Item 1. Financial Statements
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
1.
|
The Company and Basis of Presentation
|
The Company and its subsidiaries operate in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay.
The accompanying condensed consolidated balance sheet as of December 31, 2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates. Majority-owned subsidiaries of which the Company has control are consolidated while those affiliates of which the Company owns between 20% and 50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 20% are generally accounted for under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate, in which case the Company would account for its investment under the equity method. The results of these subsidiaries and affiliates are included in the condensed consolidated financial statements effective with their formation or from their dates of acquisition. Intercompany balances and transactions are eliminated in consolidation.
These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2020, included in the Annual Report on Form 10-K filed February 26, 2021 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results to be achieved for the full year.
2.
|
Impact of COVID-19 Pandemic
|
As the Company has previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread, and the situation continues to evolve. As a movie exhibitor that operates spaces where patrons gather in close proximity, the Company has been, and continues to be, significantly impacted by protective actions taken by governmental authorities to control the spread of the pandemic. To comply with government mandates at the initial outbreak of the COVID-19 pandemic, the Company temporarily closed all of its theatres in the U.S. and Latin America in March of 2020, implemented temporary personnel and salary reductions, halted non-essential operating and capital expenditures, and negotiated modified timing and/or abatement of contractual payments with landlords and other major suppliers until its theatres reopened. In addition, the Company suspended its quarterly dividend.
As of March 31, 2021, the Company had reopened 301 of its domestic theatres and 78 of its international theatres and continued to show a limited volume of new releases along with library content during reduced operating hours. Theatre staffing levels remain reduced as compared to pre-COVID levels due to limited operating hours as well as the Company’s focus on initiatives to enhance productivity. The Company also continues to limit operating expenses and capital expenditures to essential activities and projects as volumes remain reduced. The Company is continuing to work with landlords and other vendors to extend payment terms while it reopens theatres and recovers from the impacts of the COVID-19 pandemic.
Based on the Company’s current estimates of recovery, it believes it has, and will generate, sufficient cash to sustain operations. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on the Company’s business, results of operations, cash flows and financial condition.
8
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Restructuring Charges
During June 2020, Company management approved and announced a restructuring plan to realign its operations to create a more efficient cost structure (referred to herein as the “Restructuring Plan”). The Restructuring Plan primarily included a permanent headcount reduction at its domestic corporate office and the permanent closure of certain domestic and international theatres. The following table summarizes activity recorded during the three months ended March 31, 2021:
|
|
U.S. Operating Segment
|
|
|
International Operating Segment
|
|
|
Consolidated
|
|
|
|
Employee-related Costs
|
|
Facility Closure Costs
|
|
Total Charges
|
|
|
Employee-related Costs
|
|
Facility Closure Costs
|
|
Total Charges
|
|
|
Employee-related Costs
|
|
Facility Closure Costs
|
|
Total Charges
|
|
Balance at December 31, 2020
|
|
$
|
840
|
|
$
|
5,740
|
|
$
|
6,580
|
|
|
$
|
—
|
|
$
|
161
|
|
$
|
161
|
|
|
$
|
840
|
|
$
|
5,901
|
|
$
|
6,741
|
|
Amounts paid
|
|
|
(350
|
)
|
|
—
|
|
|
(350
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(350
|
)
|
|
—
|
|
|
(350
|
)
|
Reserve adjustments
|
|
|
—
|
|
|
(208
|
)
|
|
(208
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(208
|
)
|
|
(208
|
)
|
Balance at March 31, 2021
|
|
$
|
490
|
|
$
|
5,532
|
|
$
|
6,022
|
|
|
$
|
—
|
|
$
|
161
|
|
$
|
161
|
|
|
$
|
490
|
|
$
|
5,693
|
|
$
|
6,183
|
|
The remaining accrued restructuring costs of $6,183 are reflected in accounts payable and accrued expenses on the condensed consolidated balance sheet as of March 31, 2021.
3.
|
New Accounting Pronouncements
|
Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”) and ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”). The purpose of ASU 2020-04 is to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. More specifically, the amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of ASU 2020-04 and ASU 2021-01 and their impact on its condensed consolidated financial statements.
ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company elected to adopt ASU 2020-06 effective January 1, 2021. See discussion of the impact of adoption at Note 7.
Lease Deferrals and Abatements
Upon the temporary closure of theatres in March 2020, the Company initiated discussions with landlords to negotiate the deferral of rent and other lease-related payments with certain of its landlords. The amendments signed with the landlords 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 to later periods combined with an early exercise of an existing renewal option or extension of the lease term. In some cases, the Company is entitled to rent-free periods while theatres remain closed in certain locations due to local regulations. Total payments deferred as of March 31, 2021 were $65,203, of which $48,287 is included in accounts payable and accrued expenses and $16,915 is included in other long-term liabilities in the condensed consolidated balance sheet.
In April 2020, the FASB staff released guidance indicating that in response to the COVID-19 crisis, an entity would not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. The election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
9
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company elected to not remeasure the related lease liabilities and right-of-use assets for those leases where the concessions and deferrals did not result in a significant change in total payments under the lease and where the remaining lease term did not change as a result of the negotiation. For those leases that were renewed or extended as a result of the negotiation to defer rent payments, the Company recalculated the related lease liability and right-of-use asset based on the new terms.
The following table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.
|
|
Three Months Ended
|
|
|
|
March 31
|
|
Lease Cost
|
Classification
|
2021
|
|
|
2020
|
|
Operating lease costs
|
|
|
|
|
|
|
|
|
Equipment (1)
|
Utilities and other
|
$
|
445
|
|
|
$
|
1,541
|
|
Real Estate (2)(3)
|
Facility lease expense
|
|
63,759
|
|
|
|
81,658
|
|
Total operating lease costs
|
|
$
|
64,204
|
|
|
$
|
83,199
|
|
|
|
|
|
|
|
|
|
|
Finance lease costs
|
|
|
|
|
|
|
|
|
Amortization of leased assets
|
Depreciation and amortization
|
$
|
3,250
|
|
|
$
|
3,707
|
|
Interest on lease liabilities
|
Interest expense
|
|
1,570
|
|
|
|
1,851
|
|
Total finance lease costs
|
|
$
|
4,820
|
|
|
$
|
5,558
|
|
(1)
|
Includes approximately $315 and $413 of short-term lease payments for the three months ended March 31, 2021 and 2020, respectively.
|
(2)
|
Includes approximately $(2,344) and $12,247 of variable lease payments based on a change in index, such as CPI or inflation, variable payments based on revenues or attendance and variable common area maintenance costs for the three months ended March 31, 2021 and 2020, respectively.
|
(3)
|
Approximately $364 and $460 of lease payments are included in general and administrative expenses primarily related to office leases for the three months ended March 31, 2021 and 2020, respectively.
|
The following table represents the minimum cash lease payments recorded as lease expense, interest expense and a reduction of lease liabilities, as well as the non-cash addition of lease assets for the periods indicated.
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
Other Information
|
|
2021
|
|
|
2020
|
|
Contractual cash payments included in the measurement of lease liabilities(1)
|
|
|
|
|
|
|
|
|
Cash outflows for operating leases
|
|
$
|
66,233
|
|
|
$
|
70,539
|
|
Cash outflows for finance leases - operating activities
|
|
$
|
1,566
|
|
|
$
|
1,811
|
|
Cash outflows for finance leases - financing activities
|
|
$
|
3,742
|
|
|
$
|
3,789
|
|
Non-cash amount of leased assets obtained in exchange for:
|
|
|
|
|
|
|
|
|
Operating lease liabilities
|
|
$
|
24,877
|
|
|
$
|
37,803
|
|
Finance lease liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
As discussed above at Lease Deferrals and Abatements, the Company negotiated certain lease amendments to defer and/or abate contractual payments as a result of the COVID-19 pandemic and temporary closure of theatres. In accordance with FASB Staff guidance, the Company did not recalculate lease liabilities and right of use assets for amendments that did not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Contractual payment amounts for the three months ended March 31, 2021 above are prior to the impact of deferred or abated rent amounts.
|
As of March 31, 2021, the Company had signed lease agreements with total noncancelable lease payments of approximately $183,689 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 the right-of-use assets and lease liabilities as of March 31, 2021.
The Company’s patrons have the option to purchase movie tickets well in advance of a movie showtime or right before the movie showtime, or at any point in between those two timeframes depending on seat availability. The Company recognizes such admissions revenues when the showtime for a purchased movie ticket has passed. Concession revenues are recognized when products are sold to the consumer. Other revenues primarily consist of screen advertising and screen rental revenues, promotional income,
10
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
studio trailer placements and transactional fees. The Company sells gift cards and discount ticket vouchers, the proceeds from which are recorded as deferred revenues. Deferred revenues for gift cards and discount ticket vouchers are recognized when they are redeemed for concession items or, if redeemed for movie tickets, when the showtime has passed. The Company offers a subscription program in the U.S. whereby patrons can pay a monthly fee to receive a monthly credit for use towards a future movie ticket purchase. The Company records the monthly subscription program fees as deferred revenues and records admissions revenues when the showtime for a movie ticket purchased with a credit has passed. The Company has loyalty programs in the U.S. and many of its international locations that either have a prepaid annual membership fee or award points to customers as purchases are made. For those loyalty programs that have an annual membership fee, the Company recognizes the fee collected as other revenues on a straight-line basis over the term of the membership. For those loyalty programs that award points to customers based on their purchases, the Company records a portion of the original transaction proceeds as deferred revenues based on the number of reward points issued to customers and recognizes the deferred revenues when the customer redeems such points. The value of loyalty points issued is based on the estimated fair value of the rewards offered. The Company generally records breakage revenue on gift cards and discount ticket vouchers based on redemption activity and historical experience with unused balances. The Company also records breakage revenue generally upon the expiration of loyalty points and subscription credits. Advances collected on concession and other contracts are deferred and recognized during the period in which the Company satisfies the related performance obligations, which may differ from the period in which the advances are collected.
Accounts receivable as of March 31, 2021 and December 31, 2020 included approximately $6,484 and $6,232 of receivables, respectively, related to contracts with customers. The Company did not record any assets related to the costs to obtain or fulfill a contract with customers during the three months ended March 31, 2021 or March 31, 2020.
Disaggregation of Revenue
The following tables present revenues for the three months ended March 31, 2021 and 2020, disaggregated based on major type of good or service and by reportable operating segment and disaggregated based on timing of revenue recognition.
|
Three Months Ended
|
|
|
March 31, 2021
|
|
|
U.S.
|
|
|
International
|
|
|
|
|
|
|
Operating
|
|
|
Operating
|
|
|
|
|
|
Major Goods/Services
|
Segment (1)
|
|
|
Segment
|
|
|
Consolidated
|
|
Admissions revenues
|
$
|
48,487
|
|
|
$
|
7,634
|
|
|
$
|
56,121
|
|
Concession revenues
|
|
33,041
|
|
|
|
6,447
|
|
|
|
39,488
|
|
Screen advertising, screen rental and promotional revenues (2)
|
|
11,167
|
|
|
|
2,201
|
|
|
|
13,368
|
|
Other revenues
|
|
4,394
|
|
|
|
990
|
|
|
|
5,384
|
|
Total revenues
|
$
|
97,089
|
|
|
$
|
17,272
|
|
|
$
|
114,361
|
|
|
Three Months Ended
|
|
|
March 31, 2020
|
|
|
U.S.
|
|
|
International
|
|
|
|
|
|
|
Operating
|
|
|
Operating
|
|
|
|
|
|
Major Goods/Services
|
Segment (1)
|
|
|
Segment
|
|
|
Consolidated
|
|
Admissions revenues
|
$
|
232,326
|
|
|
$
|
60,136
|
|
|
$
|
292,462
|
|
Concession revenues
|
|
152,758
|
|
|
|
37,598
|
|
|
|
190,356
|
|
Screen advertising, screen rental and promotional revenues
|
|
18,209
|
|
|
|
12,446
|
|
|
|
30,655
|
|
Other revenues
|
|
24,150
|
|
|
|
5,993
|
|
|
|
30,143
|
|
Total revenues
|
$
|
427,443
|
|
|
$
|
116,173
|
|
|
$
|
543,616
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2021
|
|
|
|
U.S.
|
|
|
International
|
|
|
|
|
|
|
|
Operating
|
|
|
Operating
|
|
|
|
|
|
Timing of Recognition
|
|
Segment (1)
|
|
|
Segment
|
|
|
Consolidated
|
|
Goods and services transferred at a point in time
|
|
$
|
80,534
|
|
|
$
|
14,312
|
|
|
$
|
94,846
|
|
Goods and services transferred over time (2)
|
|
|
16,555
|
|
|
|
2,960
|
|
|
|
19,515
|
|
Total
|
|
$
|
97,089
|
|
|
$
|
17,272
|
|
|
$
|
114,361
|
|
11
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Three Months Ended
|
|
|
|
March 31, 2020
|
|
|
|
U.S.
|
|
|
International
|
|
|
|
|
|
|
|
Operating
|
|
|
Operating
|
|
|
|
|
|
Timing of Recognition
|
|
Segment (1)
|
|
|
Segment
|
|
|
Consolidated
|
|
Goods and services transferred at a point in time
|
|
$
|
401,442
|
|
|
$
|
101,252
|
|
|
$
|
502,694
|
|
Goods and services transferred over time
|
|
|
26,001
|
|
|
|
14,921
|
|
|
|
40,922
|
|
Total
|
|
$
|
427,443
|
|
|
$
|
116,173
|
|
|
$
|
543,616
|
|
|
(1)
|
U.S. segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 17 for additional information on intercompany eliminations.
|
|
(2)
|
Amount includes amortization of NCM screen advertising advances. See Deferred Revenues below.
|
Deferred Revenues
The following table presents changes in the Company’s NCM screen advertising advances and deferred revenues for the three months ended March 31, 2021.
|
|
NCM screen advertising advances (1)
|
|
|
Other
Deferred
Revenues (2)
|
|
|
Total
|
|
Balance at January 1, 2021
|
|
$
|
344,255
|
|
|
$
|
138,830
|
|
|
$
|
483,085
|
|
Amounts recognized as accounts receivable
|
|
|
—
|
|
|
|
93
|
|
|
|
93
|
|
Cash received from customers in advance
|
|
|
—
|
|
|
|
8,024
|
|
|
|
8,024
|
|
Interest accrued related to significant financing component
|
|
|
5,835
|
|
|
|
—
|
|
|
|
5,835
|
|
Revenue recognized during period
|
|
|
(7,850
|
)
|
|
|
(13,258
|
)
|
|
|
(21,108
|
)
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
(1,071
|
)
|
|
|
(1,071
|
)
|
Balance at March 31, 2021
|
|
$
|
342,240
|
|
|
$
|
132,618
|
|
|
$
|
474,858
|
|
|
(1)
|
See Note 9 for the maturity of balance as of March 31, 2021.
|
|
(2)
|
Includes liabilities associated with outstanding gift cards and discount ticket vouchers, points or rebates outstanding under the Company’s loyalty and membership programs and revenues not yet recognized for screen advertising, screen rental and other promotional activities. Classified as accounts payable and accrued expenses or other long-term liabilities on the condensed consolidated balance sheet.
|
The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of March 31, 2021 and when the Company expects to recognize this revenue.
|
|
Twelve Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Remaining Performance Obligations
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
Thereafter
|
|
|
Total
|
|
Other deferred revenues
|
|
$
|
118,836
|
|
|
$
|
13,782
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
132,618
|
|
The following table presents computations of basic and diluted loss per share:
12
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss attributable to Cinemark Holdings, Inc.
|
|
$
|
(208,241
|
)
|
|
$
|
(59,591
|
)
|
Loss allocated to participating share-based awards (1)
|
|
|
3,144
|
|
|
|
350
|
|
Net loss attributable to common stockholders
|
|
$
|
(205,097
|
)
|
|
$
|
(59,241
|
)
|
|
|
|
|
|
|
|
|
|
Denominator (shares in thousands):
|
|
|
|
|
|
|
|
|
Basic weighted average common stock outstanding
|
|
|
117,177
|
|
|
|
116,496
|
|
Common equivalent shares for restricted stock units (2)
|
|
|
—
|
|
|
|
—
|
|
Common equivalent shares for convertible notes (3)
|
|
|
—
|
|
|
|
—
|
|
Diluted common equivalent shares
|
|
|
117,177
|
|
|
|
116,496
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share attributable to common stockholders
|
|
$
|
(1.75
|
)
|
|
$
|
(0.51
|
)
|
Diluted loss per share attributable to common stockholders
|
|
$
|
(1.75
|
)
|
|
$
|
(0.51
|
)
|
|
(1)
|
For the three months ended March 31, 2021 and 2020, a weighted average of approximately 1,797 and 683 shares of restricted stock, respectively, were considered participating securities.
|
|
(2)
|
For the three months ended March 31, 2021 and 2020, approximately 65 and 92, respectively, common equivalent shares for restricted stock units were excluded because they were anti-dilutive.
|
|
(3)
|
For the three months ended March 31, 2021, excludes the conversion of the 4.50% Convertible Senior Notes, issued August 21, 2020, into 32,051 shares of common stock, as they would be anti-dilutive.
|
The Company considers its unvested share-based payment awards, which contain non-forfeitable rights to dividends, participating securities, and includes such participating securities in its computation of loss per share pursuant to the two-class method. Basic loss per share for the two classes of stock (common stock and unvested restricted stock) is calculated by dividing net loss by the weighted average number of shares of common stock and unvested restricted stock outstanding during the reporting period. Diluted loss per share is calculated using the weighted average number of shares of common stock plus the potentially dilutive effect of common equivalent shares outstanding determined under both the two-class method and the treasury stock method.
The impact of the 4.50% Convertible Senior Notes on diluted loss per share are calculated under the if-converted method, which assumes conversion of the notes at the beginning of the period. During the three months ended March 31, 2021, the weighted average closing price of the Company’s common stock of $21.15 exceeded the exercise price of $14.35 per share. The if-converted value of the 4.50% Convertible Senior Notes exceeded the aggregate outstanding principle value of the notes by $279,745.
As stated in Note 13 of the Company’s Annual Report on Form 10-K filed February 26, 2021, the Company entered into hedge transactions with, and sold warrants to, counterparties in connection with the issuance of the 4.50% Convertible Senior Notes. The weighted average closing price of the Company’s common stock of $21.15 did not exceed the exercise price of $22.08 per share for the warrants during the three months ended March 31, 2021. The hedge transactions are generally expected to reduce the potential dilution of any conversion of the 4.50% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 4.50% Convertible Senior Notes, as the case may be.
7.
|
Long Term Debt Activity
|
Senior Secured Credit Facility
Cinemark USA, Inc. has a senior secured credit facility that includes a $700,000 term loan and a $100,000 revolving credit line (the “Credit Agreement”). As of March 31, 2021, there was $638,083 outstanding under the term loan and no borrowings were outstanding under the revolving credit line. As of March 31, 2021, $100,000 was available for borrowing under the revolving credit line. Quarterly principal payments of $1,649 are due on the term loan through December 31, 2024, with a final principal payment of $613,351 due on March 29, 2025. The revolving credit line matures November 28, 2022. The average interest rate applicable to outstanding term loan borrowings under the Credit Agreement at March 31, 2021 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed below.
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. The leverage covenant applies when amounts are outstanding under the revolving line of credit under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020.
13
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
On August 21, 2020, the Company further amended the waiver of the leverage covenant to extend through the fiscal quarter ending September 30, 2021. The amendment also (i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, (ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits the Company to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver, and (iv) makes such other changes to permit the issuance of the 4.50% Convertible Senior Notes discussed below.
5.875% Senior Notes
On March 16, 2021, Cinemark USA, Inc. issued $405,000 aggregate principal amount of 5.875% senior notes due 2026, at par value (the “5.875% Senior Notes”). Proceeds, after payment of fees, were used to fund a cash tender offer to purchase any and all of Cinemark USA’s 5.125% Senior Notes (the “5.125% Senior Notes”) and to redeem any of the 5.125% Senior Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on March 15, 2026. The Company incurred debt issue costs of approximately $5,980 in connection with the issuance, which are recorded as a reduction of long-term debt, less current on the consolidated balance sheet.
The 5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior debt and are senior in right of payment to all of Cinemark USA, Inc.’s and its guarantors’ existing and future senior subordinated debt. The 5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the collateral securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 5.875% Senior Notes.
The indenture to the 5.875% Senior Notes contains covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. Upon a change of control, as defined in the indenture, the Company would be required to make an offer to repurchase the 5.875% Senior Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indenture governing the 5.875% 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 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.
5.125% 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 three months ended March 31, 2021, which included the write-off of $1,168 unamortized debt issuance costs and the payment of $1,435 in fees.
14
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Additional Borrowings of International Subsidiaries
During the three months ended March 31, 2021, certain of the Company’s international subsidiaries borrowed an aggregate of $9,012 under various local bank loans. Below is a summary of these loans:
|
|
Loan Amounts
|
|
|
|
|
|
|
|
|
|
Loan Description
|
|
(in USD)
|
|
|
Interest Rates
|
|
|
Covenants
|
|
Maturity
|
Peru bank loan
|
|
$
|
3,277
|
|
|
4.8%
|
|
|
Negative covenants
|
|
January 2024
|
Brazil bank loan
|
|
$
|
5,735
|
|
|
4.0%
|
|
|
Negative covenants
|
|
January 2029
|
Additionally, the Company deposited cash into a collateral account to support the issuance of bank letters of credit to the lenders for the international loans noted above. The total amount deposited during the three months ended March 31, 2021 was $7,300. Total deposits made to support bank letters of credit for the Company’s outstanding international loans is $21,147 and is considered restricted cash as of March 31, 2021.
Interest Rate Swap Agreements
Below is a summary of the Company’s interest rate swap agreements designated as cash flow hedges as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
Notional
|
|
|
|
|
|
|
|
|
|
|
|
|
March 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
|
|
$
|
7,567
|
|
$
|
175,000
|
|
|
December 31, 2018
|
|
2.12%
|
|
|
1-Month LIBOR
|
|
December 31, 2024
|
|
|
9,687
|
|
$
|
137,500
|
|
|
December 31, 2018
|
|
2.19%
|
|
|
1-Month LIBOR
|
|
December 31, 2024
|
|
|
8,003
|
|
$
|
150,000
|
|
|
March 31, 2020
|
|
0.57%
|
|
|
1-Month LIBOR
|
|
March 31, 2022
|
|
|
642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
25,899
|
|
(1)
|
Approximately $9,786 of the total is included in accounts payable and accrued expenses and $16,113 is included in other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2021.
|
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 $1,124 was recorded in amortization of accumulated losses for amended swaps in the condensed consolidated income statement for the three months ended March 31, 2021, respectively.
The fair values of the amended interest rate swaps and the new interest rate swap are recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. The changes in fair value are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged items affect earnings. The valuation technique used to determine fair value is the income approach. Under this approach, the Company uses projected future interest rates, which fall in Level 2 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35, as provided by counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under the agreements.
Adoption of ASU 2020-06
ASU 2020-06 simplifies the guidance on an issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature of such debt. Instead, they will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models reduces reported interest expense and increases reported net income for entities that have issued a convertible instrument within the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method is no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.
15
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company adopted ASU 2020-06 under the modified retrospective method effective January 1, 2021. As a result of the adoption, the entire $460,000 principal balance of the 4.50% Convertible Senior Notes are recorded in long-term debt and is no longer bifurcated between long-term debt and equity. The impact of the adoption is as follows:
|
•
|
Reclassified $101,123 previously allocated to the cash conversion feature and recorded in equity, from equity to long term debt on the condensed consolidated balance sheet.
|
|
•
|
Reversed the accretion of interest of $5,714 on the 4.50% Convertible Senior Notes recorded during the year ended December 31, 2020 with a credit to retained earnings.
|
|
•
|
Reclassified $3,764 of debt issue costs previously allocated to equity to long-term debt on the condensed consolidated balance sheet.
|
|
•
|
Recorded offsetting amortization of debt issue costs of $274 as an adjustment to retained earnings on the condensed consolidated balance sheet.
|
Fair Value of Long-Term Debt
The Company estimates the fair value of its long-term debt using the market approach, which utilizes quoted market prices that fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC 820, Fair Value Measurement (“ASC Topic 820”). The carrying value of the Company’s long-term debt, excluding unamortized debt discounts and debt issue costs, was $2,538,135 and $2,527,900 as of March 31, 2021 and December 31, 2020, respectively. The fair value of the Company’s long-term debt was $2,846,837 and $2,652,635 as of March 31, 2021 and December 31, 2020, respectively.
8. Equity
Below is a summary of changes in stockholders’ equity attributable to Cinemark Holdings, Inc., noncontrolling interests and total equity for the three months ended March 31, 2021 and 2020:
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional Paid-In-Capital
|
|
Retained Earnings (Deficit)
|
|
Accumulated Other Comprehensive Loss
|
|
Total Cinemark Holdings, Inc. Stockholders’ Equity
|
|
Noncontrolling Interests
|
|
Total Equity
|
|
Balance at January 1, 2021
|
|
$
|
124
|
|
$
|
(87,004
|
)
|
$
|
1,245,569
|
|
$
|
27,937
|
|
$
|
(398,653
|
)
|
$
|
787,973
|
|
$
|
10,996
|
|
$
|
798,969
|
|
Impact of adoption of ASU 2020-06, net of deferred taxes of $23,756 (See Note 7)
|
|
|
—
|
|
|
—
|
|
|
(73,604
|
)
|
|
5,440
|
|
|
—
|
|
|
(68,164
|
)
|
|
—
|
|
|
(68,164
|
)
|
Issuance of share based awards and share based awards compensation expense
|
|
|
—
|
|
|
—
|
|
|
4,668
|
|
|
—
|
|
|
—
|
|
|
4,668
|
|
|
—
|
|
|
4,668
|
|
Stock withholdings related to share based awards that vested during the three months ended March 31, 2021
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
Dividends accrued on unvested restricted stock unit awards
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
Net loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(208,241
|
)
|
|
—
|
|
|
(208,241
|
)
|
|
(602
|
)
|
|
(208,843
|
)
|
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,704
|
|
|
5,704
|
|
|
—
|
|
|
5,704
|
|
Amortization of accumulated losses for amended swap agreements
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,124
|
|
|
1,124
|
|
|
—
|
|
|
1,124
|
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,465
|
)
|
|
(9,465
|
)
|
|
—
|
|
|
(9,465
|
)
|
Balance at March 31, 2021
|
|
$
|
124
|
|
$
|
(87,012
|
)
|
$
|
1,176,633
|
|
$
|
(174,866
|
)
|
$
|
(401,290
|
)
|
$
|
513,589
|
|
$
|
10,394
|
|
$
|
523,983
|
|
16
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional Paid-In-Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Total Cinemark Holdings, Inc. Stockholders’ Equity
|
|
Noncontrolling Interests
|
|
Total Equity
|
|
Balance at January 1, 2020
|
|
$
|
122
|
|
$
|
(81,567
|
)
|
$
|
1,170,039
|
|
$
|
687,332
|
|
$
|
(340,112
|
)
|
$
|
1,435,814
|
|
$
|
12,508
|
|
$
|
1,448,322
|
|
Issuance of share based awards and share based awards compensation expense
|
|
|
—
|
|
|
—
|
|
|
4,111
|
|
|
—
|
|
|
—
|
|
|
4,111
|
|
|
—
|
|
|
4,111
|
|
Stock withholdings related to share based awards that vested during the three months ended March 31, 2020
|
|
|
—
|
|
|
(2,691
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,691
|
)
|
|
—
|
|
|
(2,691
|
)
|
Dividends paid to stockholders, $0.36 per common share (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42,311
|
)
|
|
—
|
|
|
(42,311
|
)
|
|
—
|
|
|
(42,311
|
)
|
Dividends paid to noncontrolling interests
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(392
|
)
|
|
(392
|
)
|
Dividends accrued on unvested restricted stock unit awards (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(256
|
)
|
|
—
|
|
|
(256
|
)
|
|
—
|
|
|
(256
|
)
|
Net income (loss)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59,591
|
)
|
|
—
|
|
|
(59,591
|
)
|
|
169
|
|
|
(59,422
|
)
|
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes, net of settlements
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,171
|
)
|
|
(24,171
|
)
|
|
—
|
|
|
(24,171
|
)
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(57,625
|
)
|
|
(57,625
|
)
|
|
—
|
|
|
(57,625
|
)
|
Balance at March 31, 2020
|
|
$
|
122
|
|
$
|
(84,258
|
)
|
$
|
1,174,150
|
|
$
|
585,174
|
|
$
|
(421,908
|
)
|
$
|
1,253,280
|
|
$
|
12,285
|
|
$
|
1,265,565
|
|
(1)
|
On March 20, 2020 the Company paid a $0.36 dividend per common share to stockholders of record on March 6, 2020. Additionally, the Company accrued dividends on outstanding unvested restricted stock units.
|
9.
|
Investment in National CineMedia LLC
|
Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:
|
|
Investment
in NCM
|
|
NCM Screen Advertising Advances
|
|
Distributions
from NCM
|
|
Equity in
Loss
|
|
Other
Revenue
|
|
Interest
Expense - NCM
|
|
Cash Received
|
|
Balance as of January 1, 2021
|
|
$
|
151,962
|
|
$
|
(344,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Screen rental revenues earned under ESA (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(855
|
)
|
|
—
|
|
|
855
|
|
Interest accrued related to significant financing component
|
|
|
—
|
|
|
(5,835
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,835
|
|
|
—
|
|
Receipt under tax receivable agreement
|
|
|
(156
|
)
|
|
—
|
|
|
(77
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
233
|
|
Equity in loss
|
|
|
(6,348
|
)
|
|
—
|
|
|
—
|
|
|
6,348
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of screen advertising advances
|
|
|
—
|
|
|
7,850
|
|
|
—
|
|
|
—
|
|
|
(7,850
|
)
|
|
—
|
|
|
—
|
|
Balance as of and for the three months ended March 31, 2021
|
|
$
|
145,458
|
|
$
|
(342,240
|
)
|
$
|
(77
|
)
|
$
|
6,348
|
|
$
|
(8,705
|
)
|
$
|
5,835
|
|
$
|
1,088
|
|
(1)
|
Amounts include the per patron and per digital screen theatre access fees due to the Company, net of amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire of approximately $370.
|
Investment in National CineMedia
NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising to our theatres. The Company does not recognize undistributed equity in the earnings on its original NCM membership units (referred to herein as the Company’s Tranche 1 Investment) until NCM’s future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company recognizes cash distributions it receives from NCM on its Tranche 1 Investment as a component of earnings as Distributions from NCM. The Company believes that the accounting model provided by ASC Topic 323-10-35-22 for recognition of equity
17
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
investee losses in excess of an investor’s basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.
Common Unit Adjustments
The Company also periodically receives consideration in the form of common units from NCM. Annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated. The common units received are recorded at estimated fair value as an increase in the Company’s investment in NCM with an offset to NCM screen advertising advances.
During March 2021, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company will receive an additional 2,311,482 common units of NCM, each of which is convertible into one share of NCMI common stock. The Company will record the additional common units received at estimated fair value with a corresponding adjustment to NCM screen advertising advances when they are received in April 2021.
As of March 31, 2021, the Company owned a total of 40,850,068 common units of NCM (excluding the common units to be received in April 2021 noted above), representing an ownership interest of approximately 25%. Each of the Company’s common units in NCM is convertible into one share of NCM, Inc. common stock. As of March 31, 2021, the estimated fair value of the Company’s investment in NCM was approximately $188,727 based on NCM, Inc.’s stock price as of March 31, 2021 of $4.62 per share (Level 1 input as defined in FASB ASC Topic 820).
Exhibitor Services Agreement
As discussed above, the Company’s domestic theatres are part of the in-theatre digital network operated by NCM under the ESA. NCM provides advertising to the Company’s theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres. The Company receives a monthly theatre access fee for participation in the NCM network and also earns screen advertising revenue on a per patron basis. The screen advertising revenues earned under the ESA are reflected in other revenue on the condensed consolidated income statement.
Prior to September 17, 2019, the ESA was accounted for under ASC Topic 606, Revenue from Contracts with Customers. Effective September 17, 2019, the Company signed an amendment to the ESA, under which the Company will provide incremental advertising time to NCM and has extended the term through February 2041. Since the agreement was amended, the Company was required to evaluate the revised contract under ASC Topic 842, Leases, and as a result, determined that the ESA met the definition of a lease. The Company leases nonconsecutive periods of use of its domestic theatre screens to NCM for purposes of showing third party advertising content. The lease, which is classified as an operating lease, generally requires variable lease payments based on the number of patrons attending the showtimes during which such advertising is shown. The lease agreement is considered short-term due to the fact that the nonconsecutive periods of use, or advertising time slots, are set on a weekly basis. The revenues earned under the ESA, both before and after the amendment, are reflected in other revenue on the consolidated income statement.
The recognition of revenue related to the NCM screen advertising advances are recorded through February 2041.
|
|
Twelve Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Remaining Maturity
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
Thereafter
|
|
|
Total
|
|
NCM screen advertising advances (1)
|
|
$
|
8,407
|
|
|
$
|
8,989
|
|
|
$
|
9,612
|
|
|
$
|
10,279
|
|
|
$
|
10,994
|
|
|
$
|
293,959
|
|
|
$
|
342,240
|
|
|
(1)
|
Amounts are net of the estimated interest to be accrued for the periods presented. See discussion of significant financing component below.
|
|
Significant Financing Component
In connection with the completion of the NCMI initial public offering, the Company amended and restated its ESA with NCM and received approximately $174,000 in cash consideration from NCM. The proceeds were recorded as deferred revenue and are being amortized over the term of the modified ESA, or through February 2041. In addition to the consideration received upon the ESA modification during 2007, the Company also receives consideration in the form of common units from NCM, at each annual common unit adjustment settlement, in exchange for exclusive access to the Company’s newly opened domestic screens under the ESA. 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, the Company recognized incremental screen rental revenue and an offsetting interest expense of $7,851 and $5,835, respectively, during the three months ended March 31, 2021. The interest expense was calculated using the Company’s incremental borrowing rates at the time when the cash was received from the NCMI IPO and each tranche of common units was received from NCM, which ranged from 4.4% to 8.3%.
18
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Effective September 17, 2019, upon the Company’s evaluation and determination that ASC Topic 842 applies to the amended ESA, the Company determined it acceptable to apply the significant financing component guidance from ASC Topic 606 by analogy as the economic substance of the agreement represents a financing arrangement.
NCM Financial Information
Below is summary financial information for NCM for the periods indicated:
|
|
Three Months Ended
|
|
|
Three Months ended
|
|
|
|
April 1, 2021
|
|
|
March 26, 2020
|
|
Gross revenues
|
|
$
|
5,445
|
|
|
$
|
64,700
|
|
Operating income (loss)
|
|
$
|
(28,239
|
)
|
|
$
|
4,900
|
|
Net loss
|
|
$
|
(43,497
|
)
|
|
$
|
(8,600
|
)
|
|
|
As of
|
|
|
As of
|
|
|
|
April 1, 2021
|
|
|
December 31, 2020
|
|
Current assets
|
|
$
|
151,292
|
|
|
$
|
142,566
|
|
Noncurrent assets
|
|
$
|
681,560
|
|
|
$
|
685,643
|
|
Current liabilities
|
|
$
|
37,569
|
|
|
$
|
46,872
|
|
Noncurrent liabilities
|
|
$
|
1,116,244
|
|
|
$
|
1,072,207
|
|
Members deficit
|
|
$
|
(320,961
|
)
|
|
$
|
(290,870
|
)
|
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 six 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 systems. DCIP expects cost recoupment to occur during late 2021. The timing of cost recoupment is dependent on VPF payments from studios. Pursuant to the operating agreement between the Exhibitors and DCIP, DCIP began to distribute excess cash to the Exhibitors upon the payoff of its outstanding debt, which occurred during the year ended December 31, 2019.
Effective November 1, 2020, the Company amended the master equipment lease agreement (“MELA”) with Kasima LLC, which is an indirect subsidiary of DCIP, resulting in the termination of the MELA. Upon termination of the MELA, the Company received a distribution of the digital projection equipment that it previously leased. As the fair value of the distributed projectors was greater than the Company’s investment in DCIP at the time of the distribution, the investment in DCIP was reduced to zero at the time of the distribution. The Company does not recognize undistributed equity in the earnings or loss of its investment in DCIP until such time that future net earnings, less distributions received, surpass the amount of the excess distribution.
As of March 31, 2021, the Company had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. The Company accounts for its investment in DCIP and its subsidiaries under the equity method of accounting.
19
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Below is summary financial information for DCIP for the periods indicated:
|
|
Three Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
Gross revenues
|
|
$
|
5,624
|
|
|
$
|
32,510
|
|
Operating income (loss)
|
|
$
|
3,980
|
|
|
$
|
(5,239
|
)
|
Net income (loss)
|
|
$
|
3,901
|
|
|
$
|
(11,140
|
)
|
|
|
As of
|
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Current assets
|
|
$
|
29,987
|
|
|
$
|
36,372
|
|
Noncurrent assets
|
|
$
|
172
|
|
|
$
|
205
|
|
Current liabilities
|
|
$
|
23,125
|
|
|
$
|
39,844
|
|
Noncurrent liabilities
|
|
$
|
940
|
|
|
$
|
687
|
|
Members' equity
|
|
$
|
6,094
|
|
|
$
|
(3,954
|
)
|
The Company had the following transactions with DCIP, reflected in utilities and other costs on the condensed consolidated statements of income, during the three months ended March 31, 2021 and 2020:
|
|
Three Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
Equipment lease payments (1)
|
|
$
|
1,045
|
|
|
$
|
1,038
|
|
Warranty reimbursements from DCIP
|
|
$
|
(266
|
)
|
|
$
|
(3,123
|
)
|
Management service fees
|
|
$
|
11
|
|
|
$
|
84
|
|
|
(1)
|
As a result of the MELA amendment noted above, the Company recorded a lease termination liability during 2020. The lease termination payments made during the three months ended March 31, 2021 reduced the liability outstanding. The remaining termination liability of $2,084 as of March 31, 2021 is reflected in accrued other current liabilities on the condensed consolidated balance sheet.
|
|
Other Investment Activity
Below is a summary of activity for each of the Company’s other investments for the three months ended March 31, 2021:
|
|
AC JV,
LLC
|
|
DCDC
|
|
FE Concepts
|
|
Other
|
|
Total
|
|
Balance at January 1, 2021
|
|
$
|
3,745
|
|
$
|
1,255
|
|
$
|
18,273
|
|
$
|
453
|
|
$
|
23,726
|
|
Equity loss
|
|
|
(453
|
)
|
|
16
|
|
|
(21
|
)
|
|
—
|
|
|
(458
|
)
|
Other
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
664
|
|
|
664
|
|
Balance at March 31, 2021
|
|
$
|
3,292
|
|
$
|
1,271
|
|
$
|
18,252
|
|
$
|
1,117
|
|
$
|
23,932
|
|
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 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, including concerts, opera and symphony, DVD product releases and marketing events, theatrical premieres, Broadway plays, live sporting events and other special events. The Company paid event fees to AC of $230 and $1,673 for the three months ended March 31, 2021 and 2020, respectively, which are included in film rentals and advertising costs on the condensed consolidated statements of income. The Company accounts for its investment in AC under the equity method of accounting.
Digital Cinema Distribution Coalition
Digital Cinema Distribution Coalition (“DCDC”) is a joint venture among the Company, Universal, Warner Bros., AMC and Regal. DCDC operates a satellite distribution network that distributes all digital content to U.S. theatres via satellite. The Company has an approximate 14.6% ownership in DCDC. The Company paid approximately $64 and $105 to DCDC during the three months ended March 31, 2021 and 2020, respectively, related to content delivery services provided by DCDC. These fees are included in film rentals and advertising costs on the condensed consolidated statements of income. The Company accounts for its investment in DCDC
20
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
under the equity method of accounting.
FE Concepts, LLC
The Company has a 50% voting interest in a joint venture, FE Concepts, LLC (“FE Concepts”) with AWSR Investments, LLC, 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. The Company accounts for its investment in FE Concepts under the equity method of accounting. The Company has a theatre services agreement with FE Concepts under which it provides film booking and equipment monitoring services. The Company recorded $16 and $10 of theatre services revenue under the agreement during the three months ended March 31, 2021 and 2020, respectively.
11.
|
Treasury Stock and Share Based Awards
|
Treasury Stock — Treasury stock represents shares of common stock repurchased or withheld by the Company and not yet retired. The Company has applied the cost method in recording its treasury shares. Below is a summary of the Company’s treasury stock activity for the three months ended March 31, 2021:
|
|
Number of
|
|
|
|
|
|
|
|
Treasury
|
|
|
|
|
|
|
|
Shares
|
|
|
Cost
|
|
Balance at January 1, 2021
|
|
|
5,050,981
|
|
|
$
|
87,004
|
|
Restricted stock withholdings (1)
|
|
|
220
|
|
|
|
8
|
|
Restricted stock forfeitures
|
|
|
9,185
|
|
|
|
—
|
|
Balance at March 31, 2021
|
|
|
5,060,386
|
|
|
$
|
87,012
|
|
(1)
|
The Company withheld restricted shares as a result of the election by certain employees to satisfy their tax liabilities upon vesting in restricted stock and restricted stock units. The Company determined the number of shares to be withheld based upon market values ranging from $17.41 to $24.14 per share.
|
As of March 31, 2021, the Company had no plans to retire any shares of treasury stock.
Restricted Stock – During the three months ended March 31, 2021, the Company granted 968,474 shares of its restricted stock to its employees. The fair value of the restricted stock granted was determined based on the closing price of the Company’s common stock on the day preceding the grant date, which ranged from $21.01 to $23.98 per share. The Company assumed forfeiture rates for the restricted stock awards that ranged from 0% to 10%. Certain of the restricted stock awards vested immediately on the grant date while others vest over periods ranging from one to four years. The recipients of restricted stock are entitled to receive non-forfeitable dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.
Below is a summary of restricted stock activity for the three months ended March 31, 2021:
|
|
Shares of
|
|
|
Weighted
Average
|
|
|
|
Restricted
|
|
|
Grant Date
|
|
|
|
Stock
|
|
|
Fair Value
|
|
Outstanding at January 1, 2021
|
|
|
1,431,975
|
|
|
$
|
21.11
|
|
Granted
|
|
|
968,474
|
|
|
$
|
21.34
|
|
Vested
|
|
|
(55,064
|
)
|
|
$
|
33.05
|
|
Forfeited
|
|
|
(9,185
|
)
|
|
$
|
15.25
|
|
Outstanding at March 31, 2021
|
|
|
2,336,200
|
|
|
$
|
20.94
|
|
Unvested restricted stock at March 31, 2021
|
|
|
2,336,200
|
|
|
$
|
20.94
|
|
21
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Compensation expense recognized during the period
|
|
$
|
4,230
|
|
|
$
|
2,691
|
|
Fair value of restricted shares that vested during the period
|
|
$
|
1,148
|
|
|
$
|
8,029
|
|
Income tax benefit (cost) related to restricted stock awards
|
|
$
|
(110
|
)
|
|
$
|
2,418
|
|
As of March 31, 2021, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $35,924 and the weighted average period over which this remaining compensation expense will be recognized is approximately two years.
Restricted Stock Units – The Company did not grant any restricted stock units during the three months ended March 31, 2021.
During the three months ended March 31, 2021, the Company evaluated the impact of the COVID-19 pandemic on the performance metric used for the restricted stock unit awards granted during February 2019 and February 2020. The Compensation Committee of the Company’s Board of Directors made a discretionary decision to certify the vest of the 2019 and 2020 restricted stock unit awards at target based upon the projected macroeconomic conditions through 2021 and beyond and the uncertain timing as to the recovery of the Company’s industry.
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Number of restricted stock unit awards that vested during the period
|
|
|
14,744
|
|
|
|
112,070
|
|
Fair value of restricted stock unit awards that vested during the period
|
|
$
|
303
|
|
|
$
|
3,554
|
|
Accumulated dividends paid upon vesting of restricted stock unit awards
|
|
$
|
63
|
|
|
$
|
544
|
|
Compensation expense recognized during the period
|
|
$
|
438
|
|
|
$
|
1,420
|
|
Income tax benefit (cost) related to restricted stock unit awards
|
|
$
|
(129
|
)
|
|
$
|
821
|
|
As of March 31, 2021, the estimated remaining unrecognized compensation expense related to outstanding restricted stock unit awards was $9,578. The weighted average period over which this remaining compensation expense will be recognized is approximately 2 years. As of March 31, 2021, the Company had restricted stock units outstanding that represented a total of 564,890 hypothetical shares of common stock, net of forfeitures, reflecting actual certified performance levels for all grants outstanding.
12.
|
Goodwill and Other Intangible Assets
|
A summary of the Company’s goodwill is as follows:
|
|
U.S.
Operating
Segment
|
|
|
International
Operating
Segment
|
|
|
Total
|
|
Balance at January 1, 2021 (1)
|
|
$
|
1,182,853
|
|
|
$
|
70,987
|
|
|
$
|
1,253,840
|
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
(4,645
|
)
|
|
|
(4,645
|
)
|
Balance at March 31, 2021 (1)
|
|
$
|
1,182,853
|
|
|
$
|
66,342
|
|
|
$
|
1,249,195
|
|
|
(1)
|
Balances are presented net of accumulated impairment losses of $214,031 for the U.S. operating segment and $43,750 for the international operating segment. See discussion of the qualitative impairment analysis performed by the Company as of March 31, 2021 at Note 13.
|
A summary of the Company’s intangible assets is as follows:
22
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
|
Balance at
January 1, 2021
|
|
Amortization
|
|
Other (1)
|
|
Balance at March 31, 2021
|
|
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
$
|
82,432
|
|
$
|
—
|
|
$
|
(297
|
)
|
$
|
82,135
|
|
Accumulated amortization
|
|
|
(68,416
|
)
|
|
(655
|
)
|
|
—
|
|
|
(69,071
|
)
|
Total net intangible assets with finite lives
|
|
$
|
14,016
|
|
$
|
(655
|
)
|
$
|
(297
|
)
|
$
|
13,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradename and other
|
|
|
300,179
|
|
|
—
|
|
|
(158
|
)
|
|
300,021
|
|
Total intangible assets, net
|
|
$
|
314,195
|
|
$
|
(655
|
)
|
$
|
(455
|
)
|
$
|
313,085
|
|
|
(1)
|
Amount represents foreign currency translation adjustments.
|
The estimated aggregate future amortization expense for intangible assets is as follows:
For the nine months ended December 31, 2021
|
|
$
|
1,972
|
|
For the twelve months ended December 31, 2022
|
|
|
2,487
|
|
For the twelve months ended December 31, 2023
|
|
|
2,399
|
|
For the twelve months ended December 31, 2024
|
|
|
2,399
|
|
For the twelve months ended December 31, 2025
|
|
|
2,292
|
|
Thereafter
|
|
|
1,515
|
|
Total
|
|
$
|
13,064
|
|
13.
|
Impairment of Long-Lived Assets
|
The Company performed a qualitative impairment analysis on its long-lived assets as of March 31, 2021. The Company’s qualitative analysis considered economic and market conditions, industry trading multiples and the impact of recent industry developments and events on the estimated fair values as determined during its most recent quantitative assessments as of December 31, 2020. The Company’s consideration of economic and market conditions included the status of the COVID-10 pandemic and its impact on the Company’s anticipated recovery as well as future film release schedules. As a result of the qualitative assessment, no impairment of long-lived assets was recorded during the three months ended March 31, 2021.
The following table is a summary of the impairment recorded as a result of the evaluations performed during the periods presented:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
U.S. Segment
|
|
|
|
|
|
|
|
|
Theatre properties
|
|
$
|
—
|
|
|
$
|
3,643
|
|
Theatre operating lease right-of-use assets
|
|
|
—
|
|
|
|
5,952
|
|
U.S. total
|
|
|
—
|
|
|
|
9,595
|
|
|
|
|
|
|
|
|
|
|
International segment
|
|
|
|
|
|
|
|
|
Theatre properties
|
|
|
—
|
|
|
|
4,484
|
|
Theatre operating lease right-of-use assets
|
|
|
—
|
|
|
|
2,540
|
|
International total
|
|
|
—
|
|
|
|
7,024
|
|
|
|
|
|
|
|
|
|
|
Total Impairment
|
|
$
|
—
|
|
|
$
|
16,619
|
|
23
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
14.
|
Fair Value Measurements
|
The Company determines fair value measurements in accordance with ASC Topic 820, which establishes a fair value hierarchy under which an asset or liability is categorized based on the lowest level of input significant to its fair value measurement. The levels of input defined by ASC Topic 820 are as follows:
Level 1 – quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date;
Level 2 – other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3 – unobservable and should be used to measure fair value to the extent that observable inputs are not available.
Below is a summary of liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of March 31, 2021 and December 31, 2020:
|
|
|
|
Carrying
|
|
|
Fair Value Hierarchy
|
|
Description
|
|
As of,
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Interest rate swap liabilities (1)
|
|
March 31, 2021
|
|
$
|
25,899
|
|
|
$
|
—
|
|
|
$
|
25,899
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap liabilities (1)
|
|
December 31, 2020
|
|
$
|
33,847
|
|
|
$
|
—
|
|
|
$
|
33,847
|
|
|
$
|
—
|
|
|
(1)
|
See further discussion of interest rate swaps at Note 7.
|
The Company uses the market approach for fair value measurements on a nonrecurring basis in the impairment evaluations of its goodwill, intangible assets and long-lived assets (see Note 12 and Note 13). See additional explanation of fair value measurement techniques used for long-lived assets, goodwill and intangible assets in “Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed February 26, 2021. There were no changes in valuation techniques. The Company elected to perform its goodwill impairment evaluation using both the market approach and the income approach for the three months ended March 31, 2021. There were no transfers in to or out of Level 1, Level 2 or Level 3 during the three months ended March 31, 2021.
15.
|
Foreign Currency Translation
|
The accumulated other comprehensive loss account in stockholders’ equity of $401,290 and $398,653 as of March 31, 2021 and December 31, 2020, respectively, primarily includes cumulative foreign currency net losses of $385,109 and $375,539, respectively, from translating the financial statements of the Company’s international subsidiaries and the cumulative changes in fair value of the Company’s interest rate swap agreements that are designated as hedges.
As of March 31, 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 information of the Company’s Argentina subsidiaries was remeasured in U.S. dollars in accordance with ASC Topic 830, Foreign Currency Matters, effective July 1, 2018.
Below is a summary of the impact of translating the March 31, 2021 and 2020 financial statements of the Company’s international subsidiaries:
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss for
|
|
|
|
Exchange Rate as of
|
|
|
Three Months Ended
|
|
Country
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
March 31, 2020
|
|
Brazil
|
|
|
5.72
|
|
|
|
5.20
|
|
|
$
|
(6,912
|
)
|
$
|
(42,873
|
)
|
Chile
|
|
|
725.34
|
|
|
|
714.14
|
|
|
|
(1,025
|
)
|
|
(11,126
|
)
|
Colombia
|
|
|
3,736.91
|
|
|
|
3,432.50
|
|
|
|
(119
|
)
|
|
(3,274
|
)
|
Peru
|
|
|
3.79
|
|
|
|
3.65
|
|
|
|
(1,172
|
)
|
|
(1,450
|
)
|
All other
|
|
|
|
|
|
|
|
|
|
|
(237
|
)
|
|
1,098
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(9,465
|
)
|
$
|
(57,625
|
)
|
24
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
|
(1)
|
Beginning July 1, 2018, Argentina was deemed highly inflationary. A gain of $226 and a loss of $294 for the three months ended March 31, 2021 and 2020, respectively, is reflected as foreign currency exchange loss on the Company’s condensed consolidated statement of income as a result of translating Argentina financial results to U.S. dollars.
|
|
16.
|
Supplemental Cash Flow Information
|
The following is provided as supplemental information to the condensed consolidated statements of cash flows:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for interest
|
|
$
|
22,285
|
|
|
$
|
8,774
|
|
Cash paid (refunds received) for income taxes, net
|
|
$
|
(1,946
|
)
|
|
$
|
2,110
|
|
Cash deposited in restricted accounts (1)
|
|
$
|
7,300
|
|
|
$
|
—
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment (2)
|
|
$
|
(6,955
|
)
|
|
$
|
2,269
|
|
Interest expense - NCM (see Note 9)
|
|
$
|
(5,835
|
)
|
|
$
|
(5,891
|
)
|
Investment in NCM – receipt of common units
|
|
$
|
—
|
|
|
$
|
3,620
|
|
Dividends accrued on unvested restricted stock unit awards
|
|
$
|
(2
|
)
|
|
$
|
(256
|
)
|
|
(1)
|
Represents cash deposited in a collateral account during the period to support the issuance of letters of credit to lenders. See further discussion at Note 7.
|
|
|
(2)
|
Additions to theatre properties and equipment included in accounts payable as of March 31, 2021 and December 31, 2020 were $21,295 and $28,250, respectively.
|
|
The Company manages its international market and its U.S. market as separate reportable operating segments, with the international segment consisting of operations in Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues. The Company uses Adjusted EBITDA, as shown in the reconciliation table below, as the primary measure of segment profit and loss to evaluate performance and allocate its resources. The Company does not report total assets by segment because that information is not used to evaluate the performance of or allocate resources between segments.
Below is a breakdown of selected financial information by reportable operating segment:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Revenues
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
97,267
|
|
|
$
|
429,302
|
|
International
|
|
|
17,272
|
|
|
|
116,173
|
|
Eliminations
|
|
|
(178
|
)
|
|
|
(1,859
|
)
|
Total revenues
|
|
$
|
114,361
|
|
|
$
|
543,616
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
(76,997
|
)
|
|
$
|
56,072
|
|
International
|
|
|
(14,953
|
)
|
|
|
10,139
|
|
Total Adjusted EBITDA
|
|
$
|
(91,950
|
)
|
|
$
|
66,211
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
13,641
|
|
|
$
|
25,673
|
|
International
|
|
|
4,039
|
|
|
|
8,470
|
|
Total capital expenditures
|
|
$
|
17,680
|
|
|
$
|
34,143
|
|
25
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The following table sets forth a reconciliation of net loss to Adjusted EBITDA:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net loss
|
|
$
|
(208,843
|
)
|
|
$
|
(59,422
|
)
|
Add (deduct):
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
(14,643
|
)
|
|
|
(3,108
|
)
|
Interest expense (1)
|
|
|
36,553
|
|
|
|
24,666
|
|
Other expense, net (2)
|
|
|
14,971
|
|
|
|
169
|
|
Cash distributions from DCIP (3)
|
|
|
—
|
|
|
|
5,161
|
|
Cash distributions from other equity investees (4)
|
|
|
156
|
|
|
|
11,445
|
|
Depreciation and amortization
|
|
|
68,160
|
|
|
|
65,256
|
|
Impairment of long-lived assets
|
|
|
—
|
|
|
|
16,619
|
|
Restructuring costs
|
|
|
(208
|
)
|
|
|
—
|
|
Loss on disposal of assets and other
|
|
|
4,505
|
|
|
|
1,905
|
|
Loss on extinguishment of debt
|
|
|
2,603
|
|
|
|
—
|
|
Non-cash rent expense
|
|
|
128
|
|
|
|
(591
|
)
|
Share based awards compensation expense
|
|
|
4,668
|
|
|
|
4,111
|
|
Adjusted EBITDA
|
|
$
|
(91,950
|
)
|
|
$
|
66,211
|
|
|
(1)
|
Includes amortization of debt issue costs and amortization of accumulated losses for amended swap agreements.
|
|
(2)
|
Includes interest income, foreign currency exchange loss, equity in income (loss) of affiliates and interest expense - NCM and excludes distributions from NCM.
|
|
(3)
|
Includes cash distributions from DCIP, which were recorded as a reduction of the Company’s investment in DCIP. These distributions are reported entirely within the U.S. operating segment.
|
|
(4)
|
Includes cash distributions received from equity investees, other than those from DCIP noted above, that were recorded as a reduction of the respective investment balances (see Notes 9 and 10). These distributions are reported entirely within the U.S. operating segment.
|
Financial Information About Geographic Areas
Below is a breakdown of selected financial information by geographic area:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
Revenues
|
|
2021
|
|
|
2020
|
|
U.S.
|
|
$
|
97,267
|
|
|
$
|
429,302
|
|
Brazil
|
|
|
4,438
|
|
|
|
52,968
|
|
Other international countries
|
|
|
12,834
|
|
|
|
63,205
|
|
Eliminations
|
|
|
(178
|
)
|
|
|
(1,859
|
)
|
Total
|
|
$
|
114,361
|
|
|
$
|
543,616
|
|
|
|
As of
|
|
|
As of
|
|
Theatre Properties and Equipment-net
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
U.S.
|
|
$
|
1,328,195
|
|
|
$
|
1,392,780
|
|
Brazil
|
|
|
64,260
|
|
|
|
72,080
|
|
Other international countries
|
|
|
140,843
|
|
|
|
150,202
|
|
Total
|
|
$
|
1,533,298
|
|
|
$
|
1,615,062
|
|
26
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
18.
|
Related Party Transactions
|
The Company manages a theatre for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Lee Roy Mitchell is the Company’s Chairman of the Board of Directors and directly and indirectly owns approximately 8% of the Company’s common stock. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5% of annual theatre revenues. The Company recorded $24 and $62 of management fee revenues during the three months ended March 31, 2021 and 2020, respectively. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.
The Company has an Aircraft Time Sharing Agreement with Copper Beech Capital, LLC (“Copper Beech”) to use, on occasion, a private aircraft owned by Copper Beech. Copper Beech is owned by Mr. Mitchell and his wife, Tandy Mitchell. The private aircraft is used by Mr. Mitchell and other executives who accompany Mr. Mitchell to business meetings for the Company. The Company reimburses Copper Beech for the actual costs of fuel usage and the expenses of the pilots, landing fees, storage fees and similar expenses incurred during the trip. For the three months ended March 31, 2021 and 2020, the aggregate amounts paid to Copper Beech for the use of the aircraft was $0 and $12, respectively.
The Company leases 14 theatres and one parking facility from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy. Raymond Syufy is one of the Company’s directors and is an officer of the general partner of Syufy. Of these 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 three months ended March 31, 2021 and 2020, the Company paid total rent of approximately $6,033 and $4,065, respectively, to Syufy.
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 that opened during December 2019. See Note 10 for further discussion.
19.
|
Commitments and Contingencies
|
From time to time, the Company is involved in various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, patent claims, landlord-tenant disputes, contractual disputes with landlords over certain termination rights or the right to discontinue rent payments due to the COVID-19 pandemic and other contractual disputes, some of which are covered by insurance. The Company believes its potential liability with respect to proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.
Cinemark Holdings, Inc., et al vs Factory Mutual Insurance Company. The Company filed suit on November 18, 2020, in the District Court, 471st Judicial District, Collin County, Texas. On December 22, 2020, the case was moved to the US District Court for the Eastern District of Texas, Sherman Division. The Company submitted a claim under its property insurance policy issued by Factory Mutual Insurance Company (the “FM Policy”) for losses sustained as a result of the COVID-19 pandemic and the forced closure of the Company’s theatres pursuant to orders issued by various government agencies. Factory Mutual Insurance Company (“FM”) denied the Company’s claim. The Company is seeking damages resulting from FM’s breach of contract, FM’s bad faith conduct and a declaration of the parties’ rights under the FM Policy. While the Company cannot predict the outcome of this litigation, management believes this lawsuit will not have a material adverse effect on the company’s financial position or results of operations.
Intertrust Technologies Corporation (“Intertrust”) v. Cinemark Holdings, Inc., Regal, AMC, et al. This case was filed against the Company on August 7, 2019 in the Eastern District of Texas – Marshall Division alleging patent infringement. The Company firmly maintains that the contentions of the Plaintiff are without merit and will vigorously defend itself against the lawsuit. Although the Company does not believe that it has infringed on any of Intertrust’s patents, it cannot predict the outcome of this litigation.
27