cnk-10q_20200630.htm

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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 June 30, 2020

☐ 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 July 24, 2020, 117,674,000 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 June 30, 2020 and December 31, 2019 (unaudited)	4

		Condensed Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2020 and 2019 (unaudited)	5

		Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2020 and 2019 (unaudited)	6

		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (unaudited)	7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47

	Item 4.	Controls and Procedures	47

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	48

	Item 1A.	Risk Factors	48

	Item 6.	Exhibits	50

SIGNATURES			51

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, including, among others, the impacts of COVID-19. Such risks and uncertainties 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 21, 2020, as updated by the information related to COVID-19 that was included in a Form 8-K that was filed on April 13, 2020, including the documents incorporated by reference therein, and this Quarterly Report on Form 10-Q. 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)

	June 30,			December 31,
	2020			2019
Assets
Current assets
Cash and cash equivalents	$	571,755		$	488,313
Inventories		15,584			21,686
Accounts receivable		23,543			83,722
Current income tax receivable		111,558			4,082
Prepaid expenses and other		22,299			37,187
Total current assets		744,739			634,990

Theatre properties and equipment		3,256,215			3,348,237
Less: accumulated depreciation and amortization		1,653,494			1,612,990
Theatre properties and equipment, net		1,602,721			1,735,247

Operating lease right-of-use assets, net		1,315,482			1,383,080

Other assets
Goodwill		1,266,937			1,283,371
Intangible assets, net		317,115			321,769
Investment in NCM		258,706			265,792
Investments in affiliates		131,130			155,285
Long-term deferred tax asset		15,056			9,369
Deferred charges and other assets, net		38,229			39,114
Total other assets		2,027,173			2,074,700
Total assets	$	5,690,115		$	5,828,017

Liabilities and equity
Current liabilities
Current portion of long-term debt	$	7,349		$	6,595
Current portion of operating lease obligations		213,124			217,406
Current portion of finance lease obligations		15,958			15,432
Current income tax payable		510			5,195
Current liability for uncertain tax positions		—			13,446
Accounts payable and accrued expenses		359,178			450,726
Total current liabilities		596,119			708,800
Long-term liabilities
Long-term debt, less current portion		2,117,286			1,771,342
Operating lease obligations, less current portion		1,167,018			1,223,462
Finance lease obligations, less current portion		132,870			141,017
Long-term deferred tax liability		152,319			141,836
Long-term liability for uncertain tax positions		14,533			848
NCM screen advertising advances		348,187			348,354
Other long-term liabilities		63,003			44,036
Total long-term liabilities		3,995,216			3,670,895
Commitments and contingencies (see Note 19)
Equity
Cinemark Holdings, Inc.'s stockholders' equity:
Common stock, $0.001 par value: 300,000,000 shares authorized, 122,516,246 shares issued and 117,681,782 shares outstanding at June 30, 2020 and 121,863,515 shares issued and 117,151,656 shares outstanding at December 31, 2019		122			122
Additional paid-in-capital		1,178,471			1,170,039
Treasury stock, 4,834,464 and 4,711,859 shares, at cost, at June 30, 2020 and December 31, 2019, respectively		(84,365	)		(81,567	)
Retained earnings		414,785			687,332
Accumulated other comprehensive loss		(422,092	)		(340,112	)
Total Cinemark Holdings, Inc.'s stockholders' equity		1,086,921			1,435,814
Noncontrolling interests		11,859			12,508
Total equity		1,098,780			1,448,322
Total liabilities and equity	$	5,690,115		$	5,828,017

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

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share data, unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues
Admissions	$	37		$	521,072		$	292,499		$	916,612
Concession		124			345,282			190,480			596,606
Other		8,813			91,402			69,611			159,261
Total revenues		8,974			957,756			552,590			1,672,479

Cost of operations
Film rentals and advertising		388			294,705			157,005			504,782
Concession supplies		2,379			62,717			37,191			105,788
Salaries and wages		8,864			108,910			96,408			205,046
Facility lease expense		65,202			89,480			147,443			175,093
Utilities and other		34,871			122,696			135,394			233,333
General and administrative expenses		28,001			44,324			69,019			82,300
Depreciation and amortization		63,581			64,573			128,837			129,035
Impairment of long-lived assets		—			12,494			16,619			18,078
Restructuring costs		19,538			—			19,538			—
Loss on disposal of assets and other		425			1,805			2,330			5,604
Total cost of operations		223,249			801,704			809,784			1,459,059

Operating income (loss)		(214,275	)		156,052			(257,194	)		213,420

Other income (expense)
Interest expense		(28,372	)		(24,929	)		(53,038	)		(50,070	)
Amortization of accumulated losses for amended swap agreements		(2,669	)		—			(2,669	)		—
Interest income		803			3,468			2,887			6,159
Foreign currency exchange gain (loss)		916			(401	)		(3,932	)		(379	)
Distributions from NCM		690			2,146			5,914			6,694
Interest expense - NCM		(5,934	)		(4,732	)		(11,825	)		(9,514	)
Equity in income (loss) of affiliates		(20,120	)		8,439			(11,634	)		18,843
Total other expense		(54,686	)		(16,009	)		(74,297	)		(28,267	)

Income (loss) before income taxes		(268,961	)		140,043			(331,491	)		185,153
Income taxes		(98,145	)		38,182			(101,253	)		50,099
Net income (loss)	$	(170,816	)	$	101,861		$	(230,238	)	$	135,054
Less: Net income (loss) attributable to noncontrolling interests		(427	)		890			(258	)		1,355
Net income (loss) attributable to Cinemark Holdings, Inc.	$	(170,389	)	$	100,971		$	(229,980	)	$	133,699


Basic		116,666			116,325			116,581			116,253
Diluted		116,666			116,548			116,581			116,524

Earnings (loss) per share attributable to Cinemark Holdings, Inc.'s common stockholders
Basic	$	(1.45	)	$	0.86		$	(1.96	)	$	1.14
Diluted	$	(1.45	)	$	0.86		$	(1.96	)	$	1.14

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

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Net income (loss)	$	(170,816	)	$	101,861		$	(230,238	)	$	135,054
Other comprehensive income (loss), net of tax
Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $275, $1,905, $1,954 and $2,974, net of settlements		849			(5,902	)		(23,322	)		(9,213	)
Other comprehensive loss in equity method investments		—			(22	)		—			(93	)
Foreign currency translation adjustments		(3,702	)		4,925			(61,327	)		5,680
Total other comprehensive loss, net of tax		(2,853	)		(999	)		(84,649	)		(3,626	)
Total comprehensive income (loss), net of tax		(173,669	)		100,862			(314,887	)		131,428
Comprehensive (income) loss attributable to noncontrolling interests		427			(890	)		258			(1,355	)
Comprehensive income (loss) attributable to Cinemark Holdings, Inc.	$	(173,242	)	$	99,972		$	(314,629	)	$	130,073

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)

	Six Months Ended June 30,
	2020			2019
Operating activities
Net income (loss)	$	(230,238	)	$	135,054
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities:
Depreciation		126,387			126,551
Amortization of intangible and other assets		2,450			2,484
Amortization of debt issue costs		2,917			2,655
Amortization of NCM screen advertising advances and other deferred revenues		(15,795	)		(8,020	)
Amortization of accumulated losses for amended swap agreements		2,669			—