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)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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Registrant's telephone number, including area code: (
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 |
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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.
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).
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.
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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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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
As of April 30, 2021,
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Item 1. |
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Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (unaudited) |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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40 |
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Item 1. |
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41 |
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Item 1A. |
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Item 6. |
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42 |
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43 |
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2
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, or incorporated by reference to, the Company’s Annual Report on Form 10-K filed February 26, 2021 and the Current Report on Form 8-K filed March 4, 2021. 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.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
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March 31, |
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December 31, |
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2021 |
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2020 |
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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 |
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Less: accumulated depreciation and amortization |
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Theatre properties and equipment, net |
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Operating lease right-of-use assets, net |
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Other assets |
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Goodwill |
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Intangible assets, net |
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Investment in NCM |
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Investments in affiliates |
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Deferred charges and other assets, net |
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Total other 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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Commitments and contingencies (see Note 19) |
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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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Retained earnings (deficit) |
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Accumulated other comprehensive loss |
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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 are an integral part of the condensed consolidated financial statements.
4
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data, unaudited)
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Three Months Ended March 31, |
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2021 |
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2020 |
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Revenues |
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Admissions |
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$ |
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$ |
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Concession |
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Other |
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Total revenues |
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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 assets |
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— |
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Restructuring costs |
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— |
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Loss on disposal of assets and other |
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Total cost of operations |
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Operating loss |
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Other income (expense) |
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Interest expense |
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Interest income |
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Loss on extinguishment of debt |
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— |
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Foreign currency exchange loss |
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Distributions from NCM |
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Interest expense - NCM |
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Equity in income (loss) of affiliates |
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Total other expense |
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Loss before income taxes |
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Income taxes |
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Net loss |
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$ |
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$ |
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Less: Net income (loss) attributable to noncontrolling interests |
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Net loss attributable to Cinemark Holdings, Inc. |
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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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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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Diluted |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
5
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, unaudited)
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Three Months Ended March 31, |
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2021 |
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2020 |
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Net loss |
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$ |
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$ |
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Other comprehensive loss, net of tax |
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Unrealized gain (loss) due to fair value adjustments on interest rate swap agreements, net of taxes of $ |
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Foreign currency translation adjustments |
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Total other comprehensive loss, net of tax |
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Total comprehensive loss, net of tax |
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Comprehensive (income) loss attributable to noncontrolling interests |
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( |
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Comprehensive loss attributable to Cinemark Holdings, Inc. |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
6
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
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Three Months Ended March 31, |
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2021 |
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2020 |
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Operating activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to cash used for operating activities: |
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Depreciation |
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Amortization of intangible and other assets |
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Amortization of debt issue costs |
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Interest accrued on NCM screen advertising advances |
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Amortization of NCM screen advertising advances and deferred revenues |
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Amortization of accumulated losses for amended swap agreements |
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— |
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Impairment of long-lived assets |
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— |
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Share based awards compensation expense |
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Loss on disposal of assets and other |
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Loss on extinguishment of debt |
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— |
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Non-cash rent expense |
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Equity in (income) loss of affiliates |
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Deferred income tax expenses |
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Distributions from equity investees |
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Changes in assets and liabilities and other |
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Net cash used for operating activities |
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Investing activities |
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Additions to theatre properties and equipment |
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Proceeds from sale of theatre properties and equipment and other |
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Investment in joint ventures and other, net |
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— |
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( |
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Net cash used for investing activities |
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Financing activities |
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Dividends paid to stockholders |
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— |
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Payroll taxes paid as a result of stock withholdings |
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( |
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( |
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Proceeds from revolving line of credit |
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— |
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Proceeds from issuance of senior notes |
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— |
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Proceeds from other borrowings |
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— |
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Redemption of senior notes |
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( |
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— |
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Repayments of long-term debt |
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( |
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( |
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Payment of debt issue costs |
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— |
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Fees paid related to debt refinancing |
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( |
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— |
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Payments on finance leases |
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Other |
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— |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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( |
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Decrease in cash and cash equivalents |
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( |
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Cash and cash equivalents: |
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Beginning of period |
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End of period |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
7
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
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1. |
The Company and Basis of Presentation |
The Company and its subsidiaries operate in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay.
The accompanying condensed consolidated balance sheet as of December 31, 2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates. Majority-owned subsidiaries of which the Company has control are consolidated while those affiliates of which the Company owns between
These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2020, included in the Annual Report on Form 10-K filed February 26, 2021 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results to be achieved for the full year.
|
2. |
Impact of COVID-19 Pandemic |
As the Company has previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread, and the situation continues to evolve. As a movie exhibitor that operates spaces where patrons gather in close proximity, the Company has been, and continues to be, significantly impacted by protective actions taken by governmental authorities to control the spread of the pandemic. To comply with government mandates at the initial outbreak of the COVID-19 pandemic, the Company temporarily closed all of its theatres in the U.S. and Latin America in March of 2020, implemented temporary personnel and salary reductions, halted non-essential operating and capital expenditures, and negotiated modified timing and/or abatement of contractual payments with landlords and other major suppliers until its theatres reopened. In addition, the Company suspended its quarterly dividend.
As of March 31, 2021, the Company had reopened
Based on the Company’s current estimates of recovery, it believes it has, and will generate, sufficient cash to sustain operations. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on the Company’s business, results of operations, cash flows and financial condition.
8
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
Restructuring Charges
During June 2020, Company management approved and announced a restructuring plan to realign its operations to create a more efficient cost structure (referred to herein as the “Restructuring Plan”). The Restructuring Plan primarily included a permanent headcount reduction at its domestic corporate office and the permanent closure of certain domestic and international theatres.
|
|
|
U.S. Operating Segment |
|
|
International Operating Segment |
|
|
Consolidated |
|
|||||||||||||||||||||
|
|
|
Employee-related Costs |
|
Facility Closure Costs |
|
Total Charges |
|
|
Employee-related Costs |
|
Facility Closure Costs |
|
Total Charges |
|
|
Employee-related Costs |
|
Facility Closure Costs |
|
Total Charges |
|
|||||||||
|
Balance at December 31, 2020 |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Amounts paid |
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
( |
) |
|
Reserve adjustments |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
( |
) |
|
( |
) |
|
Balance at March 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
The remaining accrued restructuring costs of $
|
3. |
New Accounting Pronouncements |
Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”) and ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”). The purpose of ASU 2020-04 is to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. More specifically, the amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of ASU 2020-04 and ASU 2021-01 and their impact on its condensed consolidated financial statements.
ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company elected to adopt ASU 2020-06 effective January 1, 2021. See discussion of the impact of adoption at Note 7.
|
4. |
Lease Accounting |
Lease Deferrals and Abatements
Upon the temporary closure of theatres in March 2020, the Company initiated discussions with landlords to negotiate the deferral of rent and other lease-related payments with certain of its landlords. The amendments signed with the landlords involve varying concessions, including the abatement of rent payments during closure, deferral of all or a portion of rent payments to later periods and deferrals of rent payments to later periods combined with an early exercise of an existing renewal option or extension of the lease term. In some cases, the Company is entitled to rent-free periods while theatres remain closed in certain locations due to local regulations. Total payments deferred as of March 31, 2021 were $
In April 2020, the FASB staff released guidance indicating that in response to the COVID-19 crisis, an entity would not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. The election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
9
CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
The Company elected to not remeasure the related lease liabilities and right-of-use assets for those leases where the concessions and deferrals did not result in a significant change in total payments under the lease and where the remaining lease term did not change as a result of the negotiation. For those leases that were renewed or extended as a result of the negotiation to defer rent payments, the Company recalculated the related lease liability and right-of-use asset based on the new terms.
The following table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.
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|
|
Three Months Ended |
|
|||||
|
|
|
March 31 |
|
|||||
|
Lease Cost |
Classification |
2021 |
|
|
2020 |
|
||
|
Operating lease costs |
|
|
|
|
|
|
|
|
|
Equipment (1) |
Utilities and other |
$ |
|
|
|
$ |
|
|
|
Real Estate (2)(3) |
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 |
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
The following table represents the minimum cash lease payments recorded as lease expense, interest expense and a reduction of lease liabilities, as well as the non-cash addition of lease assets for the periods indicated.
|
|
|
Three Months Ended |
|
|||||
|
|
|
March 31, |
|
|||||
|
Other Information |
|
2021 |
|
|
2020 |
|
||
|
Contractual cash payments included in the measurement of lease liabilities(1) |
|
|
|
|
|
|
|
|
|
Cash outflows for operating leases |
|
$ |
|
|
|
$ |
|
|
|
Cash outflows for finance leases - operating activities |
|
$ |
|
|
|
$ |
|
|
|
Cash outflows for finance leases - financing activities |
|
$ |
|
|
|
$ |
|
|
|
Non-cash amount of leased assets obtained in exchange for: |
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
$ |
|
|
|
|||