statement law. The claim is also asserted as a representative action under the California Private Attorney General Act (PAGA) for penalties. The Court granted class certification. 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 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.Legal Proceedings
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 interest. 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 support 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 of Appeal reversed, holding, among other things, that Plaintiff’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 reflected in loss on disposal of assets and other 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 it engaged in any form of circuit dealing, it cannot predict the outcome of its pending motions or 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, patent claims, landlord-tenant disputes, patent claimscontractual disputes with landlords over certain termination rights or the right to discontinue rent payments due to the COVID-19 pandemic and other contractual disputes, some of which are covered by insurance or by indemnification from vendors.insurance. 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 Holdings, Inc., et al vs Factory Mutual Insurance Company. The Company filed suit on November 18, 2020, in the District Court, 471st Judicial District, Collin County, Texas. On December 22, 2020, the case was moved to the US District Court for the Eastern District of Texas, Sherman Division. The Company submitted a claim under its property insurance policy issued by Factory Mutual Insurance Company (the “FM Policy”) for losses sustained as a result of the closure of the Company’s theatres due to the COVID-19 pandemic. Factory Mutual Insurance Company (“FM”) denied the Company’s claim. The Company is seeking damages resulting from FM’s breach of contract, FM’s bad faith conduct and a declaration of the parties’ rights under the FM Policy. The Company cannot predict the outcome of this litigation.
Intertrust Technologies Corporation (“Intertrust”) v. Cinemark Holdings, Inc., Regal, AMC, et al. This case was filed against the Company on August 7, 2019 in the Eastern District of Texas – Marshall Division alleging patent infringement. The Company firmly maintains that the contentions of the Plaintiff are without merit. The parties have reached a settlement, announced settlement to the Court, and are in the process of memorializing the agreed-to deal terms in final definitive agreements, to be followed by a dismissals of the case with prejudice. The settlement is recorded in (gain) loss on sale of assets and other on the consolidated statement of income (loss) for the year ended December 31, 2021.
Lakeenya Neal, et al v. Cinemark Holdings, Inc., et al. This class action lawsuit was filed against the Company on December 10, 2021, in the Central District of Los Angeles County Superior Court of the State of California alleging certain violations of the Fair and Accurate Credit Transactions Act. We firmly maintain that the allegations are without merit and will vigorously defend this lawsuit. The Company cannot predict the outcome of this litigation.
|
|
The Company manages its internationalU.S. market and its U.S.international market as separate reportable operating segments, with the international segment consisting of operations in Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues. The Company uses Adjusted EBITDA, as shown in the reconciliation table below, because we believe it provides managementas the primary measure of segment profit and investors with additional informationloss 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-41F-43
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
compensation purposes.performance and allocate its resources. The Company does not report asset information by segment because that information is not used to evaluate Company performance or allocate resources between segments.
BelowThe following table is a breakdown of select financial information by reportable operating segment:segment for the periods presented:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
U.S. |
| $ | 2,230,693 |
|
| $ | 2,236,237 |
|
| $ | 2,551,719 |
|
| $ | 2,594,246 |
| $ | 559,184 |
| $ | 1,296,343 |
| ||
International |
|
| 701,573 |
|
|
| 769,436 |
|
|
| 682,778 |
|
| 702,196 |
| 129,401 |
| 216,842 |
| |||||
Eliminations |
|
| (13,501 | ) |
|
| (14,126 | ) |
|
| (12,762 | ) |
|
| (13,343 | ) |
|
| (2,275 | ) |
|
| (2,721 | ) |
Total revenues |
| $ | 2,918,765 |
|
| $ | 2,991,547 |
|
| $ | 3,221,735 |
|
| $ | 3,283,099 |
|
| $ | 686,310 |
|
| $ | 1,510,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
U.S. |
| $ | 550,150 |
|
| $ | 559,693 |
|
| $ | 650,189 |
|
| $ | 616,799 |
| $ | (225,663 | ) |
| $ | 85,886 |
| |
International |
|
| 157,690 |
|
|
| 165,576 |
|
|
| 132,941 |
|
|
| 129,884 |
|
|
| (49,899 | ) |
|
| (4,271 | ) |
Total Adjusted EBITDA |
| $ | 707,840 |
|
| $ | 725,269 |
|
| $ | 783,130 |
|
| $ | 746,683 |
|
| $ | (275,562 | ) |
| $ | 81,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
U.S. |
| $ | 242,271 |
|
| $ | 321,040 |
|
| $ | 270,870 |
|
| $ | 230,561 |
| $ | 64,026 |
| $ | 78,305 |
| ||
International |
|
| 84,637 |
|
|
| 59,822 |
|
|
| 75,203 |
|
|
| 73,066 |
|
|
| 19,904 |
|
|
| 17,237 |
|
Total capital expenditures |
| $ | 326,908 |
|
| $ | 380,862 |
|
| $ | 346,073 |
|
| $ | 303,627 |
|
| $ | 83,930 |
|
| $ | 95,542 |
|
|
|
The following table sets forth a reconciliation of net income to Adjusted EBITDA:EBITDA for the periods presented:
|
| Year Ended December 31, |
| |||||||||
|
| 2019 |
|
| 2020 |
|
| 2021 |
| |||
Net income (loss) |
| $ | 195,777 |
|
| $ | (607,287 | ) |
| $ | (380,098 | ) |
Add (deduct): |
|
|
|
|
|
|
|
|
| |||
Income taxes |
|
| 80,520 |
|
|
| (303,637 | ) |
|
| (32,280 | ) |
Interest expense (1) |
|
| 99,941 |
|
|
| 115,651 |
|
|
| 125,569 |
|
Loss on extinguishment of debt |
|
| 0 |
|
|
| 0 |
|
|
| 6,527 |
|
Other (income) expense (2) |
|
| (22,422 | ) |
|
| 62,425 |
|
|
| 43,612 |
|
Distributions from DCIP (3) |
|
| 23,696 |
|
|
| 10,383 |
|
|
| 0 |
|
Other cash distributions from equity investees (4) |
|
| 29,670 |
|
|
| 15,047 |
|
|
| 156 |
|
Non-cash distributions from DCIP (5) |
|
| 0 |
|
|
| (12,915 | ) |
|
| 0 |
|
Depreciation and amortization |
|
| 261,155 |
|
|
| 259,776 |
|
|
| 265,363 |
|
Impairment of long-lived and other assets |
|
| 57,001 |
|
|
| 152,706 |
|
|
| 20,845 |
|
(Gain) loss on disposal of assets and other |
|
| 12,008 |
|
|
| (8,923 | ) |
|
| 8,025 |
|
Restructuring charges |
|
| 0 |
|
|
| 20,369 |
|
|
| (1,001 | ) |
Non-cash rent expense |
|
| (4,360 | ) |
|
| 2,357 |
|
|
| (3,451 | ) |
Share based awards compensation expense |
|
| 13,697 |
|
|
| 18,486 |
|
|
| 28,348 |
|
Adjusted EBITDA |
| $ | 746,683 |
|
| $ | (275,562 | ) |
| $ | 81,615 |
|
|
| 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 |
|
|
|
|
|
|
|
F-42F-44
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Financial Information About Geographic Area
Below isThe following tables are a breakdown of select financial information by geographic area:area for the periods presented:
|
| Year Ended December 31, | ||||
|
| 2019 |
| 2020 |
| 2021 |
Revenues |
|
|
|
|
|
|
U.S. |
| $2,594,246 |
| $559,184 |
| $1,296,343 |
Brazil |
| 302,074 |
| 59,321 |
| 73,468 |
Other international countries |
| 400,122 |
| 70,080 |
| 143,374 |
Eliminations |
| (13,343) |
| (2,275) |
| (2,721) |
Total |
| $3,283,099 |
| $686,310 |
| $1,510,464 |
|
| As of December 31, |
| |||||
|
| 2020 |
|
| 2021 |
| ||
Theatre properties and equipment, net |
|
|
|
|
|
| ||
U.S. |
| $ | 1,392,780 |
|
| $ | 1,208,701 |
|
Brazil |
|
| 72,080 |
|
|
| 56,750 |
|
Other international countries |
|
| 150,202 |
|
|
| 117,395 |
|
Total |
| $ | 1,615,062 |
|
| $ | 1,382,846 |
|
|
| Year Ended December 31, |
| |||||||||
|
| 2016 |
|
| 2017 |
|
| 2018 |
| |||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 2,230,693 |
|
| $ | 2,236,237 |
|
| $ | 2,551,719 |
|
Brazil |
|
| 304,407 |
|
|
| 341,485 |
|
|
| 283,009 |
|
Other international countries |
|
| 397,166 |
|
|
| 427,951 |
|
|
| 399,769 |
|
Eliminations |
|
| (13,501 | ) |
|
| (14,126 | ) |
|
| (12,762 | ) |
Total |
| $ | 2,918,765 |
|
| $ | 2,991,547 |
|
| $ | 3,221,735 |
|
|
| 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 |
|
|
|
The Company manages theatresa theatre for Laredo Theatres, Ltd. (“Laredo”). The Company is the sole general partner and owns 75%75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25%25% of the limited partnership interests in Laredo and is 100%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 8%9% of Cinemark Holdings, Inc.’s common stock. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5%5% of annual theatre revenues up to $50,000$50,000 and 3%3% of annual theatre revenues in excess of $50,000.$50,000. The Company recorded $506, $586$694, $146 and $654$399 of management fee revenuesrevenue during the years ended December 31, 2016, 20172019, 2020 and 2018,2021, respectively. All such amounts are included in the Company’s consolidated financial statements with the intercompany amounts eliminated in consolidation.
Walter Hebert, Mr. Mitchell’s brother-in-law, previously served as the Executive Vice President – Purchasing of the Company and retired in July 2021. Mr. Hebert now serves as a consultant to the Company until July 2022. During the year ended December 31, 2021, the Company paid Mr. Hebert $122 for consulting services.
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, 2016, 20172019, 2020 and 2018,2021, the aggregate amounts paid to Copper Beech Capital, LLC for the use of the aircraft was approximately $110, $131$114, $12 and $68,$23, 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-43F-45
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company currently leases 1413 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 15 leases, 14 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, 2016, 20172019, 2020 and 2018,2021, the Company paid total rent of approximately $21,124, $22,483$25,678, $23,810 and $23,447,$23,317, respectively, to Syufy. During 2019, the Company began providing digital equipment support to drive-in theatres owned by Syufy. The Company recorded approximately $30, $0 and $55 of management fees related to these services during the years ended December 31, 2019, 2020 and 2021, 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 operates a family entertainment center that offers bowling, gaming, movies and other amenities. See Note 7 for further discussion. The Company has a theatre services agreement with FE Concepts under which the Company receives service fees for providing film booking and equipment monitoring services for the facility. The Company recorded $64, $34 and $62 of service fees during the years ended December 31, 2019, 2020 and 2021, respectively.
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 $124,900, $134,500$158,450, $42,000 and $148,750$0 during the years ended December 31, 2016, 20172019, 2020 and 2018,2021, respectively. Additionally, the Company received a cash contribution from Cinemark Holdings, Inc. of $120,000 during the year ended December 31, 2021. The Company had a receivable from Cinemark Holdings, Inc. of $14,581$36,775 and $19,530$46,651 as of December 31, 2016, 20172020 and 2018,2021, 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.
|
|
The Company’s valuation allowance for deferred tax assets for the years ended December 31, 2016, 2017 and 2018periods presented were as follows:
|
| Valuation Allowance for Deferred Taxes |
| |||||
Balance at January 1, 2016 |
| $ | 50,636 |
| ||||
|
| Valuation Allowance for Deferred Taxes |
| |||||
Balance at January 1, 2019 |
| $ | 54,725 |
| ||||
Additions |
|
| 483 |
|
| 7,611 |
| |
Deductions |
|
| (36,595 | ) |
|
| (1,977 | ) |
Balance at December 31, 2016 |
| $ | 14,524 |
| ||||
Balance at December 31, 2019 |
| $ | 60,359 |
| ||||
Additions |
|
| 21,347 |
|
| 144,239 |
| |
Deductions |
|
| (625 | ) |
|
| (992 | ) |
Balance at December 31, 2017 |
| $ | 35,246 |
| ||||
Additions (1) |
|
| 22,005 |
| ||||
Balance at December 31, 2020 |
| $ | 203,606 |
| ||||
Additions |
| 52,516 |
| |||||
Deductions |
|
| (2,526 | ) |
| (10,974 | ) | |
Balance at December 31, 2018 |
| $ | 54,725 |
| ||||
Currency translation |
|
| (4,301 | ) | ||||
Balance at December 31, 2021 |
| $ | 240,847 |
|
|
|
F-44
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
As of December 31, 2018, the Company had outstanding $400,000 aggregate principal amount of 5.125% senior notes due 2022, or the 5.125% Senior Notes, and $755,000 aggregate principal amount of 4.875% senior notes due 2023, or the 4.875% Senior 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 information presents:
|
|
|
|
|
|
F-45
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 2017
|
| Parent |
|
| Subsidiary |
|
| Subsidiary |
|
|
|
|
|
|
|
|
| |||
|
| Company |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||
|
| (In thousands) |
| |||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 130,590 |
|
| $ | 180,623 |
|
| $ | 211,202 |
|
| $ | — |
|
| $ | 522,415 |
|
Other current assets |
|
| 59,661 |
|
|
| 17,841 |
|
|
| 76,789 |
|
|
| (19,270 | ) |
|
| 135,021 |
|
Accounts receivable from parent or subsidiaries |
|
| 117,972 |
|
|
| 119,616 |
|
|
| — |
|
|
| (223,007 | ) |
|
| 14,581 |
|
Total current assets |
|
| 308,223 |
|
|
| 318,080 |
|
|
| 287,991 |
|
|
| (242,277 | ) |
|
| 672,017 |
|
Theatre properties and equipment - net |
|
| 650,783 |
|
|
| 765,500 |
|
|
| 411,771 |
|
|
| — |
|
|
| 1,828,054 |
|
Investment in subsidiaries |
|
| 1,691,626 |
|
|
| 121,795 |
|
|
| — |
|
|
| (1,813,421 | ) |
|
| — |
|
Other assets |
|
| 1,427,328 |
|
|
| 134,845 |
|
|
| 536,816 |
|
|
| (113,720 | ) |
|
| 1,985,269 |
|
Total assets |
| $ | 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 |
| $ | 5,710 |
|
| $ | — |
|
| $ | 1,389 |
|
| $ | — |
|
| $ | 7,099 |
|
Current portion of capital lease obligations |
|
| 9,532 |
|
|
| 11,124 |
|
|
| 4,855 |
|
|
| — |
|
|
| 25,511 |
|
Accounts payable and accrued expenses |
|
| 215,580 |
|
|
| 116,409 |
|
|
| 110,089 |
|
|
| (6,402 | ) |
|
| 435,676 |
|
Accounts payable to parent or subsidiaries |
|
| — |
|
|
| — |
|
|
| 223,007 |
|
|
| (223,007 | ) |
|
| — |
|
Total current liabilities |
|
| 230,822 |
|
|
| 127,533 |
|
|
| 339,340 |
|
|
| (229,409 | ) |
|
| 468,286 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion |
|
| 1,878,992 |
|
|
| — |
|
|
| 11,211 |
|
|
| (109,822 | ) |
|
| 1,780,381 |
|
Capital lease obligations, less current portion |
|
| 132,189 |
|
|
| 75,767 |
|
|
| 43,195 |
|
|
| — |
|
|
| 251,151 |
|
Other long-term liabilities and deferrals |
|
| 426,355 |
|
|
| 60,567 |
|
|
| 93,871 |
|
|
| (16,766 | ) |
|
| 564,027 |
|
Total long-term liabilities |
|
| 2,437,536 |
|
|
| 136,334 |
|
|
| 148,277 |
|
|
| (126,588 | ) |
|
| 2,595,559 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cinemark USA, Inc.'s stockholder's equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 49,543 |
|
|
| 457,368 |
|
|
| 10,238 |
|
|
| (467,606 | ) |
|
| 49,543 |
|
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 |
|
| — |
|
|
| — |
|
|
| 11,893 |
|
|
| — |
|
|
| 11,893 |
|
Total equity |
|
| 1,409,602 |
|
|
| 1,076,353 |
|
|
| 748,961 |
|
|
| (1,813,421 | ) |
|
| 1,421,495 |
|
Total liabilities and equity |
| $ | 4,077,960 |
|
| $ | 1,340,220 |
|
| $ | 1,236,578 |
|
| $ | (2,169,418 | ) |
| $ | 4,485,340 |
|
F-46
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 2018
|
| Parent |
|
| Subsidiary |
|
| Subsidiary |
|
|
|
|
|
|
|
|
| |||
|
| Company |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||
|
| (In thousands) |
| |||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 197,965 |
|
| $ | 10,886 |
|
| $ | 217,365 |
|
| $ | — |
|
| $ | 426,216 |
|
Other current assets |
|
| 60,829 |
|
|
| 19,997 |
|
|
| 67,149 |
|
|
| (15,178 | ) |
|
| 132,797 |
|
Accounts receivable from parent or subsidiaries |
|
| — |
|
|
| 284,893 |
|
|
| — |
|
|
| (265,363 | ) |
|
| 19,530 |
|
Total current assets |
|
| 258,794 |
|
|
| 315,776 |
|
|
| 284,514 |
|
|
| (280,541 | ) |
|
| 578,543 |
|
Theatre properties and equipment - net |
|
| 664,759 |
|
|
| 789,536 |
|
|
| 378,838 |
|
|
| - |
|
|
| 1,833,133 |
|
Investment in subsidiaries |
|
| 1,806,255 |
|
|
| 57,845 |
|
|
| - |
|
|
| (1,864,100 | ) |
|
| - |
|
Other assets |
|
| 1,500,366 |
|
|
| 155,011 |
|
|
| 546,834 |
|
|
| (112,536 | ) |
|
| 2,089,675 |
|
Total assets |
| $ | 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 |
| $ | 6,595 |
|
| $ | — |
|
| $ | 1,389 |
|
| $ | — |
|
| $ | 7,984 |
|
Current portion of capital lease obligations |
|
| 11,918 |
|
|
| 9,406 |
|
|
| 5,741 |
|
|
| — |
|
|
| 27,065 |
|
Accounts payable and accrued expenses |
|
| 297,302 |
|
|
| 58,544 |
|
|
| 96,780 |
|
|
| (13,622 | ) |
|
| 439,004 |
|
Accounts payable to parent or subsidiaries |
|
| 40,421 |
|
|
| — |
|
|
| 224,942 |
|
|
| (265,363 | ) |
|
| - |
|
Total current liabilities |
|
| 356,236 |
|
|
| 67,950 |
|
|
| 328,852 |
|
|
| (278,985 | ) |
|
| 474,053 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion |
|
| 1,872,627 |
|
|
| — |
|
|
| 7,955 |
|
|
| (107,955 | ) |
|
| 1,772,627 |
|
Capital lease obligations, less current portion |
|
| 123,329 |
|
|
| 59,539 |
|
|
| 49,599 |
|
|
| — |
|
|
| 232,467 |
|
Other long-term liabilities and deferrals |
|
| 413,177 |
|
|
| 60,137 |
|
|
| 77,844 |
|
|
| (6,137 | ) |
|
| 545,021 |
|
Total long-term liabilities |
|
| 2,409,133 |
|
|
| 119,676 |
|
|
| 135,398 |
|
|
| (114,092 | ) |
|
| 2,550,115 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cinemark USA, Inc.'s stockholder's equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 49,543 |
|
|
| 457,368 |
|
|
| 10,238 |
|
|
| (467,606 | ) |
|
| 49,543 |
|
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 |
|
| — |
|
|
| — |
|
|
| 12,379 |
|
|
| — |
|
|
| 12,379 |
|
Total equity |
|
| 1,464,805 |
|
|
| 1,130,542 |
|
|
| 745,936 |
|
|
| (1,864,100 | ) |
|
| 1,477,183 |
|
Total liabilities and equity |
| $ | 4,230,174 |
|
| $ | 1,318,168 |
|
| $ | 1,210,186 |
|
| $ | (2,257,177 | ) |
| $ | 4,501,351 |
|
F-47
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
YEAR ENDED DECEMBER 31, 2016
|
| Parent |
|
| Subsidiary |
|
| Subsidiary |
|
|
|
|
|
|
|
|
| |||
|
| Company |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||
|
| (In thousands) |
| |||||||||||||||||
Revenues |
| $ | 1,014,713 |
|
| $ | 1,219,218 |
|
| $ | 737,981 |
|
| $ | (53,147 | ) |
| $ | 2,918,765 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatre operating expenses |
|
| 804,041 |
|
|
| 828,905 |
|
|
| 540,310 |
|
|
| (53,147 | ) |
|
| 2,120,109 |
|
General and administrative expenses |
|
| 13,085 |
|
|
| 84,453 |
|
|
| 43,099 |
|
|
| — |
|
|
| 140,637 |
|
Depreciation and amortization |
|
| 70,654 |
|
|
| 79,139 |
|
|
| 59,278 |
|
|
| — |
|
|
| 209,071 |
|
Impairment of long-lived assets |
|
| 1,929 |
|
|
| — |
|
|
| 907 |
|
|
| — |
|
|
| 2,836 |
|
Loss on disposal of assets and other |
|
| 5,613 |
|
|
| 13,759 |
|
|
| 1,087 |
|
|
|
|
|
|
| 20,459 |
|
Total cost of operations |
|
| 895,322 |
|
|
| 1,006,256 |
|
|
| 644,681 |
|
|
| (53,147 | ) |
|
| 2,493,112 |
|
Operating income |
|
| 119,391 |
|
|
| 212,962 |
|
|
| 93,300 |
|
|
| — |
|
|
| 425,653 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (96,442 | ) |
|
| (7,538 | ) |
|
| (5,642 | ) |
|
| 1,309 |
|
|
| (108,313 | ) |
Loss on debt amendments and refinancing |
|
| (13,445 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13,445 | ) |
Distributions from NCM |
|
| 1,414 |
|
|
| — |
|
|
| 13,242 |
|
|
| — |
|
|
| 14,656 |
|
Equity in income of affiliates |
|
| 245,010 |
|
|
| 58,528 |
|
|
| 30,370 |
|
|
| (301,946 | ) |
|
| 31,962 |
|
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 |
|
| 256,279 |
|
|
| 263,971 |
|
|
| 145,060 |
|
|
| (301,946 | ) |
|
| 363,364 |
|
Income taxes |
|
| (498 | ) |
|
| 52,277 |
|
|
| 53,072 |
|
|
| — |
|
|
| 104,851 |
|
Net income |
|
| 256,777 |
|
|
| 211,694 |
|
|
| 91,988 |
|
|
| (301,946 | ) |
|
| 258,513 |
|
Less: Net income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 1,736 |
|
|
| — |
|
|
| 1,736 |
|
Net income attributable to Cinemark USA, Inc. |
| $ | 256,777 |
|
| $ | 211,694 |
|
| $ | 90,252 |
|
| $ | (301,946 | ) |
| $ | 256,777 |
|
F-48
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
YEAR ENDED DECEMBER 31, 2017
|
| Parent |
|
| Subsidiary |
|
| Subsidiary |
|
|
|
|
|
|
|
|
| |||
|
| Company |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||
|
| (In thousands) |
| |||||||||||||||||
Revenues |
| $ | 1,013,960 |
|
| $ | 1,220,993 |
|
| $ | 807,350 |
|
| $ | (50,756 | ) |
| $ | 2,991,547 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatre operating expenses |
|
| 795,976 |
|
|
| 834,135 |
|
|
| 591,223 |
|
|
| (50,756 | ) |
|
| 2,170,578 |
|
General and administrative expenses |
|
| 13,176 |
|
|
| 82,955 |
|
|
| 54,780 |
|
|
| — |
|
|
| 150,911 |
|
Depreciation and amortization |
|
| 79,676 |
|
|
| 87,463 |
|
|
| 70,374 |
|
|
| — |
|
|
| 237,513 |
|
Impairment of long-lived assets |
|
| 3,725 |
|
|
| 1,502 |
|
|
| 9,857 |
|
|
| — |
|
|
| 15,084 |
|
Loss on disposal of assets and other |
|
| 16,895 |
|
|
| 3,372 |
|
|
| 2,545 |
|
|
| — |
|
|
| 22,812 |
|
Total cost of operations |
|
| 909,448 |
|
|
| 1,009,427 |
|
|
| 728,779 |
|
|
| (50,756 | ) |
|
| 2,596,898 |
|
Operating income |
|
| 104,512 |
|
|
| 211,566 |
|
|
| 78,571 |
|
|
| — |
|
|
| 394,649 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (94,229 | ) |
|
| (7,675 | ) |
|
| (5,447 | ) |
|
| 1,433 |
|
|
| (105,918 | ) |
Loss on debt amendments and refinancing |
|
| (521 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (521 | ) |
Distributions from NCM |
|
| — |
|
|
| — |
|
|
| 16,407 |
|
|
| — |
|
|
| 16,407 |
|
Equity in income of affiliates |
|
| 255,594 |
|
|
| 16,838 |
|
|
| 33,742 |
|
|
| (270,189 | ) |
|
| 35,985 |
|
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 |
|
| 267,831 |
|
|
| 221,769 |
|
|
| 128,327 |
|
|
| (270,189 | ) |
|
| 347,738 |
|
Income taxes |
|
| 2,188 |
|
|
| 69,770 |
|
|
| 8,298 |
|
|
| — |
|
|
| 80,256 |
|
Net income |
|
| 265,643 |
|
|
| 151,999 |
|
|
| 120,029 |
|
|
| (270,189 | ) |
|
| 267,482 |
|
Less: Net income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 1,839 |
|
|
| — |
|
|
| 1,839 |
|
Net income attributable to Cinemark USA, Inc. |
| $ | 265,643 |
|
| $ | 151,999 |
|
| $ | 118,190 |
|
| $ | (270,189 | ) |
| $ | 265,643 |
|
F-49
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
YEAR ENDED DECEMBER 31, 2018
|
| Parent |
|
| Subsidiary |
|
| Subsidiary |
|
|
|
|
|
|
|
|
| |||
|
| Company |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||
|
| (In thousands) |
| |||||||||||||||||
Revenues |
| $ | 1,192,478 |
|
| $ | 1,362,043 |
|
| $ | 723,804 |
|
| $ | (56,590 | ) |
| $ | 3,221,735 |
|
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatre operating expenses |
|
| 916,726 |
|
|
| 933,858 |
|
|
| 541,981 |
|
|
| (56,590 | ) |
|
| 2,335,975 |
|
General and administrative expenses |
|
| 11,497 |
|
|
| 100,407 |
|
|
| 50,736 |
|
|
| — |
|
|
| 162,640 |
|
Depreciation and amortization |
|
| 89,429 |
|
|
| 99,627 |
|
|
| 72,106 |
|
|
| — |
|
|
| 261,162 |
|
Impairment of long-lived assets |
|
| 4,118 |
|
|
| 13,612 |
|
|
| 14,642 |
|
|
| — |
|
|
| 32,372 |
|
Loss on disposal of assets and other |
|
| 13,321 |
|
|
| 23,337 |
|
|
| 2,044 |
|
|
| — |
|
|
| 38,702 |
|
Total cost of operations |
|
| 1,035,091 |
|
|
| 1,170,841 |
|
|
| 681,509 |
|
|
| (56,590 | ) |
|
| 2,830,851 |
|
Operating income |
|
| 157,387 |
|
|
| 191,202 |
|
|
| 42,295 |
|
|
| - |
|
|
| 390,884 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (97,585 | ) |
|
| (6,520 | ) |
|
| (7,266 | ) |
|
| 1,377 |
|
|
| (109,994 | ) |
Loss on debt amendments and refinancing |
|
| (1,484 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,484 | ) |
Distributions from NCM |
|
| — |
|
|
| — |
|
|
| 15,389 |
|
|
| — |
|
|
| 15,389 |
|
Interest expense - NCM |
|
| (19,724 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19,724 | ) |
Equity in income of affiliates |
|
| 183,463 |
|
|
| (12,561 | ) |
|
| 33,167 |
|
|
| (164,827 | ) |
|
| 39,242 |
|
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 |
|
| 226,344 |
|
|
| 172,107 |
|
|
| 79,621 |
|
|
| (164,827 | ) |
|
| 313,245 |
|
Income taxes |
|
| 10,608 |
|
|
| 68,624 |
|
|
| 16,800 |
|
|
| - |
|
|
| 96,032 |
|
Net income |
|
| 215,736 |
|
|
| 103,483 |
|
|
| 62,821 |
|
|
| (164,827 | ) |
|
| 217,213 |
|
Less: Net income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 1,478 |
|
|
| — |
|
|
| 1,478 |
|
Net income attributable to Cinemark USA, Inc. |
| $ | 215,736 |
|
| $ | 103,483 |
|
| $ | 61,343 |
|
| $ | (164,827 | ) |
| $ | 215,735 |
|
F-50
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME INFORMATION
YEAR ENDED DECEMBER 31, 2016
|
| 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
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME INFORMATION
YEAR ENDED DECEMBER 31, 2017
|
| 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 |
|
F-52
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME INFORMATION
YEAR ENDED DECEMBER 31, 2018
|
| 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 2016
|
| Parent |
|
| Subsidiary |
|
| Subsidiary |
|
|
|
|
|
|
|
|
| |||
|
| Company |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||
|
| (In thousands) |
| |||||||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 256,777 |
|
| $ | 211,694 |
|
| $ | 91,988 |
|
| $ | (301,946 | ) |
| $ | 258,513 |
|
Adjustments to reconcile net income to cash provided by operating activities |
|
| (178,147 | ) |
|
| 55,128 |
|
|
| 53,381 |
|
|
| 301,946 |
|
|
| 232,308 |
|
Changes in assets and liabilities |
|
| 154,085 |
|
|
| (164,005 | ) |
|
| (18,642 | ) |
|
| — |
|
|
| (28,562 | ) |
Net cash provided by operating activities |
|
| 232,715 |
|
|
| 102,817 |
|
|
| 126,727 |
|
|
| — |
|
|
| 462,259 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to theatre properties and equipment |
|
| (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 |
|
| 2,912 |
|
|
| 374 |
|
|
| 284 |
|
|
| — |
|
|
| 3,570 |
|
Proceeds from sale of marketable securities |
|
| 13,451 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,451 |
|
Intercompany note issuances |
|
| (4,455 | ) |
|
| — |
|
|
| — |
|
|
| 4,455 |
|
|
|
|
|
Dividends received from subsidiaries |
|
| 26,033 |
|
|
| 229,649 |
|
|
| — |
|
|
| (255,682 | ) |
|
| — |
|
Investment in joint ventures and other |
|
| (1,000 | ) |
|
| — |
|
|
| (132 | ) |
|
| — |
|
|
| (1,132 | ) |
Net cash provided by (used for) investing activities |
|
| (86,798 | ) |
|
| 99,180 |
|
|
| (88,924 | ) |
|
| (251,227 | ) |
|
| (327,769 | ) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to parent |
|
| (124,900 | ) |
|
| — |
|
|
| (255,682 | ) |
|
| 255,682 |
|
|
| (124,900 | ) |
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 |
|
| (6,645 | ) |
|
| (10,005 | ) |
|
| (2,693 | ) |
|
| — |
|
|
| (19,343 | ) |
Other |
|
| 1,863 |
|
|
| (6,834 | ) |
|
| (1,759 | ) |
|
| — |
|
|
| (6,730 | ) |
Net cash used for financing activities |
|
| (140,426 | ) |
|
| (16,839 | ) |
|
| (257,083 | ) |
|
| 251,227 |
|
|
| (163,121 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
| — |
|
|
| — |
|
|
| 1,266 |
|
|
| — |
|
|
| 1,266 |
|
Increase (decrease) in cash and cash equivalents |
|
| 5,491 |
|
|
| 185,158 |
|
|
| (218,014 | ) |
|
| — |
|
|
| (27,365 | ) |
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
| 141,364 |
|
|
| 95,865 |
|
|
| 351,274 |
|
|
| — |
|
|
| 588,503 |
|
End of year |
| $ | 146,855 |
|
| $ | 281,023 |
|
| $ | 133,260 |
|
| $ | — |
|
| $ | 561,138 |
|
F-54
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 2017
|
| 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 |
|
F-55
CINEMARK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 2018
|
| 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 |
|
* * * * *
F-46
UNAUDITED SUPPLEMENTAL SCHEDULES
As required by the indentures governing the Company’s 5.125%5.250% Senior Notes, 5.875% Senior Notes and 4.875% Senior8.750% Secured 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.
S-1
CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 20182021
(Inin thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
|
| Restricted |
| Unrestricted |
|
|
|
|
| |||||||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 370,460 |
|
| $ | 55,756 |
|
| $ | — |
|
| $ | 426,216 |
|
| $ | 342,603 |
| $ | 100,074 |
| $ | — |
| $ | 442,677 |
| |||
Other current assets |
|
| 267,077 |
|
|
| (106,143 | ) |
|
| (8,607 | ) |
|
| 152,327 |
|
|
| 338,664 |
|
|
| (119,168 | ) |
|
| (5,719 | ) |
|
| 213,777 |
|
Total current assets |
|
| 637,537 |
|
|
| (50,387 | ) |
|
| (8,607 | ) |
|
| 578,543 |
|
| 681,267 |
| (19,094 | ) |
| (5,719 | ) |
| 656,454 |
| |||||
Theatre properties and equipment, net |
|
| 1,833,133 |
|
|
| — |
|
|
| — |
|
|
| 1,833,133 |
|
| 1,382,846 |
| — |
| — |
| 1,382,846 |
| |||||||
Operating lease right-of-use assets, net |
| 1,230,790 |
| — |
| — |
| 1,230,790 |
| |||||||||||||||||||||||
Other assets |
|
| 1,916,169 |
|
|
| 522,225 |
|
|
| (348,719 | ) |
|
| 2,089,675 |
|
|
| 1,794,697 |
|
|
| 319,387 |
|
|
| (371,542 | ) |
|
| 1,742,542 |
|
Total assets |
| $ | 4,386,839 |
|
| $ | 471,838 |
|
| $ | (357,326 | ) |
| $ | 4,501,351 |
|
| $ | 5,089,600 |
|
| $ | 300,293 |
|
| $ | (377,261 | ) |
| $ | 5,012,632 |
|
Liabilities and equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current portion of long-term debt |
| $ | 6,595 |
|
| $ | 1,389 |
|
| $ | — |
|
| $ | 7,984 |
|
| $ | 24,254 |
| $ | — |
| $ | — |
| $ | 24,254 |
| |||
Current portion of capital lease obligations |
|
| 27,065 |
|
|
| — |
|
|
| — |
|
|
| 27,065 |
| ||||||||||||||||
Current portion of operating lease obligations |
| 217,092 |
| — |
| — |
| 217,092 |
| |||||||||||||||||||||||
Current portion of finance lease obligations |
| 14,605 |
| — |
| — |
| 14,605 |
| |||||||||||||||||||||||
Accounts payable and accrued expenses |
|
| 447,610 |
|
|
| 1 |
|
|
| (8,607 | ) |
|
| 439,004 |
|
|
| 510,366 |
|
|
| — |
|
|
| (5,719 | ) |
|
| 504,647 |
|
Total current liabilities |
|
| 481,270 |
|
|
| 1,390 |
|
|
| (8,607 | ) |
|
| 474,053 |
|
| 766,317 |
| — |
| (5,719 | ) |
| 760,598 |
| ||||||
Long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Long-term debt, less current portion |
|
| 2,014,327 |
|
|
| - |
|
|
| (241,700 | ) |
|
| 1,772,627 |
|
| 2,293,215 |
| — |
| (264,523 | ) |
| 2,028,692 |
| ||||||
Capital lease obligations, less current portion |
|
| 232,467 |
|
|
| — |
|
|
| — |
|
|
| 232,467 |
| ||||||||||||||||
Operating lease obligations, less current portion |
| 1,078,260 |
| — |
| — |
| 1,078,260 |
| |||||||||||||||||||||||
Finance lease obligations, less current portion |
| 102,571 |
| — |
| — |
| 102,571 |
| |||||||||||||||||||||||
Other long-term liabilities and deferrals |
|
| 484,528 |
|
|
| 60,493 |
|
|
| — |
|
|
| 545,021 |
|
|
| 475,666 |
|
|
| 11,999 |
|
|
| — |
|
|
| 487,665 |
|
Total long-term liabilities |
|
| 2,731,322 |
|
|
| 60,493 |
|
|
| (241,700 | ) |
|
| 2,550,115 |
|
| 3,949,712 |
| 11,999 |
| (264,523 | ) |
| 3,697,188 |
| ||||||
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Equity |
|
| 1,174,247 |
|
|
| 409,955 |
|
|
| (107,019 | ) |
|
| 1,477,183 |
|
|
| 373,571 |
|
|
| 288,294 |
|
|
| (107,019 | ) |
|
| 554,846 |
|
Total liabilities and equity |
| $ | 4,386,839 |
|
| $ | 471,838 |
|
| $ | (357,326 | ) |
| $ | 4,501,351 |
|
| $ | 5,089,600 |
|
| $ | 300,293 |
|
| $ | (377,261 | ) |
| $ | 5,012,632 |
|
Note: "Restricted Group" and "Unrestricted Group" are defined in the indentures for the senior notes.
S-2
CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOMELOSS INFORMATION
YEAR ENDED DECEMBER 31, 20182021
(Inin thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
|
| Restricted |
| Unrestricted |
|
|
|
|
| |||||||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||||||
Revenues |
| $ | 3,221,735 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,221,735 |
|
| $ | 1,510,464 |
| $ | — |
| $ | — |
| $ | 1,510,464 |
| |||
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
| — |
| ||||
Theatre operating costs |
|
| 2,335,975 |
|
|
| — |
|
|
| — |
|
|
| 2,335,975 |
|
| 1,308,628 |
| — |
| — |
| 1,308,628 |
| |||||||
General and administrative expenses |
|
| 162,645 |
|
|
| (5 | ) |
|
| — |
|
|
| 162,640 |
|
| 158,472 |
| 18 |
| — |
| 158,490 |
| |||||||
Depreciation and amortization |
|
| 261,162 |
|
|
| — |
|
|
| — |
|
|
| 261,162 |
|
| 265,363 |
| — |
| — |
| 265,363 |
| |||||||
Impairment of long-lived assets |
|
| 32,372 |
|
|
| — |
|
|
| — |
|
|
| 32,372 |
|
| 20,845 |
| — |
| — |
| 20,845 |
| |||||||
Restructuring costs |
| (1,001 | ) |
| — |
| — |
| (1,001 | ) | ||||||||||||||||||||||
Loss on sale of assets and other |
|
| 38,702 |
|
|
| — |
|
|
| — |
|
|
| 38,702 |
|
|
| 8,025 |
|
|
| — |
|
|
| — |
|
|
| 8,025 |
|
Total cost of operations |
|
| 2,830,856 |
|
|
| (5 | ) |
|
| — |
|
|
| 2,830,851 |
|
|
| 1,760,332 |
|
|
| 18 |
|
|
| — |
|
|
| 1,760,350 |
|
Operating income (loss) |
|
| 390,879 |
|
|
| 5 |
|
|
| — |
|
|
| 390,884 |
| ||||||||||||||||
Operating loss |
| (249,868 | ) |
| (18 | ) |
| — |
| (249,886 | ) | |||||||||||||||||||||
Other income (expense) |
|
| (154,545 | ) |
|
| 76,906 |
|
|
| — |
|
|
| (77,639 | ) |
|
| (169,057 | ) |
|
| 6,565 |
|
|
| — |
|
|
| (162,492 | ) |
Income before income taxes |
|
| 236,334 |
|
|
| 76,911 |
|
|
| — |
|
|
| 313,245 |
| ||||||||||||||||
Loss before income taxes |
| (418,925 | ) |
| 6,547 |
| — |
| (412,378 | ) | ||||||||||||||||||||||
Income taxes |
|
| 72,086 |
|
|
| 23,946 |
|
|
| — |
|
|
| 96,032 |
|
|
| (33,758 | ) |
|
| 1,478 |
|
|
| — |
|
|
| (32,280 | ) |
Net income |
|
| 164,248 |
|
|
| 52,965 |
|
|
| — |
|
|
| 217,213 |
| ||||||||||||||||
Net loss |
| (385,167 | ) |
| 5,069 |
| — |
| (380,098 | ) | ||||||||||||||||||||||
Less: Net income attributable to noncontrolling interests |
|
| 1,478 |
|
|
| — |
|
|
| — |
|
|
| 1,478 |
|
|
| 568 |
|
|
| — |
|
|
| — |
|
|
| 568 |
|
Net income attributable to Cinemark USA, Inc. |
| $ | 162,770 |
|
| $ | 52,965 |
|
| $ | — |
|
| $ | 215,735 |
| ||||||||||||||||
Net loss attributable to Cinemark USA, Inc. |
| $ | (385,735 | ) |
| $ | 5,069 |
|
| $ | 0 |
|
| $ | (380,666 | ) |
Note: "Restricted Group" and "Unrestricted Group" are defined in the indentures for the senior notes.
S-3
CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF
COMPREHENSIVE INCOMELOSS INFORMATION
YEAR ENDED DECEMBER 31, 20182021
(Inin thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
| ||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||
Net income |
| $ | 164,248 |
|
| $ | 52,965 |
|
| $ | — |
|
| $ | 217,213 |
|
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 |
|
| — |
|
|
| (139 | ) |
|
| — |
|
|
| (139 | ) |
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 |
|
| 98,144 |
|
|
| 52,826 |
|
|
| — |
|
|
| 150,970 |
|
Comprehensive income attributable to noncontrolling interests |
|
| (1,478 | ) |
|
| — |
|
|
| — |
|
|
| (1,478 | ) |
Comprehensive income attributable to Cinemark USA, Inc. |
| $ | 96,666 |
|
| $ | 52,826 |
|
| $ | — |
|
| $ | 149,492 |
|
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
| ||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||
Net loss |
| $ | (385,167 | ) |
| $ | 5,069 |
|
| $ | — |
|
| $ | (380,098 | ) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes of $(3278), net of settlements |
|
| 15,944 |
|
|
| — |
|
|
| — |
|
|
| 15,944 |
|
Foreign currency translation adjustments |
|
| (18,837 | ) |
|
| — |
|
|
| — |
|
|
| (18,837 | ) |
Total other comprehensive loss, net of tax |
|
| (2,893 | ) |
|
| — |
|
|
| — |
|
|
| (2,893 | ) |
Total comprehensive loss, net of tax |
|
| (388,060 | ) |
|
| 5,069 |
|
|
| — |
|
|
| (382,991 | ) |
Comprehensive income attributable to noncontrolling interests |
|
| (568 | ) |
|
| — |
|
|
| — |
|
|
| (568 | ) |
Comprehensive loss attributable to Cinemark USA, Inc. |
| $ | (388,628 | ) |
| $ | 5,069 |
|
| $ | 0 |
|
| $ | (383,559 | ) |
Note: "Restricted Group" and "Unrestricted Group" are defined in the indentures for the senior notes.
S-4
CINEMARK USA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 20182021
(Inin thousands)
|
| Restricted |
|
| Unrestricted |
|
|
|
|
|
|
|
|
|
| Restricted |
| Unrestricted |
|
|
|
|
| |||||||||
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
|
| Group |
|
| Group |
|
| Eliminations |
|
| Consolidated |
| ||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net income |
| $ | 164,248 |
|
| $ | 52,965 |
|
| $ | - |
|
| $ | 217,213 |
| ||||||||||||||||
Adjustments to reconcile net income to cash provided by operating activities |
|
| 343,793 |
|
|
| 2,866 |
|
|
| — |
|
|
| 346,659 |
| ||||||||||||||||
Net loss |
| $ | (385,167 | ) |
| $ | 5,069 |
| $ | — |
|
| $ | (380,098 | ) | |||||||||||||||||
Adjustments to reconcile net loss to cash used for operating activities |
| 306,069 |
| 9,659 |
| — |
| 315,728 |
| |||||||||||||||||||||||
Changes in assets and liabilities |
|
| 32,060 |
|
|
| (39,633 | ) |
|
| — |
|
|
| (7,573 | ) |
|
| 242,356 |
|
|
| (1,629 | ) |
|
| — |
|
|
| 240,727 |
|
Net cash provided by operating activities |
|
| 540,101 |
|
|
| 16,198 |
|
|
| — |
|
|
| 556,299 |
| ||||||||||||||||
Net cash provided by (used for) operating activities |
| 163,258 |
| 13,099 |
| — |
| 176,357 |
| |||||||||||||||||||||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Additions to theatre properties and equipment and other |
|
| (346,073 | ) |
|
| — |
|
|
| — |
|
|
| (346,073 | ) | ||||||||||||||||
Additions to theatre properties and equipment |
| (95,542 | ) |
| — |
| — |
| (95,542 | ) | ||||||||||||||||||||||
Proceeds from sale of theatre properties and equipment and other |
|
| 3,920 |
|
|
| — |
|
|
| — |
|
|
| 3,920 |
|
| 6,246 |
| — |
| — |
| 6,246 |
| |||||||
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 |
|
| (19,896 | ) |
|
| 361 |
|
|
| — |
|
|
| (19,535 | ) | ||||||||||||||||
Investments and loans to affiliates |
|
| — |
|
|
| (7,785 | ) |
|
| 7,785 |
|
|
| — |
| ||||||||||||||||
Net cash used for investing activities |
|
| (451,731 | ) |
|
| (21,339 | ) |
|
| 21,700 |
|
|
| (451,370 | ) |
| (89,296 | ) |
| (7,785 | ) |
| 7,785 |
| (89,296 | ) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Dividends paid to parent |
|
| (148,750 | ) |
|
| — |
|
|
| — |
|
|
| (148,750 | ) | ||||||||||||||||
Borrowings from affiliate |
|
| 21,700 |
|
|
| — |
|
|
| (21,700 | ) |
|
| — |
| ||||||||||||||||
Contributions from parent |
| 120,000 |
| — |
| — |
| 120,000 |
| |||||||||||||||||||||||
Borrowings from parent/subsidiary |
| 7,785 |
| — |
| (7,785 | ) |
| — |
| ||||||||||||||||||||||
Proceeds from issuance of senior notes |
| 1,170,000 |
| — |
| — |
| 1,170,000 |
| |||||||||||||||||||||||
Proceeds from other borrowings |
| 13,475 |
| — |
| — |
| 13,475 |
| |||||||||||||||||||||||
Redemptions of senior notes |
| (1,155,000 | ) |
| — |
| — |
| (1,155,000 | ) | ||||||||||||||||||||||
Repayments on long-term debt |
|
| (7,984 | ) |
|
| - |
|
|
| — |
|
|
| (7,984 | ) |
| (10,284 | ) |
| — |
| — |
| (10,284 | ) | ||||||
Payment of debt issue costs |
|
| (5,218 | ) |
|
| - |
|
|
| — |
|
|
| (5,218 | ) | ||||||||||||||||
Payments on capital leases |
|
| (25,353 | ) |
|
| — |
|
|
| — |
|
|
| (25,353 | ) | ||||||||||||||||
Payment of debt issuance costs |
| (17,272 | ) |
| — |
| — |
| (17,272 | ) | ||||||||||||||||||||||
Payments on finance leases |
| (14,689 | ) |
| — |
| — |
| (14,689 | ) | ||||||||||||||||||||||
Other |
|
| (4,601 | ) |
|
| — |
|
|
| — |
|
|
| (4,601 | ) |
|
| (6,160 | ) |
|
| — |
|
|
| — |
|
|
| (6,160 | ) |
Net cash used for financing activities |
|
| (170,206 | ) |
|
| — |
|
|
| (21,700 | ) |
|
| (191,906 | ) | ||||||||||||||||
Net cash provided by (used for) financing activities |
| 107,855 |
| — |
| (7,785 | ) |
| 100,070 |
| ||||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
|
| (9,222 | ) |
|
| — |
|
|
| — |
|
|
| (9,222 | ) |
|
| (4,992 | ) |
|
| — |
|
|
| — |
|
|
| (4,992 | ) |
Decrease in cash and cash equivalents |
|
| (91,058 | ) |
|
| (5,141 | ) |
|
| — |
|
|
| (96,199 | ) |
|
| 176,825 |
| 5,314 |
| — |
| 182,139 |
| ||||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning of year |
|
| 461,518 |
|
|
| 60,897 |
|
|
| — |
|
|
| 522,415 |
|
|
| 165,778 |
|
|
| 94,760 |
|
|
| — |
|
|
| 260,538 |
|
End of year |
| $ | 370,460 |
|
| $ | 55,756 |
|
| $ | — |
|
| $ | 426,216 |
|
| $ | 342,603 |
|
| $ | 100,074 |
|
| $ | — |
|
| $ | 442,677 |
|
Note: "Restricted Group" and "Unrestricted Group" are defined in the indentures for the senior notes.
S-5
S-5