<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER 33-77444
CINEMARK USA, INC.
------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-2206284
----- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
iNCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7502 GREENVILLE AVE., SUITE 800, LB-9, DALLAS, TEXAS 75231
----------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(214) 696-1644
---------------
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
---------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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 X NO
--- ---
THE REGISTRANT BECAME SUBJECT TO THE FILING REQUIREMENTS OF THE SECURITIES
EXCHANGE ACT OF 1934 ON JUNE 10, 1992.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
1,500 SHARES OF CLASS A COMMON STOCK AS OF AUGUST 13, 1996
238,365 SHARES OF CLASS B COMMON STOCK (INCLUDING OPTIONS TO
ACQUIRE 5,893 SHARES OF CLASS B COMMON STOCK EXERCISABLE
WITHIN 60 DAYS OF SUCH DATE) AS OF AUGUST 13, 1996
<PAGE> 2
CINEMARK USA, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 (UNAUDITED)
AND DECEMBER 31, 1995 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) FOR THE THREE AND SIX MONTH
PERIODS ENDED JUNE 30, 1996 AND 1995 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) FOR THE SIX MONTH
PERIODS ENDED JUNE 30, 1996 AND 1995 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6(B). REPORTS ON FORM 8-K 12
SIGNATURES 16
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
ASSETS ----------------------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,840,264 $ 13,649,724
Temporary cash investments 282,026 275,126
Inventories 1,439,056 1,061,580
Advances to affiliates and other receivables 5,637,378 4,241,479
----------------------------------
Total current assets 14,198,724 19,227,909
THEATRE PROPERTIES AND EQUIPMENT 357,285,445 287,542,090
Less accumulated depreciation and amortization (69,722,268) (63,059,873)
-----------------------------------
Theatre properties and equipment - net 287,563,177 224,482,217
OTHER ASSETS:
Certificates of deposit 1,821,867 1,822,954
Investments in and advances to affiliates 4,858,155 4,275,602
Intangible assets - net 7,227,012 7,718,292
Deferred charges and other - net 10,437,528 10,220,127
----------------------------------
Total other assets 24,344,562 24,036,975
----------------------------------
TOTAL $326,106,463 $267,747,101
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $379,009 $377,737
Accounts payable and accrued expenses 44,018,226 36,239,365
Notes payable to related party 0 2,051,642
Income taxes payable and deferred 0 1,648,629
---------------------------------
Total current liabilities 44,397,235 40,317,373
LONG-TERM LIABILITIES:
12% senior notes - Cinemark USA, Inc. 125,000,000 125,000,000
12% senior subordinated notes-Cinemark Mexico (USA), Inc. 20,640,373 20,549,249
Other long-term debt, less current portion 57,001,490 50,516,320
Deferred lease expenses 10,513,953 9,811,038
Theatre development advance 769,657 1,125,703
Deferred income taxes 4,965,363 4,296,211
----------------------------------
Total long-term liabilities 218,890,836 211,298,521
MINORITY INTERESTS IN SUBSIDIARIES 4,739,587 4,786,165
SHAREHOLDERS' EQUITY :
Class A common stock, $.01 par value;
10,000,000 shares authorized, 1,500 shares
issued and outstanding 15 30
Class B common stock, no par value; 1,000,000
shares authorized, 232,472 shares issued 49,529,943 10,967,419
Additional paid-in capital 7,099,320 6,604,037
Unearned compensation - stock options (2,084,957) (2,848,738)
Retained earnings 33,990,662 27,161,692
Treasury stock, 54,791 Class B shares (20,000,000) (20,000,000)
Cumulative foreign currency translation adjustment (10,456,178) (10,539,398)
-----------------------------------
Total shareholders' equity 58,078,805 11,345,042
-----------------------------------
TOTAL $326,106,463 $267,747,101
===================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 52,185,186 $ 44,684,760 $ 97,408,274 $ 82,828,127
Concessions 28,864,195 24,743,584 53,506,210 46,376,295
Other 3,528,586 3,630,090 7,389,162 7,009,400
----------------------------------------------------------------
Total 84,577,967 73,058,434 158,303,646 136,213,822
COSTS AND EXPENSES:
Cost of operations:
Film rentals 26,332,580 21,790,585 46,915,669 39,100,278
Concession supplies 4,701,716 4,687,756 9,023,970 8,433,308
Salaries and wages 11,454,376 10,643,236 21,263,603 20,021,665
Facility leases 7,939,896 7,711,548 15,943,730 15,274,992
Advertising 2,041,542 1,801,025 4,172,706 3,497,573
Utilities and other 12,203,697 9,542,369 22,960,389 19,015,615
----------------------------------------------------------------
Total 64,673,807 56,176,519 120,280,067 105,343,431
General and administrative
expenses 7,143,666 5,051,866 11,399,523 9,140,515
Depreciation and
amortization 4,316,541 3,736,968 8,671,525 7,104,874
----------------------------------------------------------------
Total 76,134,014 64,965,353 140,351,115 121,588,820
----------------------------------------------------------------
OPERATING INCOME 8,443,953 8,093,081 17,952,531 14,625,002
OTHER INCOME (EXPENSE):
Interest expense (4,423,234) (5,110,853) (9,351,787) (9,906,075)
Amortization of debt issue cost (164,886) (164,886) (323,700) (329,773)
Amortization of bond discount (46,039) (40,213) (91,124) (79,593)
Interest income 140,315 402,923 307,799 931,296
Other gains and losses 3,696,212 (634,268) 3,696,212 (634,268)
Foreign currency exchange
gain (loss) (34,466) 322,300 (48,840) 50,068
Minority interests in
subsidiaries (8,810) (47,991) 46,578 (67,941)
Equity in income of
affiliates 244,279 226,001 401,499 266,125
----------------------------------------------------------------
Total (596,629) (5,046,987) (5,363,363) (9,770,161)
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 7,847,324 3,046,094 12,589,168 4,854,841
INCOME TAXES 3,535,308 1,437,584 5,425,513 2,217,027
----------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY
ITEM 4,312,016 1,608,510 7,163,655 2,637,814
EXTRAORDINARY ITEM:
Loss on early extinguishment
of debt, net of income tax
benefit of $273,834 (334,685)
----------------------------------------------------------------
NET INCOME $ 4,312,016 $ 1,608,510 $ 6,828,970 $ 2,637,814
================================================================
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Before extraordinary item $ 22.92 $ 9.79 $ 40.06 $ 16.16
================================================================
Net income $ 22.92 $ 9.79 $ 38.19 $ 16.16
================================================================
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 188,125 164,264 178,820 163,279
================================================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net Income $ 6,828,970 $ 2,637,814
Noncash items in net income :
Depreciation 7,164,166 6,425,255
Amortization 1,922,183 1,088,985
Deferred lease expenses 702,915 783,510
Deferred income tax expense 669,152 0
Debt issued for accrued interest 34,871 80,340
Amortized compensation - stock options 622,958 569,701
Equity in income of affiliate (401,499) (266,125)
Minority interests (46,578) 67,941
Loss on sale of assets 289,171
Loss on early extinguishment of debt 608,519
Cash from (used for) operating working capital:
Inventories (377,476) (177,131)
Co-op advertising and other receeivables (1,395,899) (1,672,718)
Accounts payable and accrued expenses 7,778,861 (1,485,015)
Income taxes payable (1,648,629) (295,440)
-----------------------------
Net cash from operations 22,462,514 8,046,288
INVESTING ACTIVITIES:
Additions to theatre properties (70,245,126) (30,228,643)
(Increase) decrease in temporary cash investments (6,900) 1,169,907
Increase in other assets (2,164,612) (1,596,778)
(Increase) decrease in advances to affiliates (181,054) 2,254,470
-----------------------------
Net cash used for investing activities (72,597,692) (28,401,044)
FINANCING ACTIVITIES:
Decrease in long-term debt (37,013,558) (4,012,395)
Increase in long-term debt 43,500,000 14,000,000
Decrease in notes payable to related parties (2,086,513) (533,563)
Net proceeds from common stock issuance 38,562,509
Increase in additional paid-in capital 636,106 302,625
Decrease in theatre development advance (356,046) (370,808)
-----------------------------
Net cash from financing activities 43,242,498 9,385,859
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 83,220 (1,647,800)
-----------------------------
DECREASE IN CASH AND CASH EQUIVALENTS (6,809,460) (12,616,697)
CASH AND CASH EQUIVALENTS:
Beginning of period 13,649,724 26,574,074
-----------------------------
End of period $ 6,840,264 13,957,377
=============================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 10,889,589 $ 9,856,830
=============================
Cash paid for income taxes $ 6,175,887 $ 2,284,180
=============================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements have been
prepared by the Company, without audit, according to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, these
interim financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to state fairly the financial position and
results of operations as of and for the periods indicated.
These financial statements should be read in conjunction with the audited
annual financial statements and the notes thereto for the year ended December
31, 1995 included in the Annual Report filed on Form 10-K by the Company under
the Securities Exchange Act of 1934 on March 31, 1996.
Operating results for the three and six months ended June 30, 1996 are not
necessarily indicative of the results to be achieved for the full year.
2. SUBSEQUENT EVENTS
The Company commenced an offer to repurchase up to $125 million
outstanding principal amount of its 12% Senior Notes due June 1, 2002 (the
"Senior Notes") at a price of $1098.33 (including a consent fee of $25) per
$1,000 principal amount, plus accrued and unpaid interest up to the date of
repurchase. Concurrently with the repurchase, the Company solicited consents
for the adoption of proposed amendments to the indenture governing the 12%
Senior Notes. Such amendments modify or eliminate certain restrictive covenants
and other provisions in the indenture. The offer expires on August 14, 1996,
with any tendered notes being purchased by the Company on August 15, 1996.
Approximately $121.9 million aggregate principle amount of Senior Notes have
been tendered.
Pursuant to an offering memorandum issued on August 12, 1996, the Company
will issue $200 million aggregate principle amount of 9-5/8% Senior
Subordinated Notes due 2008 on August 15, 1996 (the "Subordinated Notes"). The
Subordinated Notes will be issued at 99.553% of the principal face amount (a
discount of $4.47 per $1,000 principal amount). The net proceeds to the Company
from the issuance of the Subordinated Notes (net of discount, fee and expenses)
are estimated to be $193.2 million. The proceeds from the Subordinated Notes
will be utilized to repurchase the tendered Senior Notes. Any excess net
proceeds will be utilized to reduce borrowings under the Company's Credit
Facility (as defined herein) and for general corporate purposes.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table presents certain income statement items as a
percentage of revenues.
<TABLE>
<CAPTION>
% OF REVENUES
-------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Admissions 61.7 61.2 61.5 60.8
Concessions 34.1 33.9 33.8 34.1
Other 4.2 4.9 4.7 5.1
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Cost of operations 76.5 76.9 76.0 77.3
General and
administrative expenses 8.4 6.9 7.2 6.7
Depreciation and
amortization 5.1 5.1 5.5 5.2
Operating income 10.0 11.1 11.3 10.8
Interest expense 5.5 7.3 6.2 7.6
Income before income taxes
and extraordinary items 9.3 4.2 8.0 3.6
Net income 5.1 2.2 4.3 1.9
</TABLE>
REVENUES
Revenues for the quarter ended June 30, 1996 increased to $84.6 million
from $73.1 million for the quarter ended June 30, 1995, a 15.8% increase. The
Company generated revenues for the six months ended June 30, 1996 (the "1996
period") of $158.3 million compared to $136.2 million for the six months ended
June 30, 1995 (the "1995 period"), a 16.2% increase. The increase in revenues
for the second quarter and the 1996 period are primarily attributable a 14.0%
increase in attendance as the result of a strong industry performance and the
addition of 131 screens since the second quarter of 1995. Revenues per average
screen increased 7.4% to $124,062 in the 1996 period from $115,533 in the 1995
period.
COST OF OPERATIONS
Cost of operations, as a percentage of revenues, decreased to 76.5% in the
second quarter of 1996 from 76.9% in the second quarter of 1995. The decrease
as a percentage of revenues resulted primarily from a decrease in concession
supplies, as a percentage of concession revenues, to 16.3% in 1996 from 19.0%
in 1995. This decreases was partially offset by increases during the quarter in
film rentals, as a percentage of admission revenues, to 50.5% in 1996 from
48.8% in 1995 and an increase in utilities and other, as a percentage of
revenues, to 14.4% in 1996 from 13.1% in 1995.
Cost of operations, as a percentage of revenues, decreased to 76.0% in the
1996 period from 77.3% in the 1995 period. The decrease as a percentage of
revenues resulted from a decrease in salaries and wages as a percentage of
revenues to 13.4% in 1996 from 14.7% in 1995, a decrease in facility lease
expense as a percentage of revenues to 10.1% in 1996 from 11.2% in 1995 and a
decrease in concession supplies, as a percentage of concession
<PAGE> 8
revenues, to 16.9% in 1996 from 18.2% in 1995. These decreases were partially
offset by increases during the period in film rentals, as a percentage of
admission revenues, to 48.2% in 1996 from 47.2% in 1995 and an increase in
utilities and other, as a percentage of revenues, to 14.5% in 1996 from 14.0%
in 1995.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, as a percentage of revenues,
increased to 8.5% in the second quarter of 1996 from 6.9% in the second quarter
of 1995. For the 1996 period, general and administrative costs increased, as a
percentage of revenues, to 7.2% from 6.7% for the 1995 period. The absolute
level of general and administrative expenses increased to $7.1 million in the
second quarter of 1996 from $5.1 million in the second quarter of 1995 and to
$11.4 million for the 1996 period from $9.1 million for the 1995 period. The
increase, as a percentage of revenues, and in absolute terms, for the quarter
and period is primarily the result of a $1.8 million special bonus payment paid
to key employees during the second quarter of 1996 to cover the taxes due on
the exercise of non-qualified stock options.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $.6 million in the second quarter
of 1996 to $4.3 million, a 15.5% increase over the second quarter of 1995. For
the 1996 period, depreciation and amortization increased 22.1% to $8.7 million
from $7.1 million in 1995. The increases are a result of the net addition of
$119.7 million in theatre property and equipment since the second quarter of
1995, a 50.4% increase. The difference in the percentage increase in
depreciation and amortization compared to the increase in theatre property and
equipment is a result of the timing of when the additions were placed in
service during the period.
INTEREST EXPENSE
Interest costs incurred, including amortization of debt issue cost and
debt discount, increased 2.9% during the second quarter of 1996 to $5.5 million
(including the capitalization of $.8 million of interest to properties under
construction) from $5.3 million in the second quarter of 1995. Interest costs
for the 1996 period, including amortization of debt issue cost and debt
discount, increased 7.9% to $11.1 million (including the capitalization of $1.4
million of interest to properties under construction) from $10.3 million in the
1995 period. The increase in interest costs incurred for the second quarter of
1996 and 1996 period was due principally to an increase in average debt
outstanding resulting from borrowings under the Company's credit facility.
INCOME TAXES
Income taxes increased to $3.5 million for the second quarter of 1996 from
$1.4 million in the second quarter of 1995, and increased to $5.4 million for
the 1996 period from $2.2 million in the 1995 period, resulting primarily from
the increase in income before taxes. The Company's effective tax rate for the
second quarter of 1996 was 44.9% compared to 47.2% for the second quarter of
1995. The effective rate for the 1996 period decreased to 43.0% from 45.7% in
the 1995 period. The decreases were primarily a result of the reduction in the
relative level of goodwill amortization and foreign losses as a result of the
increase in total earnings. The effective tax rates reflect the full reserve of
the potential tax benefit associated with the loss incurred by the Company's
Mexican Subsidiary.
<PAGE> 9
OTHER GAINS AND LOSSES
Other gains and losses for the second quarter of 1996 and the 1996 period
of $3.7 million is primarily attributable to a gain from the settlement of
litigation.
EXTRAORDINARY ITEMS
The Company replaced its bank line of credit with a revolving and term
credit agreement in February 1996. Borrowings under the new credit facility
were used to repay indebtedness under the Company's previous $75 million bank
line of credit. As a result, an extraordinary loss of $.3 million (net of
related tax benefit) was recognized in connection with the write-off of the
unamortized debt issue cost associated with the Company's previous bank line of
credit.
NET INCOME
Net income of $4.3 million for the second quarter of 1996 and $1.6 million
for the second quarter of 1995 included the consolidated losses of the
Company's Mexican Subsidiary of $.7 million (net of minority interest) and $.7
million (net of minority interest), respectively. Net income of $6.8 million
for the 1996 period and $2.6 million for the 1995 period included the
consolidated losses of the Company's Mexican Subsidiary of $1.6 million (net of
minority interest) and $1.5 million (net of minority interest), respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues are collected in cash, primarily through box office
receipts and the sale of concession items. Because its revenues are received in
cash prior to the payment of related expenses, the Company has an operating
"float" and, as a result, historically has not required traditional working
capital financing.
The Company's theatres are typically equipped with modern projection and
sound equipment, with approximately 61% of the screens operated by the Company
having been built in the last six years. The Company's investing activities
have been principally in connection with new theatre openings and acquisitions
of existing theatres and theatre circuits. From January 1, 1996 to August 13,
1996, the Company has opened in the U.S. six theatres (84 screens) and has
thirteen theatres (167 screens) under construction. In addition, as of August
13, 1996, the Company has ten theatres (139 screens) scheduled to begin
construction during the remainder of 1996 or in 1997. The Company currently
estimates that its capital expenditures for the development of these screens in
1996 and 1997 will be approximately $110 million and $70 million, respectively.
As of August 13, 1996, the Company had expended approximately $57.4 million
toward the development of these screens. Actual expenditures for theatre
development and acquisitions during 1996 are subject to change based upon the
availability of attractive opportunities for expansion of the Company's theatre
circuit.
On June 10, 1992, the Company issued $125 million of Senior Notes due 2002
(the "Senior Notes"). The Senior Notes bear interest at the rate of 12% per
annum, payable semi-annually on June 1 and December 1 of each year. A sinking
fund providing for the redemption of the Senior Notes in equal amounts on June
1, 2000 and June 1, 2001 is calculated to retire 50% of the Senior Notes prior
to maturity. The Company commenced an offer to repurchase up to $125 million
outstanding principal amount of its Senior Notes at a price of $1098.33
(including a consent fee of $25) per $1,000 principal amount, plus accrued and
unpaid interest up to the date of repurchase. Concurrently with the repurchase,
the Company solicited consents for the adoption of proposed amendments to the
indenture governing the Senior Notes. Such amendments modify or eliminate
certain restrictive covenants and other provisions in the indenture. The offer
expires on August 14, 1996, with any tendered notes being purchased by the
Company on August 15, 1996.
<PAGE> 10
Approximately $121.9 million aggregate principle amount of Senior Notes have
been tendered.
Pursuant to an offering memorandum issued on August 12, 1996, the Company
will issue $200 million aggregate principle amount of 9-5/8% Senior
Subordinated Notes due 2008 (the "Subordinated Notes") on August 15, 1996. The
Subordinated Notes will be issued at 99.553% of the principal face amount (a
discount of $4.47 per $1,000 principal amount). Interest on the Subordinated
Notes is payable semi-annually in arrears on February 1 and August 1 of each
year. The net proceeds to the Company from the issuance of the Subordinated
Notes (net of discount, fees and expenses) are estimated to be $193.2 million.
The proceeds from the Subordinated Notes will be utilized to repurchase the
tendered Senior Notes. Any excess net proceeds will be utilized to reduce
borrowings under the Company's Credit Facility (as defined herein) and for
general corporate purposes.
On February 14, 1996, the Company replaced its existing bank line of
credit with a revolving and term credit agreement (the "Credit Facility"),
which has a final maturity of 2003 and provides for borrowing availability of
up to $175 million. Any amounts borrowed by the Company under the Credit
Facility prior to February 13, 1999 will be borrowed on a revolving basis. On
February 13, 1999, any outstanding revolving borrowings under the Credit
Facility will be converted into a term loan. The term loan will be payable
quarterly beginning June 30, 1999 with 11.25%, 18.75%, 23.75% and 36.25% of the
initial principal amount of the term loan due in 1999, 2000, 2001 and 2002,
respectively. Any remaining principal amount of the term loan is due and
payable on February 13, 2003. As of August 13, 1996, the Company had borrowed
$56.5 million under the Credit Facility.
From the proceeds of the Senior Note issuance in 1992, the Company
contributed $20 million to the capital of Cinemark International. Cinemark
International plans to invest up to an additional $40 million in international
ventures, principally in Latin America, over the next two to three years. The
Company anticipates that investments in excess of Cinemark International's
available cash will be funded by the Company or by debt or equity financing to
be provided by third parties directly to Cinemark International or its
subsidiaries.
In 1993, the Company incorporated Cinemark de Mexico, S.A. de C.V.
("Cinemark de Mexico") as an indirect subsidiary of Cinemark International to
pursue new development opportunities in Mexico. At August 13, 1996, the Company
operated eleven theatres (114 screens) and had two theatres (25 screens) under
commitment with executed leases. In 1993 and 1994, Cinemark Mexico, which is
the direct parent of Cinemark de Mexico, issued $22.4 million principal amount
of 12% Senior Subordinated Notes due 2003 (the "Cinemark Mexico Notes") with
detachable warrants. The Cinemark Mexico Indenture (as amended) governing the
notes requires Cinemark Mexico to maintain a Cash Flow Coverage Ratio (as
defined in the Indenture) of 2.0 to 1.0 beginning in the third quarter of 1997.
Cinemark Mexico has reached an agreement in principle with the majority holder
of the Cinemark Mexico Notes to postpone the implementation of this covenant
until the first quarter of 2000. The agreement in principle also provides that
Cinemark Mexico will issue new notes to such holder which provide for the
interest to be paid, at the option of the Company, in cash or in kind, in
exchange for all Cinemark Mexico Notes owned by such holder, and accrued unpaid
interest from February 1, 1996 to the date of such exchange. Cinemark Mexico
and the Majority Holder elected to pursue the exchange of the Cinemark Mexico
Notes for the New Notes in order to provide for additional cash liquidity to
fund capital investments in the Cinemark Mexico business and to take full
advantage of the opportunities Cinemark Mexico currently believes exists in the
Mexican motion picture industry. In this connection, the Company has agreed to
make an additional $10 million investment in common stock of Cinemark Mexico
when the Notes are issued. As part of the negotiations of this agreement, the
Majority Holder has agreed to postpone the payment of the approximately $1.3
million cash interest payment on the Mexico Notes otherwise due on August 1,
1996 until the earlier of an exchange of the old and new notes or September 30,
1996.
<PAGE> 11
At August 13, 1996, Cinemark International owned 91.4% (71.8% on a fully
diluted basis including the exercise of the warrants) of the common stock of
Cinemark Mexico. The remaining 8.6% (6.7% on a fully diluted basis including
the exercise of the warrants) was owned by a corporation controlled by Mexican
citizens. The Cinemark Mexico Indenture also allows for the incurrence by
Cinemark Mexico of $10 million of additional senior debt. On December 4, 1995,
Cinemark Mexico entered into the Mexico Senior Credit Facility with Cinemark
International, allowing it to borrow $10 million from Cinemark International.
As of August 13, 1996, Cinemark Mexico had borrowed $9 million under the Mexico
Senior Credit Facility.
Cinemark International entered into a joint venture agreement in November
1992 with a Chilean theatre operator. Cinemark Chile, S.A. ("Cinemark Chile")
currently operates two theatres (13 screens), and as of August 13, 1996, had
one theatre (12 screens) under commitment. If additional capital is required
for other theatre development opportunities in Chile, the Company expects to
obtain such capital from third parties through debt or equity issuance by
Cinemark Chile. In December 1995, Cinemark entered into a joint venture
agreement with Argentine theatre operators to develop multiplex theatres in
Argentina. In 1996 Cinemark LTDA, a Brazilian company ("Cinemark Brazil"), was
organized as an indirect subsidiary of Cinemark International. Cinemark Brazil
will develop modern multiplex theatres in Brazil. Cinemark Brazil plans to
begin construction on its first theatre within the next 60 days.
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 5. OTHER INFORMATION
Supplemental schedules specified by the Senior Notes indenture:
Condensed Consolidating Balance Sheet (unaudited) as of
June 30, 1996
Condensed Consolidating Statement of Income (unaudited)
for the six months ended June 30, 1996
Condensed Consolidating Statement of Cash Flow (unaudited)
for the six months ended June 30, 1996
ITEM 6(A) EXHIBITS
27 - Financial Data Schedule
(B) REPORTS ON FORM 8-K
No reports have been filed by Registrant during the quarter for
which this report is filed.
<PAGE> 13
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Restricted Cinemark II
Group Group Eliminations TOTAL
-----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,510,176 $ 1,330,088 $ $ 6,840,264
Temporary cash investments 282,026 282,026
Inventories 1,329,635 109,421 1,439,056
Advances to affiliates and other receivables 4,861,449 2,231,160 (1,455,231) 5,637,378
-----------------------------------------------------------
Total current assets 11,701,260 3,952,695 (1,455,231) 14,198,724
THEATRE PROPERTIES AND EQUIPMENT 332,342,486 24,942,959 357,285,445
Less accumulated depreciation and amortization (68,466,020) (1,256,248) (69,722,268)
-----------------------------------------------------------
Theatre properties and equipment - net 263,876,466 23,686,711 287,563,177
OTHER ASSETS:
Certificates of deposit 1,821,867 1,821,867
Investments in and advances to affiliates 5,654,477 3,812,905 (4,609,227) 4,858,155
Intangible assets - net 9,610,796 (2,383,784) 7,227,012
Deferred charges and other - net 5,487,381 4,950,147 10,437,528
-----------------------------------------------------------
Total other assets 22,574,521 8,763,052 (6,993,011) 24,344,562
-----------------------------------------------------------
TOTAL $ 298,152,247 $ 36,402,458 $ (8,448,242) $326,106,463
===========================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 379,009 $ - $ $ 379,009
Accounts payable and accrued expenses 40,622,753 3,395,473 44,018,226
Income taxes payable 0 292,346 (292,346)
-----------------------------------------------------------
Total current liabilities 41,001,762 3,687,819 (292,346) 44,397,235
LONG-TERM LIABILITIES:
12% senior notes - Cinemark USA, Inc. 125,000,000 125,000,000
12% senior notes-Cinemark Mexico (USA), Inc. 20,640,373 20,640,373
Other long-term debt, less current portion 57,001,490 57,001,490
Deferred lease expenses 10,273,418 240,535 10,513,953
Notes payable to related party 0 1,162,885 (1,162,885) 0
Theatre development advance 769,657 769,657
Deferred income taxes 4,965,363 4,965,363
-----------------------------------------------------------
Total long-term liabilities 198,009,928 22,043,793 (1,162,885) 218,890,836
MINORITY INTERESTS IN SUBSIDIARIES 1,061,752 3,677,835 4,739,587
SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value; 10,000,000 shares
authorized, 1,500 shares issued and outstanding 15 15
Class B common stock, no par value; 1,000,000 shares
authorized, 232,472 shares issued 49,529,943 1,000 (1,000) 49,529,943
Additional paid-in capital 7,099,320 20,244,000 (20,244,000) 7,099,320
Unearned compensation - stock options (2,084,957) (2,084,957)
Retained earnings (deficit) 33,990,662 (2,769,587) 2,769,587 33,990,662
Treasury stock, 54,791 Class B shares (20,000,000) (20,000,000)
Cumulative foreign currency translation adjustment (10,456,178) (10,482,402) 10,482,402 (10,456,178)
-----------------------------------------------------------
Total shareholders' equity $ 58,078,805 6,993,011 (6,993,011) 58,078,805
-----------------------------------------------------------
TOTAL $ 298,152,247 $ 36,402,458 $ (8,448,242) $326,106,463
===========================================================
</TABLE>
Note: "Restricted Group" and "Cinemark II Group" are defined in the Indenture
(Section 4.02) for the Senior Notes dated June 10, 1992.
<PAGE> 14
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Restricted Cinemark II
Group Group Eliminations TOTAL
------------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 91,525,790 $ 5,882,484 $ - $ 97,408,274
Concessions 50,376,237 3,129,973 53,506,210
Other 7,746,138 87,957 (444,933) 7,389,162
-----------------------------------------------------------
Total 149,648,165 9,100,414 (444,933) 158,303,646
COSTS AND EXPENSES:
Cost of operations:
Film rental 44,230,656 2,685,013 46,915,669
Concession supplies 7,971,998 1,051,972 9,023,970
Salaries and wages 20,091,804 1,171,799 21,263,603
Facility leases 14,877,926 1,065,804 15,943,730
Advertising 3,973,252 199,454 4,172,706
Utilities and other 21,536,929 1,423,460 22,960,389
-----------------------------------------------------------
Total 112,682,565 7,597,502 0 120,280,067
General and administrative expenses 10,909,555 934,901 (444,933) 11,399,523
Depreciation and amortization 8,239,896 500,063 (68,434) 8,671,525
-----------------------------------------------------------
Total $131,832,016 $ 9,032,466 $ (513,367) $140,351,115
-----------------------------------------------------------
OPERATING INCOME $ 17,816,149 $ 67,948 $ 68,434 $ 17,952,531
OTHER INCOME (EXPENSE):
Interest expense $ (8,007,787) $(1,344,000) $ (9,351,787)
Amortization of debt issue costs and
debt discount (274,079) (140,745) (414,824)
Interest Income 167,456 140,343 307,799
Other gains 3,696,212 3,696,212
Foreign currency exchange loss 0 (48,840) (48,840)
Minority interests (105,353) 151,931 46,578
Equity in income (loss) of affiliates (910,776) 257,553 1,054,722 401,499
-----------------------------------------------------------
Total (5,434,327) (983,758) 1,054,722 (5,363,363)
-----------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 12,381,822 (915,810) 1,123,156 12,589,168
INCOME TAXES 5,218,167 207,346 5,425,513
----------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 7,163,655 (1,123,156) 1,123,156 7,163,655
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net
of income tax benefit of $273,834 (334,685) 0 (334,685)
----------------------------------------------------------
NET INCOME (LOSS) $ 6,828,970 $(1,123,156) $1,123,156 $ 6,828,970
==========================================================
</TABLE>
Note: "Restricted Group" and "Cinemark II Group" are defined in the Indenture
(Section 4.02) for the Senior Notes dated June 10, 1992.
<PAGE> 15
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Restricted Cinemark II
Group Group Eliminations TOTAL
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net income (loss) $ 6,828,970 $ (1,123,156) $ 1,123,156 $ 6,828,970
Noncash items in net income:
Depreciation 6,665,319 498,847 7,164,166
Amortization 1,848,656 141,961 (68,434) 1,922,183
Deferred lease expenses 664,295 38,620 702,915
Deferred income tax expense 669,152 669,152
Debt issued for accrued interest 34,871 34,871
Amortized compensation - stock option 622,958 622,958
Equity in income (loss) of affiliate 979,210 (257,553) (1,123,156) (401,499)
Minority interests 105,353 (151,931) (46,578)
Loss on early extinguishment of debt 608,519 608,519
Cash used for operating working capital $ 4,266,546 (434,420) 524,731 4,356,857
------------------------------------------------------------
Net cash from (used for) operations $ 23,293,849 $ (1,287,632) $ 456,297 $ 22,462,514
INVESTING ACTIVITIES:
Additions to theatre properties (64,511,974) (5,733,152) (70,245,126)
Increase in temporary cash investments 0 (6,900) (6,900)
Increase in other assets (1,547,849) (685,197) 68,434 (2,164,612)
(Increase) decrease in advances to affiliates 68,946 (250,000) (181,054)
------------------------------------------------------------
Net cash used for investing activities $(65,990,877) $ (6,675,249) $ 68,434 $(72,597,692)
FINANCING ACTIVITIES:
Decrease in long-term debt (37,013,558) (37,013,558)
Increase in long-term debt 43,500,000 43,500,000
Increase (decrease) in notes payable
to related parties (2,086,513) 524,731 (524,731) (2,086,513)
Net proceeds from common stock issuance 38,562,509 38,562,509
Increase in additional paid-in capital 636,106 636,106
Decrease in theatre development advance (356,046) (356,046)
------------------------------------------------------------
Net cash from financing activities $ 43,242,498 $ 524,731 $ (524,731) $ 43,242,498
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 0 83,220 83,220
------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 545,470 (7,354,930) 0 (6,809,460)
CASH AND CASH EQUIVALENTS:
Beginning of period 4,964,706 8,685,018 13,649,724
------------------------------------------------------------
End of period $ 5,510,176 $ 1,330,088 $ 6,840,264
============================================================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 9,545,589 $ 1,344,000 $ 10,889,589
============================================================
Cash paid for income taxes $ 6,175,887 $ 6,175,887
============================================================
</TABLE>
Note: "Restricted Group" and "Cinemark II Group" are defined in the Indenture
(Section 4.02) for the Senior Notes dated June 10, 1992.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
CINEMARK USA, INC.
Registrant
DATE: August 13, 1996
/Jeffrey J. Stedman/
------------------------
Jeffrey J. Stedman
Vice President and
Chief Financial Officer
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CINEMARK
USA, INC. AND SUBSIDIARIES JUNE 30, 1996, FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,840,264
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,439,056
<CURRENT-ASSETS> 14,198,724
<PP&E> 357,285,445
<DEPRECIATION> 69,722,268
<TOTAL-ASSETS> 326,106,463
<CURRENT-LIABILITIES> 44,397,235
<BONDS> 202,641,863
<COMMON> 49,529,958
0
0
<OTHER-SE> 8,548,847
<TOTAL-LIABILITY-AND-EQUITY> 326,106,463
<SALES> 158,303,646
<TOTAL-REVENUES> 158,303,646
<CGS> 0
<TOTAL-COSTS> 128,951,592
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,766,611
<INCOME-PRETAX> 12,589,168
<INCOME-TAX> 5,425,513
<INCOME-CONTINUING> 7,163,655
<DISCONTINUED> 0
<EXTRAORDINARY> (334,685)
<CHANGES> 0
<NET-INCOME> 6,828,970
<EPS-PRIMARY> 0
<EPS-DILUTED> 38.19
</TABLE>
