UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
SECURITIES EXCHANGE ACT OF 1934
Commission File Number |
Exact Name of Registrant as Specified in its Charter, Principal Executive Office Address and Telephone Number |
State of Incorporation |
I.R.S. Employer Identification No. |
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Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
Trading Symbol(s) |
Name of each exchange on which registered |
Cinemark Holdings, Inc. ("Holdings") |
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Cinemark USA, Inc. ("CUSA") |
None |
None |
None |
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.
Cinemark Holdings, Inc.
Cinemark USA, Inc.
(Note: As a voluntary filer, Cinemark USA, Inc. is not subject to the filing requirements of Section 13 or 15(d) of the Exchange Act. Cinemark USA, Inc. has filed all reports pursuant to Section 13 or 15(d) of the Exchange Act during the preceding 12 months as if it was subject to such filing requirements.)
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).
Cinemark Holdings, Inc.
Cinemark USA, Inc.
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.
Cinemark Holdings, Inc.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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Cinemark USA, Inc.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Cinemark Holdings, Inc. Yes
Cinemark USA, Inc. Yes
As of July 28, 2023,
As of July 28, 2023,
Cinemark USA, Inc. meetS the conditions set forth in General Instructions (H)(1)(a) and (b) of Form 10-Q and IS therefore filing this form with reduced disclosure format pursuant to General Instructions (H)(2).
This combined Form 10-Q is separately filed by Holdings and CUSA. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrant. When this Form 10-Q is incorporated by reference into any filings with the SEC made by Holdings or CUSA, as a registrant, the portions of this Form 10-Q that relate to the other registrant are not incorporated by reference therein.
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CINEMARK USA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Item 1. |
Cinemark Holdings, Inc. and Subsidiaries Financial Statements (unaudited) |
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Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 |
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Cinemark USA, Inc. and Subsidiaries Financial Statements (unaudited) |
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Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 |
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Cinemark Holdings, Inc. and Cinemark USA, Inc. Notes to Condensed Consolidated Financial Statements |
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15 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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38 |
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Item 3. |
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53 |
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Item 4. |
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53 |
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Item 1. |
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Item 1A. |
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55 |
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Item 2. |
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55 |
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Item 5. |
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56 |
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Item 6. |
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61 |
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62 |
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1
Cautionary Statement Regarding Forward-Looking Statements
Certain matters within this Quarterly Report on Form 10-Q include “forward–looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The “forward-looking statements” include our current expectations, assumptions, estimates and projections about the respective business and industry of Holdings and CUSA. They include statements relating to:
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. These statements are neither historical facts nor guarantees of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions and are, therefore, subject to risks, inherent uncertainties and other factors, some of which are beyond our control and difficult to predict. Such risks and uncertainties could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. For a description of our risk factors, please review the “Risk Factors” section or other sections of, or incorporated by reference to, the Company’s Annual Report on Form 10-K filed February 24, 2023. All forward-looking statements attributable to either Holdings or CUSA or persons acting on our behalf, are expressly qualified in their entirety by such risk factors. Forward-looking statements contained in this Form 10-Q reflect the views of Holdings and CUSA only as of the date of this Form 10-Q. Neither Holdings nor CUSA undertake any 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.
Unless the context otherwise requires, all references to “we,” “our,” “us,” "the Company” or “Cinemark” relate to Cinemark Holdings, Inc. and its consolidated subsidiaries, and all references to CUSA relate to Cinemark USA, Inc. and its consolidated subsidiaries. All references to Latin America relate to Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia and Paraguay.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data, unaudited)
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June 30, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Inventories |
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Accounts receivable |
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Current income tax receivable |
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Prepaid expenses and other |
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Total current assets |
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Theatre properties and equipment, net of accumulated depreciation of $ |
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Operating lease right-of-use assets, net |
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Other long-term assets |
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Goodwill |
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Intangible assets, net |
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Investment in NCMI/NCM |
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Investments in affiliates |
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Deferred charges and other assets, net |
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Total other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and equity |
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Current liabilities |
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Current portion of long-term debt |
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$ |
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$ |
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Current portion of operating lease obligations |
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Current portion of finance lease obligations |
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Current income tax payable |
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Accounts payable and accrued expenses |
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Total current liabilities |
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Long-term liabilities |
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Long-term debt, less current portion |
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Operating lease obligations, less current portion |
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Finance lease obligations, less current portion |
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Long-term deferred tax liability |
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Long-term liability for uncertain tax positions |
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NCM screen advertising advances |
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Other long-term liabilities |
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Total long-term liabilities |
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Equity |
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Cinemark Holdings, Inc.'s stockholders' equity: |
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Common stock, $ |
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Additional paid-in-capital |
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Treasury stock, |
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( |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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( |
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( |
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Total Cinemark Holdings, Inc.'s stockholders' equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes, as they relate to Cinemark Holdings, Inc., are an integral part of the condensed consolidated financial statements.
3
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in millions, except per share data, unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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Admissions |
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$ |
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$ |
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$ |
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$ |
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Concession |
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Other |
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Total revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of operations |
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Film rentals and advertising |
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Concession supplies |
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Salaries and wages |
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Facility lease expense |
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Utilities and other |
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General and administrative expenses |
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Depreciation and amortization |
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Impairment of long-lived and other assets |
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Restructuring costs |
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Gain on disposal of assets and other |
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( |
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( |
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Total cost of operations |
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Operating income (loss) |
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( |
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Other income (expense) |
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Interest expense |
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( |
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( |
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( |
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Interest income |
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Loss on debt extinguishment and refinancing |
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( |
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( |
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Foreign currency and other related gain (loss) |
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( |
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( |
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( |
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Interest expense - NCM |
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( |
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( |
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( |
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( |
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Equity in income (loss) of affiliates |
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( |
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( |
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Unrealized gain on investment in NCMI |
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Total other expense |
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( |
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( |
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( |
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Income (loss) before income taxes |
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( |
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Income tax expense |
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Net income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
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Less: Net income attributable to noncontrolling interests |
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Net income (loss) attributable to Cinemark Holdings, Inc. |
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$ |
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$ |
( |
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$ |
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$ |
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Weighted average shares outstanding |
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Basic |
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Diluted |
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Income (loss) per share attributable to Cinemark Holdings, Inc.'s common stockholders |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
( |
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$ |
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$ |
( |
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The accompanying notes, as they relate to Cinemark Holdings, Inc., are an integral part of the condensed consolidated financial statements.
4
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions, unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
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Other comprehensive income (loss), net of tax |
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Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes and settlements |
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( |
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Foreign currency translation adjustments |
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( |
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( |
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Total other comprehensive income (loss), net of tax |
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$ |
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$ |
( |
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$ |
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$ |
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Total comprehensive income (loss), net of tax |
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( |
) |
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( |
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Comprehensive income attributable to noncontrolling interests |
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( |
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( |
) |
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( |
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( |
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Comprehensive income (loss) attributable to Cinemark Holdings, Inc. |
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$ |
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$ |
( |
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$ |
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$ |
( |
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The accompanying notes, as they relate to Cinemark Holdings, Inc., are an integral part of the condensed consolidated financial statements.
5
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in millions, unaudited)
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Total |
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Accumulated |
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Cinemark |
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Common Stock |
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Additional |
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Other |
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Holdings, Inc's |
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Shares |
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Treasury |
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Paid-in- |
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Accumulated |
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Comprehensive |
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Stockholders’ |
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Noncontrolling |
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Total |
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Issued |
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Amount |
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Stock |
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Capital |
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Deficit |
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Loss |
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Equity |
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Interests |
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Equity |
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Balance at January 1, 2023 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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$ |
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Restricted stock forfeitures and stock withholdings related to share based awards that vested during the three months ended March 31, 2023 |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of stock upon vesting of performance stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of share based awards and share based awards compensation expense |
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— |
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— |
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— |
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— |
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— |
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Net (loss) income |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
) |
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( |
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Amortization of accumulated gains for amended swap agreements |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||||
Balance at March 31, 2023 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Restricted stock forfeitures and stock withholdings related to share based awards that vested during the three months ended June 30, 2023 |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of share based awards and share based awards compensation expense |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Distributions to non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization of accumulated gains for amended swap agreements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance at June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
6
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY, CONT’D
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Cinemark |
|
|
|
|
|
|
|
|||||||||
|
|
Common Stock |
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Holdings, Inc's |
|
|
|
|
|
|
|
||||||||||||
|
|
Shares |
|
|
|
|
|
Treasury |
|
|
Paid-in- |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders’ |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||
|
|
Issued |
|
|
Amount |
|
|
Stock |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
|||||||||
Balance at January 1, 2022 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Restricted stock forfeitures and stock withholdings related to share based awards that vested during the three months ended March 31, 2022 |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of stock upon vesting of performance stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of share based awards and share based awards compensation expense |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Net (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance at March 31, 2022 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Restricted stock forfeitures and stock withholdings related to share based awards that vested during the three months ended June 30, 2022 |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of share based awards and share based awards compensation expense |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Net (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 30, 2022 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The accompanying notes, as they relate to Cinemark Holdings, Inc., are an integral part of the condensed consolidated financial statements.
7
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating activities |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization of intangible and other assets |
|
|
|
|
|
|
||
Loss on debt extinguishment and refinancing |
|
|
|
|
|
|
||
Amortization of original issue discount and debt issuance costs |
|
|
|
|
|
|
||
Interest accrued on NCM screen advertising advances |
|
|
|
|
|
|
||
Amortization of NCM screen advertising advances and other deferred revenue |
|
|
( |
) |
|
|
( |
) |
Amortization of accumulated (gains) losses for amended swap agreements |
|
|
( |
) |
|
|
|
|
Impairment of long-lived and other assets |
|
|
|
|
|
|
||
Share based awards compensation expense |
|
|
|
|
|
|
||
Gain on disposal of assets and other |
|
|
( |
) |
|
|
( |
) |
Unrealized gain on investment in NCMI |
|
|
( |
) |
|
|
|
|
Non-cash rent expense |
|
|
( |
) |
|
|
( |
) |
Equity in loss of affiliates |
|
|
|
|
|
|
||
Deferred income tax expense (benefit) |
|
|
|
|
|
( |
) |
|
Distributions from equity investees |
|
|
|
|
|
|
||
Changes in assets and liabilities and other |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Investing activities |
|
|
|
|
|
|
||
Additions to theatre properties and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of theatre properties and equipment and other |
|
|
|
|
|
|
||
Net cash used for investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Financing activities |
|
|
|
|
|
|
||
Proceeds from refinancing of senior secured credit facility |
|
|
|
|
|
|
||
Repayment of term loan upon refinancing of senior secured credit facility |
|
|
( |
) |
|
|
|
|
Redemption of 8.75% Secured Notes |
|
|
( |
) |
|
|
|
|
Payment of debt issuance costs |
|
|
( |
) |
|
|
|
|
Payment of fees on refinancing of senior secured credit facility |
|
|
( |
) |
|
|
|
|
Other repayments of long-term debt |
|
|
( |
) |
|
|
( |
) |
Restricted stock withholdings for payroll taxes |
|
|
( |
) |
|
|
( |
) |
Payments on finance leases |
|
|
( |
) |
|
|
( |
) |
Other financing activities |
|
|
|
|
|
( |
) |
|
Net cash used for financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Cash and cash equivalents: |
|
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
|
||
End of period |
|
$ |
|
|
$ |
|
||
The accompanying notes, as they relate to Cinemark Holdings, Inc., are an integral part of the condensed consolidated financial statements.
* * * * * * * *
8
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data, unaudited)
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Assets |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Inventories |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Current income tax receivable |
|
|
|
|
|
|
||
Prepaid expenses and other |
|
|
|
|
|
|
||
Accounts receivable from parent |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Theatre properties and equipment, net of accumulated depreciation of $ |
|
|
|
|
|
|
||
Operating lease right-of-use assets, net |
|
|
|
|
|
|
||
Other long-term assets |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Investment in NCMI/NCM |
|
|
|
|
|
|
||
Investments in affiliates |
|
|
|
|
|
|
||
Deferred charges and other assets, net |
|
|
|
|
|
|
||
Total other long-term assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and equity |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
$ |
|
|
$ |
|
||
Current portion of operating lease obligations |
|
|
|
|
|
|
||
Current portion of finance lease obligations |
|
|
|
|
|
|
||
Current income tax payable |
|
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term liabilities |
|
|
|
|
|
|
||
Long-term debt, less current portion |
|
|
|
|
|
|
||
Operating lease obligations, less current portion |
|
|
|
|
|
|
||
Finance lease obligations, less current portion |
|
|
|
|
|
|
||
Long-term deferred tax liability |
|
|
|
|
|
|
||
Long-term liability for uncertain tax positions |
|
|
|
|
|
|
||
NCM screen advertising advances |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total long-term liabilities |
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
||
Cinemark USA, Inc.'s stockholder's equity: |
|
|
|
|
|
|
||
Class A common stock, $ |
|
|
|
|
|
|
||
Class B common stock, |
|
|
|
|
|
|
||
Treasury stock, |
|
|
( |
) |
|
|
( |
) |
Additional paid-in-capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total Cinemark USA, Inc.'s stockholder's equity |
|
|
|
|
|
|
||
Noncontrolling interests |
|
|
|
|
|
|
||
Total equity |
|
|
|
|
|
|
||
Total liabilities and equity |
|
$ |
|
|
$ |
|
||
The accompanying notes, as they relate to Cinemark USA, Inc., are an integral part of the condensed consolidated financial statements.
9
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in millions, unaudited)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Admissions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Concession |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Film rentals and advertising |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Concession supplies |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and wages |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Facility lease expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Utilities and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of long-lived and other assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring costs |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Gain on disposal of assets and other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total cost of operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on debt extinguishment and refinancing |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Foreign currency and other related gain (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Interest expense - NCM |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Equity in income (loss) of affiliates |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Unrealized gain on investment in NCMI |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total other expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income (loss) before income taxes |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
( | ) |
|||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Less: Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to Cinemark USA, Inc. |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
The accompanying notes, as they relate to Cinemark USA, Inc., are an integral part of the condensed consolidated financial statements.
10
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions, unaudited)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes and settlements |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Foreign currency translation adjustments |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total other comprehensive income (loss), net of tax |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
Total comprehensive income (loss), net of tax |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Comprehensive income attributable to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Comprehensive income (loss) attributable to Cinemark USA, Inc. |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
The accompanying notes, as they relate to Cinemark USA, Inc., are an integral part of the condensed consolidated financial statements.
11
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|||||||||||
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Cinemark |
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Common Stock |
|
|
Common Stock |
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
USA, Inc's |
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Treasury |
|
|
Paid-in- |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholder's |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||||
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Stock |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
|||||||||||
Balance at January 1, 2023 |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Share based awards compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Amortization of accumulated gains for amended swap agreements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance at March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Share based awards compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization of accumulated gains for amended swap agreements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance at June 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
The accompanying notes, as they relate to Cinemark USA, Inc., are an integral part of the condensed consolidated financial statements.
12
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY, CONT’D
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|||||||||||
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Cinemark |
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Common Stock |
|
|
Common Stock |
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
USA, Inc's |
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Treasury |
|
|
Paid-in- |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholder's |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||||
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Stock |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
|||||||||||
Balance at January 1, 2022 |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Share based awards compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance at March 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Share based awards compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization of accumulated losses for amended swap agreements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
The accompanying notes, as they relate to Cinemark USA, Inc., are an integral part of the condensed consolidated financial statements.
13
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating activities |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization of intangible and other assets |
|
|
|
|
|
|
||
Loss on debt extinguishment and refinancing |
|
|
|
|
|
|
||
Amortization of original issue discount and debt issuance costs |
|
|
|
|
|
|
||
Interest accrued on NCM screen advertising advances |
|
|
|
|
|
|
||
Amortization of NCM screen advertising advances and other deferred revenue |
|
|
( |
) |
|
|
( |
) |
Amortization of accumulated (gains) losses for amended swap agreements |
|
|
( |
) |
|
|
|
|
Share based awards compensation expense |
|
|
|
|
|
|
||
Impairment of long-lived and other assets |
|
|
|
|
|
|
||
Gain on disposal of assets and other |
|
|
( |
) |
|
|
( |
) |
Unrealized gain on investment in NCMI |
|
|
( |
) |
|
|
|
|
Non-cash rent expense |
|
|
( |
) |
|
|
( |
) |
Equity in loss of affiliates |
|
|
|
|
|
|
||
Deferred income tax expense |
|
|
|
|
|
|
||
Distributions from equity investees |
|
|
|
|
|
|
||
Changes in assets and liabilities and other |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Investing activities |
|
|
|
|
|
|
||
Additions to theatre properties and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of theatre properties and equipment and other |
|
|
|
|
|
|
||
Net cash used for investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Financing activities |
|
|
|
|
|
|
||
Proceeds from refinancing of senior secured credit facility |
|
|
|
|
|
|
||
Repayment of term loan upon refinancing of senior secured credit facility |
|
|
( |
) |
|
|
— |
|
Redemption of 8.75% Secured Notes |
|
|
( |
) |
|
|
|
|
Payment of debt issuance costs |
|
|
( |
) |
|
|
|
|
Payment of fees on refinancing of senior secured credit facility |
|
|
( |
) |
|
|
|
|
Repayments of long-term debt |
|
|
( |
) |
|
|
( |
) |
Restricted stock withholdings for payroll taxes |
|
|
( |
) |
|
|
( |
) |
Payments on finance leases |
|
|
( |
) |
|
|
( |
) |
Other financing activities |
|
|
|
|
|
( |
) |
|
Net cash used for financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Decrease in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Cash and cash equivalents: |
|
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
|
||
End of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The accompanying notes, as they relate to Cinemark USA, Inc., are an integral part of the condensed consolidated financial statements.
14
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Cinemark Holdings, Inc. (“Holdings”) is a holding company and its wholly-owned subsidiary is Cinemark USA, Inc (“CUSA”). Holdings consolidates CUSA and its subsidiaries for financial statement purposes, and CUSA comprises approximately the entire balance of Holdings’ assets, liabilities and operating cash flows. In addition, CUSA’s operating revenue comprises
We 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, and Paraguay. The Company closed its one theatre in Curacao in January 2023 and our theatres in Ecuador are currently held for sale. See Note 6 for a discussion of the Ecuador theatre assets held for sale.
The impact of the COVID-19 pandemic had an unprecedented impact on the theatrical exhibition industry. While the industry has made significant progress in its recovery from the pandemic, its ongoing recovery will be contingent upon several key factors, including the volume of new film content available, the box office performance of new film content released, the duration of the exclusive theatrical release window, and evolving consumer behavior with competition from other forms of in-and-out-of-home entertainment.
The accompanying condensed consolidated balance sheets of Holdings and CUSA as of December 31, 2022, each of which were derived from audited financial statements, and the unaudited condensed consolidated financial statements of Holdings and CUSA, respectively, 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 that Holdings or CUSA, as applicable, has control of are consolidated while those investments in entities of which Holdings or CUSA, as applicable, owns between
These condensed consolidated financial statements of Holdings and CUSA should be read in conjunction with the audited annual consolidated financial statements of Holdings and CUSA and the notes thereto for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed February 24, 2023 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be achieved for the full year.
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”), ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”) and ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”). 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 2022-06 defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The amendments in ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2024. The Company applied the optional relief guidance prospectively to the modification of the reference rate
15
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
in its interest rate swap agreements from LIBOR to Term SOFR during the second quarter of 2023 (see Note 7). The application of the guidance did not have any impact on the Company’s condensed consolidated financial statements.
The following table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
Lease Cost |
Classification |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Operating lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment (1) |
Utilities and other |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Real Estate (1) |
Facility lease expense |
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of leased assets |
Depreciation and amortization |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest on lease liabilities |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
||||
Total finance lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
Lease Cost |
Classification |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Operating lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment - Short-term lease payments |
Utilities and other |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Real Estate - Variable lease payments (1) |
Facility lease expense |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Real Estate - Office leases |
General and administrative |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1) Represents lease payments that are based on a change in index, such as CPI or inflation, variable payments based on revenue or attendance and variable common area maintenance costs
The following table represents the minimum cash lease payments included in the measurement of lease liabilities and the non-cash addition of lease right-of-use assets for the periods presented.
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
Other Information |
|
2023 |
|
|
2022 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Cash outflows for operating leases |
|
$ |
|
|
$ |
|
||
Cash outflows for finance leases - operating activities |
|
$ |
|
|
$ |
|
||
Cash outflows for finance leases - financing activities |
|
$ |
|
|
$ |
|
||
Non-cash amount of right-of-use assets obtained in exchange for: |
|
|
|
|
|
|
||
Operating lease liability additions, net of write-offs |
|
$ |
|
|
$ |
|
||
As of June 30, 2023, the Company had signed lease agreements with total noncancelable lease payments of approximately $
16
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
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 revenue when the showtime for a purchased movie ticket has passed. Concession revenue is recognized when products are sold to the consumer, or if purchased in advance, based on the showtime associated with the customer’s movie ticket. Other revenue primarily consists of screen advertising, screen rental revenue, promotional income, studio trailer placements, revenue from electronic video games located in our theatres, and transactional fees. Except for National CineMedia, LLC (“NCM”) screen advertising advances discussed below in Note 8, these revenues are generally recognized when the Company has met its performance obligations. The Company sells gift cards and discount ticket vouchers called Supersavers, the proceeds from which are recorded as deferred revenue. Deferred revenue for gift cards and discount ticket vouchers is recognized when they are redeemed for concession items or, if redeemed for movie tickets, 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 subscription program fees as deferred revenue and records admissions revenue 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 fee or award points to customers as purchases are made. For those loyalty programs that have a prepaid annual fee, the Company recognizes the fee collected as other revenue on a straight-line basis over the annual membership period. 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 revenue based on the number of reward points issued to customers and recognizes the deferred revenue 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 records breakage revenue generally upon the expiration of loyalty points and subscription credits as the Company does not yet have sufficient historical data related to the redemption patterns for these programs to estimate breakage. 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 June 30, 2023 and December 31, 2022 included approximately $
17
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Disaggregation of Revenue
The following tables present revenue disaggregated based on major type of good or service and by reportable operating segment.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
June 30, 2023 |
|
|
June 30, 2023 |
|
||||||||||||||||||
|
|
U.S. |
|
|
International |
|
|
|
|
|
U.S. |
|
|
International |
|
|
|
|
||||||
|
|
Operating |
|
|
Operating |
|
|
|
|
|
Operating |
|
|
Operating |
|
|
|
|
||||||
|
|
Segment (1) |
|
|
Segment |
|
|
Consolidated |
|
|
Segment (1) |
|
|
Segment |
|
|
Consolidated |
|
||||||
Admissions revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Concession revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Screen advertising, screen rental and promotional revenue (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
June 30, 2022 |
|
|
June 30, 2022 |
|
||||||||||||||||||
|
|
U.S. |
|
|
International |
|
|
|
|
|
U.S. |
|
|
International |
|
|
|
|
||||||
|
|
Operating |
|
|
Operating |
|
|
|
|
|
Operating |
|
|
Operating |
|
|
|
|
||||||
|
|
Segment (1) |
|
|
Segment |
|
|
Consolidated |
|
|
Segment (1) |
|
|
Segment |
|
|
Consolidated |
|
||||||
Admissions revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Concession revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Screen advertising, screen rental and promotional revenue (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The following tables present revenue disaggregated based on timing of recognition and by reportable operating segment.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
June 30, 2023 |
|
|
June 30, 2023 |
|
||||||||||||||||||
|
|
U.S. |
|
|
International |
|
|
|
|
|
U.S. |
|
|
International |
|
|
|
|
||||||
|
|
Operating |
|
|
Operating |
|
|
|
|
|
Operating |
|
|
Operating |
|
|
|
|
||||||
|
|
Segment (1) |
|
|
Segment |
|
|
Consolidated |
|
|
Segment (1) |
|
|
Segment |
|
|
Consolidated |
|
||||||
Goods and services transferred at a point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Goods and services transferred over time (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
June 30, 2022 |
|
|
June 30, 2022 |
|
||||||||||||||||||
|
|
U.S. |
|
|
International |
|
|
|
|
|
U.S. |
|
|
International |
|
|
|
|
||||||
|
|
Operating |
|
|
Operating |
|
|
|
|
|
Operating |
|
|
Operating |
|
|
|
|
||||||
|
|
Segment (1) |
|
|
Segment |
|
|
Consolidated |
|
|
Segment (1) |
|
|
Segment |
|
|
Consolidated |
|
||||||
Goods and services transferred at a point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Goods and services transferred over time (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
18
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Screen Advertising Advances and Other Deferred Revenue
The following table presents changes in the Company’s deferred revenue for the six months ended June 30, 2023.
|
|
NCM screen advertising advances (1) |
|
|
Other |
|
||
Balance at January 1, 2023 |
|
$ |
|
|
$ |
|
||
Amounts recognized as accounts receivable |
|
|
|
|
|
|
||
Cash received from customers in advance |
|
|
|
|
|
|
||
Interest accrued related to significant financing component |
|
|
|
|
|
|
||
Revenue recognized during period |
|
|
( |
) |
|
|
( |
) |
Foreign currency translation adjustments |
|
|
|
|
|
( |
) |
|
Balance at June 30, 2023 |
|
$ |
|
|
$ |
|
||
The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of June 30, 2023 and when the Company expects to recognize this revenue.
|
|
|
Twelve Months Ended June 30, |
|
|
|
|
|
|
|
|||||||
Remaining Performance Obligations |
|
|
|
|
|
|
|
|
Total |
|
|||||||
Other deferred revenue |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
19
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
The following table presents computations of basic and diluted earnings (loss) per share for Holdings:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to Cinemark Holdings, Inc. |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
(Income) loss allocated to participating share-based awards (1) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Basic net income (loss) attributable to common stockholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Add: Interest expense on convertible notes, net of tax (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net income (loss) attributable to common stockholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common equivalent shares for restricted stock units (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common equivalent shares for convertible notes (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common equivalent shares for warrants (4) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings (loss) per share attributable to common stockholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Diluted earnings (loss) per share attributable to common stockholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Share-based awards
Holdings considers its unvested share-based awards, which contain non-forfeitable rights to dividends, participating securities, and includes such participating securities in its computation of earnings (loss) per share pursuant to the two-class method. Basic earnings (loss) per share for the two classes of stock (common stock and unvested restricted stock) is calculated by dividing net income (loss) by the weighted average number of shares of common stock and unvested restricted stock outstanding during the reporting period. Diluted earnings (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.
Convertible notes, hedges and warrants
The 4.50% Convertible Senior Notes, discussed further in Note 14 of the Company’s Annual Report on Form 10-K filed February 24, 2023, may be considered dilutive in periods in which Holdings has net income. The impact of such dilution on earnings per share is calculated under the if-converted method, which requires that all of the shares of Holdings' common stock issuable upon conversion of the 4.50% Convertible Senior Notes be included in the calculation of diluted earnings per share assuming conversion at the beginning of the reporting period. Also, the interest expense, net of tax, related to the 4.50% Convertible Senior Notes is excluded from the calculation of diluted net income (loss) attributable to common stockholders assuming conversion of the 4.50% Convertible Senior Notes at the beginning of the reporting period.
20
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
The closing price of Holdings' common stock did not exceed the strike price of $
Holdings entered into hedge transactions with counterparties in connection with the issuance of the 4.50% Convertible Senior Notes. The convertible note hedge transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the 4.50% Convertible Senior Notes, the number of shares of Holdings' common stock underlying the 4.50% Convertible Notes, which initially gives Holdings the option to purchase approximately
During December 2022, the Company entered into a purchase and sale agreement for the sale of the stock of its Ecuador subsidiary. The transaction is expected to close during 2023, pending customary antitrust and regulatory approvals. See Note 19 for discussion of subsequent event related to this transaction. At June 30, 2023 and December 31, 2022, the assets and liabilities of the Ecuador subsidiary qualified as held for sale upon satisfaction of the criteria set forth in ASC 360-10-45-9 (205-20-45-1E), Property, Plant, and Equipment. The sale of the Ecuador subsidiary does not qualify as discontinued operations since it does not represent a strategic shift in the Company’s operations that will have a major effect on its results and operations.
|
June 30, |
|
|
December 31, |
|
||
|
2023 |
|
|
2022 |
|
||
Theatre property and equipment, net |
$ |
|
|
$ |
|
||
Operating lease right-of-use asset, net |
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
||
|
|
|
|
|
|
||
Total assets |
$ |
|
|
$ |
|
||
Total liabilities |
$ |
|
|
$ |
|
||
The table below summarizes total revenue and operating income for the Ecuador subsidiary for the periods presented:
|
Three Months Ended June 30, 2023 |
|
|
Six Months Ended June 30, 2023 |
|
||
Total revenue |
$ |
|
|
$ |
|
||
Operating income |
$ |
|
|
$ |
|
||
21
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Long-term debt of Holdings consisted of the following for the periods presented:
|
June 30, |
|
|
December 31, |
|
||
|
2023 |
|
|
2022 |
|
||
Cinemark Holdings, Inc. 4.50% convertible senior notes due 2025 |
$ |
|
|
$ |
|
||
Cinemark USA, Inc. term loan due 2030 |
|
|
|
|
|
||
Cinemark USA, Inc. 8.75% senior secured notes due 2025 |
|
|
|
|
|
||
Cinemark USA, Inc. 5.875% senior notes due 2026 |
|
|
|
|
|
||
Cinemark USA, Inc. 5.25% senior notes due 2028 |
|
|
|
|
|
||
Other |
|
|
|
|
|
||
Total long-term debt carrying value (1) |
$ |
|
|
$ |
|
||
Less: Current portion |
|
|
|
|
|
||
Less: Debt issuance costs and original issue discount, net of accumulated amortization (1) |
|
|
|
|
|
||
Long-term debt, less current portion, net of unamortized debt issuance costs and original issue discount (1) |
$ |
|
|
$ |
|
||
|
June 30, |
|
|
December 31, |
|
||
|
2023 |
|
|
2022 |
|
||
Total long-term debt carrying value |
$ |
|
|
$ |
|
||
Less: Current portion |
|
|
|
|
|
||
Less: Debt issuance costs and original issue discount, net of accumulated amortization |
|
|
|
|
|
||
Long-term debt, less current portion, net of unamortized debt issuance costs and original issue discount |
$ |
|
|
$ |
|
||
Senior Secured Credit Facility
On May 26, 2023, CUSA amended and restated its senior secured credit facility (the “Credit Agreement”) to provide for an aggregate principal amount of $
CUSA used the $
Under the Credit Agreement, principal payments of $
The term loan was issued net of an original issue discount of $
Interest on the term loan accrues, at CUSA's option, at either (i) a rate determined by reference to the secured overnight financing rate ("SOFR") as published by CME Group Benchmark Administration Limited and identified by Barclay's Bank PLC (the
22
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Administrative Agent) as the forward-looking term rate based on
Interest on revolving credit loans accrues, at CUSA's option, at either (i) the Term SOFR Rate plus an applicable margin that ranges from
CUSA’s obligations under the Credit Agreement are guaranteed by Holdings and certain subsidiaries of Holdings other than CUSA (the “Other Guarantors”) and are secured by security interests in substantially all of CUSA’s, Holdings’ and the Other Guarantors’ personal property.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on the ability of Holdings, CUSA and their subsidiaries to: merge, consolidate, liquidate, or dissolve; sell, transfer or otherwise dispose of assets; create, incur or permit to exist certain indebtedness and liens; pay dividends, repurchase stock and make other Restricted Payments (as defined in the Credit Agreement); prepay certain indebtedness; make investments; enter into transactions with affiliates; and change the nature of their business. At any time that CUSA has revolving credit loans outstanding, it is not permitted to allow the Consolidated Net Senior Secured Leverage Ratio to exceed
The Credit Agreement also includes customary events of default, including, among other things, payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, a change of control, material money judgments and failure to maintain security interests. If an event of default occurs, all commitments under the Credit Agreement may be terminated and all obligations under the Credit Agreement could be accelerated by the Lenders, causing all loans outstanding (including accrued interest and fees payable thereunder) to be declared immediately due and payable.
The Restricted Payments covenant, as defined in the Credit Agreement generally does not limit the ability of Holdings and its subsidiaries to pay dividends and make other Restricted Payments if the Consolidated Net Total Leverage Ratio (as defined in the Credit Agreement) is less than or equal to
8.75% Secured Notes
On May 1, 2023, CUSA redeemed $
Interest Rate Swap Agreements
The Company’s interest rate swap agreements 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. Effective May 31, 2023, in conjunction with
23
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
the amendment of its Credit Agreement, the Company amended its three then existing interest rate swap agreements to update the reference rate from LIBOR to Term SOFR, and the Company applied the optional relief provided in FASB ASC Topic 848 prospectively to account for this modification. Topic 848 provides optional expedients that allow an entity not to dedesignate an existing hedging relationship when critical terms of the agreement are modified, but rather allow an existing hedging relationship to continue when one or more of the critical terms in the existing hedging agreement change because of reference rate reform. Therefore, we did not dedesignate the hedging relationship due to the amendment of our existing interest rate swap agreements on May 31, 2023, and accumulated losses due to the fair value adjustments on the interest rate swaps remained in other comprehensive income.
Below is a summary of the Company's interest rate swap agreements, which are designated as cash flow hedges, as of June 30, 2023:
Notional |
|
|
|
|
|
|
|
|
|
|
Estimated |
|
||
Amount |
|
|
Effective Date |
|
Pay Rate |
|
Receive Rate |
|
Expiration Date |
|
Fair Value (1) |
|
||
$ |
|
|
|
|
|
|
$ |
|
||||||
$ |
|
|
|
|
|
|
|
|
||||||
$ |
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
||
The fair values of the interest rate swaps are recorded on Holdings' and CUSA's condensed consolidated balance sheets 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 used projected future interest rates as provided by counterparties to the interest rate swap agreements 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 2 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35.
Fair Value of Long-Term Debt
The Company estimates the fair value of its long-term debt primarily using quoted market prices, which fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC 820, Fair Value Measurement (“ASC Topic 820”).
|
|
As of |
|
|||||
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Holdings fair value (1) |
|
$ |
|
|
$ |
|
||
CUSA fair value |
|
$ |
|
|
$ |
|
||
24
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Below is a summary of activity with NCMI and NCM included in each of Holdings' and CUSA's condensed consolidated financial statements:
|
|
Investment |
|
NCM Screen Advertising Advances |
|
Equity in |
|
Other |
|
Interest |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance as of January 1, 2023 |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
||||
Screen rental revenue earned under ESA (1) |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
Interest accrued related to significant financing component |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
|
|
Equity in loss (2) |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
Redemption of common units of NCM for common stock of NCMI (4) |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Unrealized gain on fair market value adjustment of investment in NCMI (4) |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Impairment of investment in NCMI |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Amortization of screen advertising advances |
|
|
— |
|
|
|
|
— |
|
|
( |
) |
|
— |
|
|
Balance as of and for the six months ended June 30, 2023 |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
|
||
NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company has an investment in NCM’s parent National Cinemedia, Inc. (”NCMI”), and previously held an investment in NCM. See further discussion below under Investment in National CineMedia. The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising to our theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres.
Investment in National CineMedia
On February 17, 2023, the Company delivered a redemption notice to NCM pursuant to the redemption right under its operating agreement with NCM to redeem approximately
On April 11, 2023, NCM filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code. NCMI expects to continue to manage NCM, the “debtor in possession,” under the jurisdiction of the bankruptcy court and in accordance with the applicable bankruptcy laws and orders of the bankruptcy court. In general, as debtor in possession under the Bankruptcy Code, NCM is authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the bankruptcy court. Due to NCM’s bankruptcy proceedings, the Company reassessed its rights and level of influence over NCM. The Company determined that effective April 11, 2023, the date NCM filed its bankruptcy petition, it no longer had significant influence over NCM and therefore ceased accounting for its investment in NCMI under the equity method of accounting in the second quarter of 2023. The Company now accounts for its investment in NCMI in accordance with the guidance set forth in FASB ASC Topic 321 Investments - Equity Securities, which requires the Company to measure its investment in common stock of NCMI at fair value and recognize unrealized holding gains and losses on its investment in earnings. The Company recognized an unrealized gain of $
25
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
See Note 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023 for additional discussion of the Company's investment in NCM.
Common Unit Adjustments
The Company 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 the impact of these theatres on total attendance. 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.
In March 2023, NCM provided CUSA notice that is was entitled to
Impairment of NCMI Investment
During the first quarter of 2023, the Company accounted for its investment in NCMI under the equity method of accounting, and therefore assessed its investment for other than temporary impairment. The Company recorded an impairment charge totaling $
Exhibitor Services Agreement
As discussed above, 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. 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. See Note 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023 for further discussion of the accounting for revenue earned under the ESA as well as the accounting related to NCM screen advertising advances.
As discussed in Note 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023, the Company’s ESA with NCM includes an implied significant financing component, as per the guidance in ASC Topic 606, Revenue from Contracts with Customers. As a result of the significant financing component, the Company recognized incremental screen rental revenue and interest expense of $
The recognition of revenue related to the NCM screen advertising advances is recorded on a straight-line basis over the term of the amended ESA through
|
|
Twelve Months Ended June 30, |
|
|
|
|
|
|
|
|||||||||||||||||||
Remaining Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|||||||||||||
NCM screen advertising advances (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
26
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Below is a summary of the activity for each of the Company’s other investees and corresponding changes to the Company's investment balances during the six months ended June 30, 2023. See Note 10 to the consolidated financial statements in
|
|
AC JV, |
|
DCDC |
|
FE Concepts |
|
Other |
|
Total |
|
|||||
Balance at January 1, 2023 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Cash distributions received |
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|||
Equity income |
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance at June 30, 2023 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Transactions with Other Investees
Below is a summary of transactions with each of the Company’s other investees for the three and six months ended June 30, 2023 and 2022:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Investee |
Transactions |
June 30, 2023 |
|
|
June 30, 2022 |
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
AC JV, LLC |
Event fees paid (1) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
DCDC |
Content delivery fees paid (1) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Treasury Stock - Holdings
Treasury stock represents shares of common stock repurchased by Holdings and not yet retired. The Company has applied the cost method in recording its treasury shares.
|
|
Number of |
|
|
|
|
||
|
|
Treasury |
|
|
|
|
||
|
|
Shares |
|
|
Cost |
|
||
Balance at January 1, 2023 |
|
|
|
|
$ |
|
||
Restricted stock withholdings (1) |
|
|
|
|
|
|
||
Restricted stock forfeitures (2) |
|
|
|
|
|
|
||
Balance at June 30, 2023 |
|
|
|
|
$ |
|
||
As of June 30, 2023, Holdings had no plans to retire any shares of treasury stock.
27
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Restricted Stock
Below is a summary of restricted stock activity for the six months ended June 30, 2023:
|
|
Shares of |
|
|
Weighted |
|
||
|
|
Restricted |
|
|
Grant Date |
|
||
|
|
Stock |
|
|
Fair Value |
|
||
Outstanding at January 1, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at June 30, 2023 |
|
|
|
|
|
|
||
Unvested restricted stock at June 30, 2023 |
|
|
|
|
|
|
||
During the six months ended June 30, 2023, Holdings granted
Below is a summary of restricted stock award activity recorded for the periods indicated.
|
|
Six Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Compensation expense recognized during the period: |
|
|
|
|
|
|
||
CUSA employees |
|
$ |
|
|
$ |
|
||
Holdings directors |
|
|
|
|
|
|
||
Total recognized by Holdings |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Fair value of restricted stock that vested during the period: |
|
|
|
|
|
|
||
CUSA employees |
|
$ |
|
|
$ |
|
||
Holdings directors |
|
|
|
|
|
|
||
Holdings total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Income tax benefit related to vested restricted stock: |
|
|
|
|
|
|
||
CUSA employees |
|
$ |
|
|
$ |
|
||
Holdings directors |
|
|
|
|
|
|
||
Holdings total income tax benefit |
|
$ |
|
|
$ |
|
||
As of June 30, 2023, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was as follows:
|
|
Estimated |
|
|
|
|
Remaining |
|
|
|
|
Expense |
|
|
CUSA employees (1) |
|
$ |
|
|
Holdings directors |
|
|
|
|
Total remaining - Holdings (1) |
|
$ |
|
|
28
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Performance Stock Units
During the six months ended June 30, 2023, Holdings granted performance awards in the form of performance stock units (“PSU”), formerly referred to as restricted stock units. Each PSU that vests will result in the issuance of one share of Holdings’ common stock. The maximum number of shares issuable under the performance awards is approximately
Performance Measurement Period |
|
Three years with additional service requirement to the third anniversary of the date of the grant |
Maximum Performance Target Level |
|
|
Percentage of maximum performance stock units that vest if performance metrics meet the threshold level (1) |
|
|
Percentage of maximum performance stock units that vest if performance metrics are at target (1) |
|
|
Percentage of maximum performance stock units that vest if performance metrics are at the maximum (1) |
|
|
Most likely performance metrics outcome estimated to be achieved at the time performance stock units were issued |
|
Target |
Assumed forfeiture rate for performance stock unit awards |
|
Below is a summary of performance stock unit activity for the periods presented:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Number of performance stock units that vested during the period |
|
|
|
|
|
|
||
Fair value of performance stock units that vested during the period |
|
$ |
|
|
$ |
|
||
Accumulated dividends paid upon vesting of performance stock units |
|
$ |
|
|
$ |
|
||
Compensation expense recognized during the period |
|
$ |
|
|
$ |
|
||
Income tax (expense) benefit related to performance stock units |
|
$ |
( |
) |
|
$ |
|
|
As of June 30, 2023, the estimated remaining unrecognized compensation expense related to outstanding performance stock units was $
29
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
A summary of the Company's goodwill is as follows:
|
|
U.S. |
|
|
International |
|
|
Total |
|
|||
Balance at January 1, 2023 (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|||
Balance at June 30, 2023 (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
A summary of the Company's intangible assets is as follows:
|
|
Balance at |
|
Additions (1) |
|
Amortization |
|
Foreign Currency Translation Adjustments and Other (2) |
|
Balance at June 30, 2023 |
|
|||||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross carrying amount |
|
$ |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
|
||
Accumulated amortization |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Total net intangible assets with finite lives |
|
$ |
|
$ |
— |
|
$ |
( |
) |
$ |
— |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible assets with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Tradename and other |
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Total intangible assets, net |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
||||
(1) Amount represents licenses acquired to sell alcoholic beverages for certain theatres.
(2) Includes foreign currency translation adjustments and the write-off of liquor licenses for closed theatres.
The estimated aggregate future amortization expense for intangible assets is as follows:
|
|
Estimated |
|
|
|
|
Amortization |
|
|
For the six months ended December 31, 2023 |
|
$ |
|
|
For the twelve months ended December 31, 2024 |
|
|
|
|
For the twelve months ended December 31, 2025 |
|
|
|
|
Total |
|
$ |
|
|
30
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
The Company performed a qualitative impairment analysis on its goodwill and tradename intangible assets as of June 30, 2023. As a result of the qualitative assessment, the Company noted no impairment indicators related to these assets as of June 30, 2023.
The qualitative impairment analysis, by asset class, is described below:
The Company also performed a qualitative impairment analysis on its other long-lived assets, including theatre properties and right of-use assets, as of June 30, 2023 to determine whether indicators of potential impairment existed at the theatre level, which is the level at which the Company tests its other long-lived assets. The qualitative analysis considers relevant market transactions, industry trading multiples and recent developments that would impact the estimates of future cash flows at the theatre level. The Company then performed a quantitative impairment analysis for those theatres for which indicators of potential impairment were identified.
The Company’s quantitative evaluation at the theatre level uses estimated undiscounted cash flows from continuing use through the remainder of the theatre’s useful life. The remainder of the theatre’s useful life for leased properties correlates with the remaining lease period, which includes the probability of the exercise of available renewal periods, and for owned properties represents the lesser of twenty years or the building’s remaining 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. Significant judgment is involved in estimating fair value, including management’s estimate of future theatre level cash flows for each of the Company's theatres based on projected box office. Fair value is estimated based on a multiple of cash 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 projected operating performance, market transactions and industry trading multiples.
See Note 1 and Note 12 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed February 24, 2023, for a further discussion of the Company’s impairment policy and a description of the qualitative and quantitative impairment assessments performed.
The Company’s impairment charges were as follows for the three and six months ended June 30, 2023 and 2022:
|
|
|
|
|
|
|
||||||||||
|
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Three Months Ended June 30, |
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|
Six Months Ended June 30, |
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|
2023 |
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2022 |
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2023 |
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2022 |
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U.S. Segment |
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||||
Theatre properties |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Theatre operating lease right-of-use assets |
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|
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Investment in NCMI (1) |
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||||
U.S. total |
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International segment |
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||||
Theatre properties |
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||||
Theatre operating lease right-of-use assets |
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International total |
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||||
|
|
|
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|
|
|
|
|
|
|
|
|
||||
Total Impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1)
31
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
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 assets and liabilities measured at fair value on a recurring basis under FASB ASC Topic 820 as of June 30, 2023 and December 31, 2022:
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Carrying |
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Fair Value Hierarchy |
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Description |
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As of |
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Value |
|
|
Level 1 |
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Level 2 |
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Level 3 |
|
||||
Interest rate swap assets (1) |
|
June 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment in NCMI (2) |
|
June 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||
Interest rate swap assets (1) |
|
December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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, 2022, filed February 24, 2023. There were no changes in valuation techniques for the six months ended June 30, 2023. There were
The accumulated other comprehensive loss account in Holdings’ stockholders’ equity of $
As of June 30, 2023, all foreign countries where the Company has operations are non-highly inflationary, other than Argentina. In non-highly inflationary countries, the local currency is the same as the functional currency and 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
During 2019, the Argentine government instituted exchange controls restricting the ability of entities and individuals to exchange Argentine pesos for foreign currencies and to remit foreign currency out of Argentina. As a result of these currency exchange controls, markets in Argentina developed a legal trading mechanism known as the Blue Chip Swap that allows reporting entities to transfer U.S. dollars out of and into Argentina. In a Blue Chip Swap transaction, a reporting entity buys U.S. dollar denominated securities in Argentina using Argentine pesos, and subsequently sells the securities for U.S. dollars, in Argentina, to access U.S. dollars locally, or outside Argentina, by transferring the securities abroad, prior to being sold (the latter commonly known as Blue Chip Swap Rate). The Blue Chip Swap rate is the implicit exchange rate resulting from the Blue Chip Swap transaction. The Blue Chip Swap rate can diverge significantly from Argentina’s official exchange rate. During the six months ended June 30, 2023, the Company entered into Blue Chip Swap transactions that resulted in a loss of approximately $
32
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES AND
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share data, unaudited)
Below is a summary of the impact of translating the June 30, 2023 and June 30, 2022 financial statements of the Company’s international subsidiaries:
|
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|
Other Comprehensive Income (Loss) for |
|
||||||
|
|
Exchange Rate as of |
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|
Six Months Ended |
|
|||||||||
Country |
|
June 30, 2023 |
|
|
December 31, 2022 |
|
|
June 30, 2023 |
|
June 30, 2022 |
|
||||
Brazil |
|
|
|
|
|
|
|
$ |
|
$ |
|
||||
Chile |
|
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( |
) |
|||
Peru |
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All other |
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