<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 MARCH 31, 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 MAY 13, 1996
183,170 SHARES OF CLASS B COMMON STOCK (INCLUDING OPTIONS TO
ACQUIRE 5,489 SHARES OF CLASS B COMMON STOCK EXERCISABLE
WITHIN 60 DAYS OF SUCH DATE) AS OF MAY 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 MARCH 31, 1996 (UNAUDITED)
AND DECEMBER 31, 1995 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) FOR THE THREE MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) FOR THE THREE MONTH
PERIODS ENDED MARCH 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 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6(B). REPORTS ON FORM 8-K 11
SIGNATURES 15
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
-------------------------------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $9,098,136 $13,649,724
Temporary cash investments 278,626 275,126
Inventories 1,049,493 1,061,580
Advances to affiliates and other receivables 4,865,597 4,241,479
-------------------------------------
Total current assets 15,291,852 19,227,909
THEATRE PROPERTIES AND EQUIPMENT 311,726,955 287,542,090
Less accumulated depreciation and amortization (66,888,271) (63,059,873)
-------------------------------------
Theatre properties and equipment - net 244,838,684 224,482,217
OTHER ASSETS:
Certificates of deposit 1,821,867 1,822,954
Investments in and advances to affiliates 4,680,960 4,275,602
Intangible assets - net 7,472,653 7,718,292
Deferred charges and other - net 10,585,924 10,220,127
-------------------------------------
Total other assets 24,561,404 24,036,975
-------------------------------------
TOTAL $284,691,940 $267,747,101
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $378,366 $377,737
Accounts payable and accrued expenses 34,187,772 36,239,365
Notes payable to related party 0 2,051,642
Income taxes payable and deferred 1,453,629 1,648,629
-------------------------------------
Total current liabilities 36,019,767 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. 20,594,334 20,549,249
Other long-term debt, less current portion 30,008,988 50,516,320
Deferred lease expenses 10,163,183 9,811,038
Theatre development advance 769,657 1,125,703
Deferred income taxes 4,296,211 4,296,211
-------------------------------------
Total long-term liabilities 190,832,373 211,298,521
MINORITY INTERESTS IN SUBSIDIARIES 4,730,777 4,786,165
SHAREHOLDERS' EQUITY :
Class A common stock, $.01 par value;
10,000,000 share authorized, 1,500 shares
issued and outstanding 30 30
Class B common stock, no par value; 1,000,000
shares authorized, 232,472 shares issued 10,967,419 10,967,419
Additional paid-in capital 45,165,037 6,604,037
Unearned compensation - stock options (2,523,131) (2,848,738)
Retained earnings 29,678,646 27,161,692
Treasury stock, 54,791 Class B shares (20,000,000) (20,000,000)
Cumulative foreign currency translation adjustment (10,178,978) (10,539,398)
-------------------------------------
Total shareholders' equity 53,109,023 11,345,042
-------------------------------------
TOTAL $284,691,940 $267,747,101
=====================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE> 4
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
------------------------------
1996 1995
------------------------------
<S> <C> <C>
REVENUES:
Admissions $45,223,088 $38,143,367
Concessions 24,642,015 21,632,711
Other 3,860,576 3,379,310
------------------------------
Total 73,725,679 63,155,388
COSTS AND EXPENSES:
Cost of operations:
Film rentals 20,583,089 17,309,693
Concession supplies 4,322,254 3,745,552
Salaries and wages 9,809,227 9,378,429
Facility leases 8,003,834 7,563,444
Advertising 2,131,164 1,696,548
Utilities and other 10,756,692 9,473,246
------------------------------
Total 55,606,260 49,166,912
General and administrative expenses 4,255,857 4,088,649
Depreciation and amortization 4,354,984 3,367,906
------------------------------
Total 64,217,101 56,623,467
------------------------------
OPERATING INCOME 9,508,578 6,531,921
OTHER INCOME (EXPENSE):
Interest expense (4,928,553) (4,795,222)
Amortization of debt issue cost (158,814) (164,887)
Amortization of bond discount (45,085) (39,380)
Interest Income 167,484 528,373
Foreign currency exchange loss (14,374) (272,232)
Minority interests in subsidiaries 55,388 (19,950)
Equity in income of affiliate 157,220 40,124
------------------------------
Total (4,766,734) (4,723,174)
------------------------------
INCOME BEFORE INCOME TAXES 4,741,844 1,808,747
AND EXTRAORDINARY ITEM
INCOME TAXES 1,890,205 779,443
------------------------------
INCOME BEFORE EXTRAORDINARY ITEM 2,851,639 1,029,304
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
income tax benefit of $273,834 (334,685)
------------------------------
NET INCOME $2,516,954 $1,029,304
==============================
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Before extraordinary item $16.82 $6.34
Net income $14.85 $6.34
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 169,515 162,410
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1996 1995
-------------------------------
<S> <C> <C>
OPERATIONS:
Net Income $2,516,954 $1,029,304
Noncash items in net income :
Depreciation 3,549,958 3,035,936
Amortization 1,008,925 536,237
Deferred lease expenses 352,145 386,625
Deferred income tax expense 0 202,655
Debt issued for accrued interest 34,871 51,859
Amortized compensation - stock options 325,607 153,147
Equity in income of affiliate (157,220) (40,124)
Minority interests (55,388) 19,950
Gain on sale of assets (5,000)
Loss on early extinguishment of debt 608,519
Cash from (used for) operating working capital:
Inventories 12,087 (64,574)
Co-op advertising and other receivables (624,118) (990,713)
Accounts payable and accrued expenses (2,051,593) (4,925,745)
Income taxes payable (195,000) 196,905
-------------------------------
Net cash from (used for) operations 5,325,747 (413,538)
INVESTING ACTIVITIES:
Additions to theatre properties (23,906,425) (8,988,453)
(Increase) decrease in temporary cash investments (3,500) 1,227,383
Increase in other assets (1,691,430) (466,501)
Increase in advances to affiliates (248,138) (23,038)
-------------------------------
Net cash used for investing activities (25,849,493) (8,250,609)
FINANCING ACTIVITIES:
Decrease in long-term debt (35,006,703) (6,128)
Increase in long-term debt 14,500,000 6,000,000
Decrease in notes payable to related parties (2,086,513)
Net proceeds from common stock issuance 38,561,000
Decrease in theatre development advance (356,046) (370,808)
-------------------------------
Net cash from financing activities 15,611,738 5,623,064
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 360,420 (2,287,362)
-------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS (4,551,588) (5,328,445)
CASH AND CASH EQUIVALENTS:
Beginning of period 13,649,724 26,574,074
-------------------------------
End of period $9,098,136 $21,245,629
===============================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $2,716,638 $1,676,588
===============================
Cash paid for income taxes $1,771,739 $195,326
===============================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<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 months ended March 31, 1996 are not
necessarily indicative of the results to be achieved for the full year.
2. SUBSEQUENT EVENTS
Effective April 19, 1996, the Company entered into a Settlement
Agreement and Release ending litigation that the Company filed against the City
of Dallas for rejecting the development plan of a proposed theatre. The City
of Dallas paid the Company $5.0 million in monetary damages and the Company
agreed to dismiss all claims against the Defendants. An Agreed Final Order to
the District Court was issued on April 23, 1996, dismissing the litigation with
prejudice. As a result of the settlement the Company will recognize a gain of
approximately $2.0 million, net of taxes and attorneys' fees, in the second
quarter of 1996.
6
<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
MARCH 31,
1996 1995
---- ----
<S> <C> <C>
Revenues:
Admissions 61.4 60.4
Concessions 33.4 34.3
Other 5.2 5.3
--- ---
Total revenues 100.0 100.0
Cost of operations 75.4 77.9
General and
administrative expenses 5.8 6.5
Depreciation and
amortization 5.9 5.3
Operating income 12.9 10.3
Interest expense 7.0 7.9
Income before income taxes
and extraordinary items 6.4 2.9
Net income 3.4 1.6
</TABLE>
REVENUES
Revenues for the quarter ended March 31, 1996, increased to $73.7
million from $63.2 million for the same period in 1995, a 16.7% increase.
The increase in revenues for the first quarter of 1996 is attributed to a 12.8%
increase in attendance as the result of a strong industry performance during
the first quarter of 1996, compared to the first quarter of 1995, and the
addition of 81 screens since the first quarter of 1995. Revenues were also
positively affected by a combined increase of 3.7% in admission and concession
prices. Revenues of theatres opened prior to the first quarter of 1995 ("same
stores") increased 6.7% in the 1996 quarter versus the 1995 quarter.
COST OF OPERATIONS
Cost of operations, as a percentage of revenues, decreased to 75.4% in
the first quarter of 1996 from 77.9% in the first quarter of 1995. The
decrease as a percentage of revenues resulted from a decrease in salaries and
wages (including payroll taxes and benefits) as a percentage of revenues (to
13.3% in the first quarter of 1996 from 14.8% in the first quarter of 1995) and
a decrease in facility lease as a percentage of revenues (to 10.9% in the first
quarter of 1996 from 12.0% in the first quarter of 1995).
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses, as a percentage of revenues,
decreased to 5.8% in the first quarter of 1996 from 6.5% in the first quarter of
1995. The decrease, as in percentage of revenues, is the result of larger
revenues for the period while general and administrative expenses increased
slightly to $4.3 million in the first quarter of 1996 from $4.1 million in the
first quarter of 1995. The increase in general and administrative expense is
attributed to additional costs (principally salaries and wages) associated with
the Company's expansion program.
INTEREST EXPENSE
7
<PAGE> 8
Interest costs incurred, including amortization of debt issue cost and
debt discount, increased 13.4% during the first quarter of 1996 to $5.7 million
(including the capitalization of $.5 million of interest to properties under
construction) from $5.0 million in the first quarter of 1995. The increase in
interest costs incurred for the first quarter of 1996 was due principally to an
increase in average debt outstanding resulting from borrowings under the
Company's $175 million Credit Facility.
INCOME TAXES
Income taxes increased 142.5% to 1.9 million for the first quarter of
1996 from $.8 million in the first quarter of 1995, resulting from the increase
in net income. The effective rate for the first quarter of 1996 was 39.9%
compared to 43.1% for the first quarter of 1995. The decrease was 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
rates reflect the full reserve of the potential tax benefit associated with the
loss incurred by the Company's Mexican subsidiary.
EXTRAORDINARY ITEMS.
The Company replaced its existing credit facility with a revolving and
term credit agreement on February 14, 1996. Borrowings under the new facility
were used to repay indebtedness under the Company's previous $75 million credit
facility. 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 credit facility.
INFLATION AND FOREIGN CURRENCY
The Mexican currency has experienced a significant devaluation since
December 1994. As a result of the devaluation, certain costs of the Company's
unrestricted Mexican subsidiary, Cinemark Mexico (USA), Inc. ("Cinemark
Mexico"), have almost doubled in relation to Cinemark Mexico's revenues.
Cinemark Mexico's debt and certain of Cinemark Mexico's theatre lease rents are
denominated in U.S. dollars while the revenues are in Mexican pesos.
Additionally, almost all of the equipment and interior finish material of
Cinemark Mexico's theatres have been imported from the U.S. As a result of the
devaluation, Cinemark Mexico has recognized a $10.2 million unrealized
translation loss adjustment in equity. The devaluation has significantly and
adversely affected the Mexican economy and will affect the short term
profitability of the theatres. Additionally, there is a lack of available
capital in the Mexican financial market as a result of the significant rise in
interest rates resulting in the reduced availability of developer financing for
future projects. Such events have caused delays in Cinemark Mexico's current
projects and a reduction in the rate of expansion initially anticipated by
Cinemark Mexico.
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues are collected in cash, primarily through box
office admissions 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 housed predominantly in modern facilities
equipped with state-of-the-art projection and sound equipment, with
approximately 60% of the screens operated by the Company having been built in
the last six years. The Company's investing activities have arisen
principally in connection with new theatre openings and acquisitions of
existing theatres and theatre circuits. At May 13, 1996, the Company had in
the U.S. 246 screens under construction or scheduled to start construction
during 1996, of which 123 screens will be developed on a fee owned or ground
lease basis. The Company currently estimates that its capital expenditures for
the development of such
8
<PAGE> 9
screens will not exceed $155.0 million, of which approximately $25.0 million
has already been incurred. Actual expenditures for theatre development and
acquisitions during 1996 are subject to change based upon the availability of
attractive opportunities for investment in expansion of the Company's theatre
circuit. New theatre openings and acquisitions historically have been financed
with internally generated cash and by debt financing, including borrowings
under the Company's credit facilities.
On February 14, 1996, the Company replaced its previous credit
facility with a revolving and term credit agreement (the "Credit Facility")
with a group of banks for which Bank of America National Trust and Savings
Association acts as administrative agent (the "Agent"). The Credit Facility
provides for loans to the Company of up to $175.0 million in the aggregate.
The term borrowings under the Credit Facility 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 loans due in 1999, 2000, 2001 and 2002,
respectively. Any remaining principal amount of the term loans are due and
payable February 13, 2003. As of May 13, 1996, the Company has borrowed $40.5
million under the Credit Facility.
On June 10, 1992, the Company issued $125 million of 12% 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 Senior Notes in equal amounts on
each June 1, 2000 and June 1, 2001 is calculated to retire 50% of the Senior
Notes prior to maturity. From the proceeds of the Senior Notes, the Company
contributed $20.0 million to the capital of Cinemark II (an "Unrestricted
Subsidiary"). Cinemark II plans to invest up to $25.0 million in international
ventures principally in Latin America over the next two to three years. The
Company anticipates that the investments in excess of Cinemark II's available
cash, approximately $2.7 million as of May 13, 1996, will be funded by
additional investments in Cinemark II by the Company.
In the fourth quarter of 1992 and the first quarter of 1993, the
Company began expansion into Mexico and Chile. The Company incorporated
companies in those countries as subsidiaries of Cinemark II to pursue new
development opportunities. At May 13, 1996, Cinemark de Mexico was operating
ten theatres (104 screens), had one theatre (10 screens) under construction and
one theatre (10 screens) under commitment with an executed lease. The Company
currently estimates that the capital expenditures to develop said screens will
not exceed $3.5 million.
On August 3, 1993, Cinemark Mexico issued $20.4 million of 12% Senior
Subordinated Notes due 2003 (the "Senior Subordinated Notes") with detachable
warrants. Cinemark II invested $6.0 million in the common stock of Cinemark
Mexico which became the holding company of Cinemark de Mexico. An additional
$1.0 million of common stock was issued to a corporation controlled by Mexican
citizens. On May 6, 1994, Cinemark Mexico issued an additional $2.0 million of
the Senior Subordinated Notes. In December of 1994, Cinemark II invested an
additional $5.0 million in the common stock of Cinemark de Mexico. New Wave
Investments invested an additional $.3 million in June of 1995 and the majority
of the bondholders acquired additional warrants in September of 1995 for $1.3
million.
The remaining net proceeds from the sale of the Senior Subordinated
Notes, Warrants and common stock of Cinemark Mexico will be used over the next
year for general corporate purposes and to develop state-of-the-art multiplex
theatres in the Mexican Republic. Additionally, the indenture for the Senior
Subordinated Notes allows for the incurrence of $10.0 million of senior debt if
additional funds are required within the first two years. On December 4, 1995,
Cinemark Mexico entered into a Senior Debt facility with Cinemark II, allowing
for the borrowing of $10 million of Senior Debt from Cinemark II. As of May
13, 1996, Cinemark Mexico has borrowed $7.5 million under the Senior Debt
Facility.
In Chile, Cinemark II entered into a joint venture agreement in
November 1992 with a Chilean theatre operator. Cinemark Chile, S.A. currently
operates two theatres (13 screens), and as of May 13, 1996, has one theatre (12
screens) under commitment. Cinemark II does not anticipate investing more than
$4.0 million in Chile. If additional capital is required for other attractive
theatre development opportunities, the Company expects to finance such capital
through third parties via debt or equity issuance by Cinemark Chile, S.A.
9
<PAGE> 10
BRAZIL
In 1996 Cinemark LTDA, a Brazilian company ("Cinemark Brazil") was
organized as an indirect subsidiary of Cinemark II. Cinemark Brazil will
develop state-of-the-art multiplex theatres comparable to new theatres
developed by the Company in the United States. Cinemark Brazil's initial plans
are to build approximately 200 screens by 2001. Cinemark Brazil plans to begin
construction on its first theatre within the next 90 days. Cinemark II
anticipates that its investment in Cinemark Brazil will not exceed $15.0
million over the next two to three years.
ARGENTINA
In December 1995, Cinemark entered into a joint venture agreement with
Argentine theatre operators to develop new state-of-the-art multiplex theatres
in Argentina. Cinemark II anticipates that its investment in Argentina over
the next two years will not exceed $5.0 million. If additional capital is
required for other attractive theatre development opportunities, the Company
expects to finance such capital requirements through third parties by debt or
equity issuances by Cinemark Argentina, S.A.
SALE OF STOCK
On February 20, 1996 the Company entered into a Securities Purchase
Agreement (the "Purchase Agreement") pursuant to which the Company issued to
Cypress Merchant Banking Partners L.P. and Cypress Pictures Ltd. (collectively,
"Cypress") an aggregate 23,893 shares of Class B Common Stock for a total
aggregate purchase price of $41.0 million. As part of the Purchase Agreement,
existing shareholders sold an additional 58,655 shares to Cypress for a total
purchase price of approximately $98.2 million. The closing of the issuance and
sale of common stock of the Company to Cypress occurred on March 12, 1996. The
net proceeds from the issuance of stock by the Company will be used to continue
the Company's expansion program and for general corporate purposes.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
TINSELTOWN LITIGATION
Effective April 19, 1996, the Company and the City of Dallas entered into a
Settlement Agreement and Release ending litigation that the Company filed
against the City of Dallas for rejecting the development plan of a proposed
theatre. The City of Dallas paid the Company $5.0 million in monetary damages
and the Company agreed to dismiss all claims against the Defendants. An Agreed
Final Order to the District Court was issued on April 23, 1996, dismissing the
litigation with prejudice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 12, 1996, the shareholders of the Company entitled to vote
for the election of directors executed a Unanimous Consent in Lieu of Meeting
of the Shareholders of the Company for the purpose of amending the Bylaws of
the Company to increase the number of directors on the Company's Board of
Directors and to elect individuals for the vacancies created by such increase.
The shareholders elected as new directors Jeffrey J. Stedman, James A. Stern
and James L. Singleton. Lee Roy Mitchell, Tandy Mitchell, Alan W. Stock, Gary
R. Gibbs, Sheldon I. Stein, W. Bryce Anderson and Heriberto Guerra continued
as directors.
ITEM 5. OTHER INFORMATION
Supplemental schedules specified by the Senior Notes indenture:
Condensed Consolidating Balance Sheet
(unaudited) as of March 31, 1996
Condensed Consolidating Statement of
Income (unaudited) for the three
months ended March 31, 1996
Condensed Consolidating Statement of
Cash Flow (unaudited) for the three
months ended March 31, 1996
ITEM 6(B) REPORTS ON FORM 8-K
No reports have been filed by Registrant during the quarter for
which this report is filed.
11
<PAGE> 12
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Restricted Cinemark II
Group Group Eliminations TOTAL
------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $5,052,395 $4,045,741 $ - $9,098,136
Temporary cash investments 278,626 278,626
Inventories 983,553 65,940 1,049,493
Advances to affiliates and other receivables 4,054,313 1,684,846 (873,562) 4,865,597
--------------------------------------------------------
Total current assets 10,090,261 6,075,153 (873,562) 15,291,852
THEATRE PROPERTIES AND EQUIPMENT 289,587,661 22,139,294 311,726,955
Less accumulated depreciation and amortization (65,866,610) (1,021,661) (66,888,271)
--------------------------------------------------------
Theatre properties and equipment - net 223,721,051 21,117,633 244,838,684
OTHER ASSETS:
Certificates of deposit 1,821,867 1,821,867
Investments in and advances to affiliates 6,378,249 3,660,710 (5,357,999) 4,680,960
Intangible assets - net 9,890,654 (2,418,001) 7,472,653
Deferred charges and other - net 5,985,492 4,600,432 10,585,924
--------------------------------------------------------
Total other assets 24,076,262 8,261,142 (7,776,000) 24,561,404
--------------------------------------------------------
TOTAL $257,887,574 $35,453,928 ($8,649,562) $284,691,940
========================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $378,366 $ - $ - $378,366
Accounts payable and accrued expenses 32,056,460 2,131,312 34,187,772
Notes payable to related party 0 0
Income taxes payable and deferred 1,368,629 85,000 1,453,629
--------------------------------------------------------
Total current liabilities 33,803,455 2,216,312 0 36,019,767
LONG-TERM LIABILITIES:
12% senior notes - Cinemark USA, Inc. 125,000,000 125,000,000
12% senior notes-Cinemark Mexico (USA), Inc. 20,594,334 20,594,334
Other long-term debt, less current portion 30,008,988 30,008,988
Deferred lease expenses 9,941,958 221,225 10,163,183
Notes payable to related party 100 873,462 (873,562) 0
Theatre development advance 769,657 769,657
Deferred income taxes 4,296,211 4,296,211
--------------------------------------------------------
Total long-term liabilities 170,016,914 21,689,021 (873,562) 190,832,373
MINORITY INTERESTS IN SUBSIDIARIES 984,406 3,746,371 4,730,777
SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value; 10,000,000 shares
authorized, 1,500 shares issued and outstanding 30 30
Class B common stock, no par value; 1,000,000 shares
authorized, 232,472 shares issued 10,967,419 1,000 (1,000) 10,967,419
Additional paid-in capital 45,165,037 20,244,000 (20,244,000) 45,165,037
Unearned compensation - stock options (2,523,131) (2,523,131)
Retained earnings (deficit) 29,678,646 (2,237,574) 2,237,574 29,678,646
Treasury stock, 54,791 Class B shares (20,000,000) (20,000,000)
Cumulative foreign currency translation adjustment (10,205,202) (10,205,202) 10,231,426 (10,178,978)
--------------------------------------------------------
Total shareholders' equity 53,082,799 7,802,224 (7,776,000) 53,109,023
--------------------------------------------------------
TOTAL $257,887,574 $35,453,928 ($8,649,562) $284,691,940
========================================================
</TABLE>
12
<PAGE> 13
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Restricted Cinemark II
Group Group Eliminations TOTAL
---------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Admissions $42,638,802 $2,584,286 $ - $45,223,088
Concessions 23,308,773 1,333,242 24,642,015
Other 4,011,151 43,186 (193,761) 3,860,576
---------------------------------------------------
Total 69,958,726 3,960,714 (193,761) 73,725,679
COSTS AND EXPENSES:
Cost of operations:
Film rentals 19,355,424 1,227,665 20,583,089
Concession supplies 3,884,709 437,545 4,322,254
Salaries and wages 9,275,478 533,749 9,809,227
Facility leases 7,421,880 581,954 8,003,834
Advertising 2,061,505 69,659 2,131,164
Utilities and other 10,234,213 522,479 10,756,692
---------------------------------------------------
Total 52,233,209 3,373,051 0 55,606,260
General and administrative expenses 4,043,903 405,715 (193,761) 4,255,857
Depreciation and amortization 4,139,886 249,315 (34,217) 4,354,984
---------------------------------------------------
Total 60,416,998 4,028,081 (227,978) 64,217,101
---------------------------------------------------
OPERATING INCOME (LOSS) 9,541,728 (67,367) 34,217 9,508,578
OTHER INCOME (EXPENSE):
Interest expense (4,256,553) (672,000) (4,928,553)
Amortization of debt issue costs and debt discount (134,003) (69,896) (203,899)
Interest Income 65,209 102,275 167,484
Foreign currency exchange loss 0 (14,374) (14,374)
Minority interests (28,007) 83,395 55,388
Equity in income (loss) of affiliates (505,064) 105,358 556,926 157,220
---------------------------------------------------
Total (4,858,418) (465,242) 556,926 (4,766,734)
---------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 4,683,310 (532,609) 591,143 4,741,844
INCOME TAXES 1,831,671 58,534 1,890,205
---------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 2,851,639 (591,143) 591,143 2,851,639
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
income tax benefit of $273,834 (334,685) (334,685)
---------------------------------------------------
NET INCOME (LOSS) $2,516,954 ($591,143) $591,143 $2,516,954
===================================================
</TABLE>
13
<PAGE> 14
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Restricted Cinemark II
Group Group Eliminations TOTAL
------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net income (loss) $2,516,954 ($591,143) $591,143 $2,516,954
Noncash items in net income:
Depreciation 3,300,643 249,315 3,549,958
Amortization 972,638 70,504 (34,217) 1,008,925
Deferred lease expenses 332,835 19,310 352,145
Debt issued for accrued interest 34,871 34,871
Amortized compensation - stock option 325,607 325,607
Equity in income of affiliate 539,281 (105,358) (591,143) (157,220)
Minority interests 28,007 (83,395) (55,388)
Loss on early extinguishment of debt 608,519 608,519
Cash used for operating working capital (1,777,800) (1,316,132) 235,308 (2,858,624)
------------------------------------------------------
Net cash from (used for) operations 6,881,555 (1,756,899) 201,091 5,325,747
INVESTING ACTIVITIES:
Additions to theatre properties (20,991,883) (2,914,542) (23,906,425)
Increase in temporary cash investments 0 (3,500) (3,500)
Increase in other assets (1,415,583) (310,064) 34,217 (1,691,430)
(Increase) decrease in advances to affiliates (358,558) 110,420 (248,138)
-----------------------------------------------------
Net cash used for investing activities (22,766,024) (3,117,686) 34,217 (25,849,493)
FINANCING ACTIVITIES:
Decrease in long-term debt (35,006,703) (35,006,703)
Increase in long-term debt 14,500,000 14,500,000
Increase (decrease) in notes payable
to related parties (2,086,513) 235,308 (235,308) (2,086,513)
Net proceeds from common stock issuance 38,561,000 38,561,000
Decrease in theatre development advance (356,046) (356,046)
----------------------------------------------------
Net cash from financing activities 15,611,738 235,308 (235,308) 15,611,738
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 360,420 360,420
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 87,689 (4,639,277) 0 (4,551,588)
CASH AND CASH EQUIVALENTS:
Beginning of period 4,964,706 8,685,018 13,649,724
----------------------------------------------------
End of period $5,052,395 $4,045,741 $9,098,136
====================================================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $1,372,638 $1,344,000 $2,716,638
====================================================
Cash paid for income taxes $1,771,739 $1,771,739
====================================================
</TABLE>
14
<PAGE> 15
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: May 13, 1996
/s/ Jeffrey J. Stedman
--------------------------------
Jeffrey J. Stedman
Vice President and
Chief Financial Officer
15
<PAGE> 16
EXHIBIT INDEX
Sequentially
Numbered
Number Description Page
- ------ ----------- ------------
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEETS, STATEMENTS OF INCOME AND STATEMENTS OF
CASH FLOW FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,376,762
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,049,493
<CURRENT-ASSETS> 15,291,852
<PP&E> 311,726,955
<DEPRECIATION> 66,888,271
<TOTAL-ASSETS> 284,691,940
<CURRENT-LIABILITIES> 36,019,767
<BONDS> 175,603,322
<COMMON> 10,967,449
0
0
<OTHER-SE> 42,141,574
<TOTAL-LIABILITY-AND-EQUITY> 284,691,940
<SALES> 73,725,679
<TOTAL-REVENUES> 73,725,679
<CGS> 0
<TOTAL-COSTS> 59,961,244
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,132,452
<INCOME-PRETAX> 4,741,844
<INCOME-TAX> 1,890,205
<INCOME-CONTINUING> 2,851,639
<DISCONTINUED> 0
<EXTRAORDINARY> (334,685)
<CHANGES> 0
<NET-INCOME> 2,516,954
<EPS-PRIMARY> 0
<EPS-DILUTED> 14.85
</TABLE>
