cnk-10q_20190930.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-33401

CINEMARK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-5490327
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3900 Dallas Parkway
Plano, Texas		75093
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (972) 665-1000

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $.001 per share	CNK	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit files). Yes ☒ No ☐

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.

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). Yes ☐ No ☒

As of October 31, 2019, 117,148,809 shares of common stock were issued and outstanding.

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

			Page
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements	4

		Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (unaudited)	4

		Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2019 and 2018 (unaudited)	5

		Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018 (unaudited)	6

		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)	7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

	Item 4.	Controls and Procedures	41

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	42

	Item 1A.	Risk Factors	42

	Item 6.	Exhibits	43

SIGNATURES			44

Cautionary Statement Regarding Forward-Looking Statements

Certain matters within this Quarterly Report on Form 10Q include “forward–looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The “forward-looking statements” may include our current expectations, assumptions, estimates and projections about our business and our industry. They may include statements relating to future revenues, expenses and profitability, the future development and expected growth of our business, projected capital expenditures, attendance at movies generally or in any of the markets in which we operate, the number or diversity of popular movies released and our ability to successfully license and exhibit popular films, national and international growth in our industry, competition from other exhibitors and alternative forms of entertainment and determinations in lawsuits in which we are defendants. Forward-looking statements can be identified by the use of words such as “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. For a description of the risk factors, please review the “Risk Factors” section or other sections in the Company’s Annual Report on Form 10-K filed February 28, 2019 and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by such risk factors. We undertake no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

	September 30,			December 31,
	2019			2018
Assets
Current assets
Cash and cash equivalents	$	482,772		$	426,222
Inventories		19,346			19,319
Accounts receivable		66,947			95,084
Current income tax receivable		4,844			3,288
Prepaid expenses and other		20,859			15,117
Total current assets		594,768			559,030

Theatre properties and equipment		3,262,990			3,404,150
Less: accumulated depreciation and amortization		1,580,589			1,571,017
Theatre properties and equipment – net		1,682,401			1,833,133

Operating lease right-of-use assets		1,384,019			—
Other assets
Goodwill		1,281,354			1,276,324
Intangible assets – net		322,671			330,910
Investment in NCM		272,756			275,592
Investments in and advances to affiliates		166,033			156,766
Long-term deferred tax asset		8,499			9,028
Deferred charges and other assets – net		39,102			41,055
Total other assets		2,090,415			2,089,675
Total assets	$	5,751,603		$	4,481,838

Liabilities and equity
Current liabilities
Current portion of long-term debt	$	7,984		$	7,984
Current portion of operating lease obligations		215,015			—
Current portion of finance and capital lease obligations		15,501			27,065
Current income tax payable		12,656			12,179
Current liability for uncertain tax positions		—			573
Accounts payable and accrued expenses		388,623			426,888
Total current liabilities		639,779			474,689
Long-term liabilities
Long-term debt, less current portion		1,771,663			1,772,627
Operating lease obligations, less current portion		1,230,152			—
Finance and capital lease obligations, less current portion		126,344			232,467
Long-term deferred tax liability		152,494			155,626
Long-term liability for uncertain tax positions		13,884			13,380
Deferred lease expenses		—			39,235
NCM screen advertising advances		276,985			287,349
Other long-term liabilities		43,851			50,348
Total long-term liabilities		3,615,373			2,551,032
Commitments and contingencies (see Note 18)
Equity
Cinemark Holdings, Inc.'s stockholders' equity:
Common stock, $0.001 par value: 300,000,000 shares authorized, 121,853,045 shares issued and 117,150,047 shares outstanding at September 30, 2019 and 121,456,721 shares issued and 116,830,530 shares outstanding at December 31, 2018		122			121
Additional paid-in-capital		1,165,910			1,155,424
Treasury stock, 4,702,998 and 4,626,191 shares, at cost, at September 30, 2019 and December 31, 2018, respectively		(81,506	)		(79,259	)
Retained earnings		748,558			686,459
Accumulated other comprehensive loss		(349,381	)		(319,007	)
Total Cinemark Holdings, Inc.'s stockholders' equity		1,483,703			1,443,738
Noncontrolling interests		12,748			12,379
Total equity		1,496,451			1,456,117
Total liabilities and equity	$	5,751,603		$	4,481,838

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

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data, unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues
Admissions	$	454,429		$	427,616		$	1,371,041		$	1,389,110
Concession		289,477			264,165			886,083			831,243
Other		77,911			62,454			237,172			202,906
Total revenues		821,817			754,235			2,494,296			2,423,259

Cost of operations
Film rentals and advertising		254,911			230,121			759,693			758,242
Concession supplies		51,573			42,720			157,361			134,577
Salaries and wages		103,270			92,495			308,316			285,997
Facility lease expense		87,436			80,592			262,529			243,873
Utilities and other		123,877			112,832			357,210			337,866
General and administrative expenses		44,702			38,299			127,002			123,714
Depreciation and amortization		67,760			64,971			196,795			193,656
Impairment of long-lived assets		27,304			1,641			45,382			5,020
Loss on disposal of assets and other		2,453			7,826			8,057			28,666
Total cost of operations		763,286			671,497			2,222,345			2,111,611

Operating income		58,531			82,738			271,951			311,648

Other income (expense)
Interest expense		(24,967	)		(27,144	)		(75,037	)		(82,725	)
Loss on debt amendments and refinancing		—			—			—			(1,484	)
Interest income		3,903			2,761			10,062			7,861
Foreign currency exchange loss		(4,406	)		(3,126	)		(4,785	)		(6,947	)
Distributions from NCM		2,474			2,386			9,168			12,168
Interest expense - NCM		(4,666	)		(4,983	)		(14,180	)		(14,875	)
Equity in income of affiliates		15,139			14,158			33,982			29,208
Total other expense		(12,523	)		(15,948	)		(40,790	)		(56,794	)

Income before income taxes		46,008			66,790			231,161			254,854
Income taxes		14,053			16,169			64,152			59,592
Net income	$	31,955		$	50,621		$	167,009		$	195,262
Less: Net income attributable to noncontrolling interests		602			393			1,957			878
Net income attributable to Cinemark Holdings, Inc.	$	31,353		$	50,228		$	165,052		$	194,384

Weighted average shares outstanding
Basic		116,356			116,119			116,288			116,032
Diluted		116,600			116,322			116,577			116,288

Earnings per share attributable to Cinemark Holdings, Inc.'s common stockholders
Basic	$	0.27		$	0.43		$	1.41		$	1.66
Diluted	$	0.27		$	0.43		$	1.41		$	1.66

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

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net income	$	31,955		$	50,621		$	167,009		$	195,262
Other comprehensive loss, net of tax
Unrealized loss due to fair value adjustments on interest rate swap agreements, net of taxes of $417, $0, $3,391 and $0, net of settlements		(1,291	)		—			(10,504	)		—
Other comprehensive loss in equity method investments		(49	)		(63	)		(142	)		(43	)
Foreign currency translation adjustments		(25,408	)		(10,797	)		(19,728	)		(66,841	)
Total other comprehensive loss, net of tax		(26,748	)		(10,860	)		(30,374	)		(66,884	)
Total comprehensive income, net of tax		5,207			39,761			136,635			128,378
Comprehensive income attributable to noncontrolling interests		(602	)		(393	)		(1,957	)		(878	)
Comprehensive income attributable to Cinemark Holdings, Inc.	$	4,605		$	39,368		$	134,678		$	127,500

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

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Nine Months Ended September 30,
	2019			2018
Operating activities
Net income	$	167,009		$	195,262
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		193,032			191,236
Amortization of intangible and other assets and favorable/unfavorable leases		3,763			2,420
Amortization of long-term prepaid rents		—			1,814
Amortization of debt issue costs		3,983			4,236
Loss on debt amendments and refinancing		—			1,484
Amortization of deferred revenues, deferred lease incentives and other		(12,203	)		(16,264	)
Impairment of long-lived assets		45,382			5,020
Share based awards compensation expense		10,486			10,364
Loss on disposal of assets and other		8,057			28,666
Non-cash rent expense		(3,252	)		—
Deferred lease expenses		—			(952