SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
CINEMARK USA, INC.
(Exact name of Registrant as specified in its charter)
Texas 75-2206284
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
3900 Dallas Parkway
Suite 500
Plano, Texas 75093
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (972) 665-1000
Securities Registered pursuant to Section 12(b) of the Act:
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:
As of August 11, 1999, 1,500 shares of Class A Common Stock and 183,741
shares of Class B Common Stock (including options to acquire 6,879 shares of
Class B Common Stock exercisable within 60 days of such date) were outstanding.
<PAGE>
CINEMARK USA, INC. AND SUBSIDIARIES
Index
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of June 30, 1999 (unaudited)
and December 31, 1998 3
Condensed Consolidated Statements of Income
(unaudited) for the three and six month
periods ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash
Flows (unaudited) for the six month
periods ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 20
2
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
-----------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,928,900 $ 25,645,868
Inventories 4,063,028 3,591,705
Co-op advertising and other receivables 20,438,040 12,414,288
Income tax receivable 5,488,846 3,032,642
Prepaid expenses and other 2,314,845 2,457,952
-----------------------------------
Total current assets 40,233,659 47,142,455
THEATRE PROPERTIES AND EQUIPMENT 1,012,740,161 888,242,478
Less accumulated depreciation and amortization (164,312,899) (138,550,648)
-----------------------------------
Theatre properties and equipment - net 848,427,262 749,691,830
OTHER ASSETS:
Certificates of deposit 209,275 4,056,096
Investments in and advances to affiliates 3,216,523 29,811,533
Goodwill - net 16,476,955 13,495,195
Deferred charges and other - net 52,983,228 38,475,525
-----------------------------------
Total other assets 72,885,981 85,838,349
===================================
TOTAL $ 961,546,902 $882,672,634
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,789,171 $ 337,895
Accounts payable and accrued expenses 89,484,928 94,725,816
-----------------------------------
Total current liabilities 91,274,099 95,063,711
LONG-TERM LIABILITIES:
Senior credit agreements 350,787,297 251,037,528
Senior subordinated notes 380,258,943 380,273,198
Deferred lease expenses 15,543,168 14,578,747
Deferred gain on sale leaseback 6,626,667 6,803,542
Deferred income taxes 21,147,600 16,114,342
-----------------------------------
Total long-term liabilities 774,363,675 668,807,357
MINORITY INTERESTS IN SUBSIDIARIES 36,270,185 43,001,950
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, 234,073 shares issued 49,537,607 49,537,607
Additional paid-in-capital 13,790,731 13,773,691
Unearned compensation - stock options (3,530,631) (4,221,326)
Retained earnings 54,646,524 58,105,217
Treasury stock, 57,211 Class B shares at cost (24,198,890) (24,198,890)
Accumulated other comprehensive income (30,606,413) (17,196,698)
-----------------------------------
Total shareholders' equity 59,638,943 75,799,616
===================================
TOTAL $ 961,546,902 $882,672,634
==================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
------------------------------ --------------------------------
<S> <C> <C> <C> <C>
REVENUES
Admissions $ 111,821,123 $ 83,146,352 $ 207,037,547 $ 161,452,645
Concessions 54,676,548 44,344,921 101,453,845 86,890,474
Other 7,368,359 3,482,467 14,642,665 6,852,664
------------------------------- --------------------------------
Total 173,866,030 130,973,740 323,134,057 255,195,783
COSTS AND EXPENSES:
Cost of operations
Film rentals and advertising 61,158,899 46,478,072 110,360,016 86,954,426
Concession supplies 9,513,044 6,957,726 17,007,078 13,530,350
Salaries and wages 21,272,565 16,743,353 40,610,548 31,456,447
Facility leases 22,172,484 14,924,409 42,745,400 27,465,559
Utilities and other 25,271,261 18,173,212 46,931,796 34,386,852
------------------------------- --------------------------------
Total 139,388,253 103,276,772 257,654,838 193,793,634
General and administrative expenses 8,507,388 7,844,461 16,500,888 14,925,398
Depreciation and amortization 12,627,818 8,162,665 23,960,603 15,861,088
------------------------------ --------------------------------
Total 160,523,459 119,283,898 298,116,329 224,580,120
OPERATING INCOME 13,342,571 11,689,842 25,017,728 30,615,663
OTHER INCOME (EXPENSE)
Interest expense (13,352,959) (10,864,954) (26,474,222) (18,590,692)
Amortization of debt issue cost (208,116) (196,154) (407,670) (361,482)
Amortization of bond discount (43,625) (43,625) (87,250) (78,917)
Interest income 704,306 963,313 1,283,869 2,181,790
Gain on sale of assets and other (66,669) 610,339 237 1,052,497
Foreign currency exchange gain (loss) (76,614) (429,101) (380) (708,835)
Equity in income of affiliates 57,267 (352,335) 113,126 (137,198)
Minority interests in subsidiaries 260,408 1,346,162 990,810 994,919
------------------------------- --------------------------------
Total (12,726,002) (8,966,355) (24,581,480) (15,647,918)
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF AN ACCOUNTING CHANGE 616,569 2,723,487 436,248 14,967,745
Income taxes (benefit) 936,329 434,919 926,304 5,538,069
------------------------------- --------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
AN ACCOUNTING CHANGE (319,760) 2,288,568 (490,056) 9,429,676
Cumulative effect of a change in an accounting principle
- net of tax benefit of $417,570 - - (2,968,637) -
------------------------------- --------------------------------
NET INCOME (LOSS) $ (319,760) $ 2,288,568 $ (3,458,693) $ 9,429,676
=============================== ================================
EARNINGS PER SHARE:
Basic:
Income (loss) before cumulative effect of an
accounting change $ (1.79) $ 12.84 $ (2.75) $ 52.89
Cumulative effect of an accounting change - - (16.64) -
------------------------------- --------------------------------
Net Income (loss) $ (1.79) $ 12.84 $ (19.39) $ 52.89
=============================== ================================
Diluted:
Income (loss) before cumulative effect of an
accounting change $ (1.79) $ 12.27 $ (2.75) $ 50.55
Cumulative effect of an accounting change - - (16.64) -
------------------------------- --------------------------------
Net Income (loss) $ (1.79) $ 12.27 $ (19.39) $ 50.55
=============================== ================================
COMMON SHARES OUTSTANDING:
Basic:
Weighted average common shares outstanding 178,362 178,302 178,362 178,302
=============================== ================================
Diluted:
Weighted average common shares outstanding 178,362 178,302 178,362 178,302
Common equivalent shares for stock options 13,408 8,235 13,408 8,235
------------------------------- --------------------------------
Weighted average shares outstanding 191,770 186,537 191,770 186,537
=============================== ================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED JUNE 30,
1999 1998
--------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (loss) $ (3,458,693) $ 9,429,676
Noncash items in net income:
Depreciation 23,972,025 15,279,171
Amortization - goodwill and other assets 396,248 943,399
Amortization of gain on sale leaseback (176,875) (106,250)
Deferred lease expenses 964,421 866,235
Amortization of prepaid leases 394,774 203,918
Deferred income tax expense 5,033,258 1,053,491
Amortization of debt discount and premium (14,255) (22,588)
Amortized compensation - stock options 712,275 442,044
Gain on sale of assets (237) (343,662)
Equity in income of affiliates (113,126) (994,919)
Minority interests in income (loss) of subsidiaries (990,810) 137,198
Cumulative effect of an accounting change 3,386,207 -
Cash provided by (used for) operating working capital:
Inventories (471,323) (976,209)
Co-op advertising and other receivables (8,023,752) (10,903,859)
Prepaid expenses and other (353,631) 8,115,825
Accounts payable and accrued expenses (5,240,888) (3,918,590)
Income tax receivable/payable (2,456,204) -
--------------------------------------
Net cash provided by (used for) operating activities 13,559,414 19,204,880
INVESTING ACTIVITIES:
Additions to Theatre properties and equipment (105,697,779) (196,237,101)
Sale of Theatre properties and equipment 647,728 133,802,332
Decrease in certificates of deposit 3,846,821 -
Decrease in investments in and advances to affiliates 8,578,136 13,919,974
Increase in deferred charges and other (13,488,129) (9,246,481)
-------------------------------------
Net cash provided by (used for) investing activities (106,113,223) (57,761,276)
FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes - 103,950,000
Decrease in long-term debt (14,922,673) (203,446,337)
Increase in long-term debt 98,405,184 127,786,272
Minority investment in subsidiaries, net (8,235,955) 6,909,573
-------------------------------------
Net cash provided by (used for) financing activities 75,246,556 35,199,508
EFFECT OF EXCHANGE RATE CHANGES ON CASH (409,715) -
-------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,716,968) (3,356,888)
CASH AND CASH EQUIVALENTS:
Beginning of period 25,645,868 31,788,380
-------------------------------------
End of period $ 7,928,900 $ 28,431,492
=====================================
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
5
<PAGE>
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, 1998 included in the Annual Report filed on Form 10-K by the
Company under the Securities Exchange Act of 1934 on March 30, 1999.
Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results to be achieved for the full year.
2 Foreign Currency Translation
The accumulated other comprehensive income in shareholders' equity of
$30,606,413 and $17,196,698 at June 30, 1999 and December 31, 1998,
respectively, primarily relates to the unrealized adjustments from translating
the financial statements ofCinemark Brasil, S.A. and Cinemark de Mexico.
In 1998, the Company was required to utilize the U.S. dollar as the
functional currency of Cinemark de Mexico for U.S.reporting purposes instead of
the peso due to the highly inflationary economy of Mexico. Thus, devaluations in
the peso during the first six months of 1998 that affected the Company's
investment were charged to exchange gain or loss rather than to the accumulated
other comprehensive income account.
In 1999, the economy of Mexico reverted back to a non highly
inflationary status in which the peso again became the functional currency of
Cinemark de Mexico resulting in certain assets, liabilities and equity accounts
being restated at the current exchange rate. Thus, changes in the peso have been
recorded in the accumulated other comprehensive income account during the first
six months of 1999.
3. FAS 130 - Comprehensive Income
Beginning in 1998, the Company adopted SFAS 130 "Reporting Comprehensive
Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in the financial statements.
The following components are reflected in the Company's comprehensive income:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income (loss) $(319,760) $ 2,288,568 $(3,458,693) $9,429,676
Foreign currency translation adjustment (2,975,771) (6,991,032) (13,409,715) (7,922,933)
Comprehensive income (loss) $(3,295,531) $(4,702,464) $(16,868,408) $1,506,743
</TABLE>
6
<PAGE>
4. Income Taxes
Beginning January 1, 1999, management plans to reinvest the
undistributed earnings of its foreign subsidiaries located in Mexico, Peru and
Argentina. For years beginning after 1998, the Company adopted the exception
allowed under APB Opinion #23 for these foreign subsidiaries. As a result,
deferred U.S. federal income taxes are not provided on the undistributed
earnings of these foreign subsidiaries. The cumulative amount of undistributed
earnings on which the Company has not recognized income taxes is $3.3 million.
5. Accounting for Start-up Activities and Organization Costs
On January 1, 1999 the Company adopted Statement of Position (SOP) 98-5
requiring start-up activities and organization costs to be expensed as incurred.
The Company's practice had been to capitalize organization costs associated with
the organization of new entities as well as costs associated with forming
international joint ventures as deferred charges and to amortize them over the
anticipated life of the respective entity or venture. The adoption of this new
accounting pronouncement resulted in the aggregate write-off of the unamortized
organization costs of $3,386,207 on January 1, 1999. This charge was recorded as
a cumulative effect of a change in accounting principle as a one-time non cash
charge to income of $2,968,637 (net of tax) in the first quarter of 1999 as
follows:
United States $152,966
Mexico -
Brazil 552,488
Other Foreign Countries 2,263,183
----------
$2,968,637
==========
6. Supplemental Cash Flow Information
The following is provided as supplemental information to the
consolidated statement of cash flows:
Six Months Ended June 30,
1999 1998
----------- -----------
Cash paid for interest $29,048,419 $17,767,502
Cash paid for income taxes $ 1,456,793 $ 3,495,845
In December 1998, the Company acquired an additional 45% equity interest
in its Chilean operating Company for $7.625 million. As a result of the
additional equity interest acquired, Chile was consolidated with the Company's
operations effective January 1, 1999. The assets and liabilities of this former
equity interest that are included in the consolidation as of January 1, 1999 are
as follows:
Theatre properties and equipment, net $26,350,993
Goodwill 3,621,050
Net other assets 3,371,491
Long-term debt (17,718,534)
------------
Investment in affiliate $15,625,000
============
The Company's Central American operating entities (Nicaragua, Costa
Rica, El Salvador and Honduras) were consolidated with the Company's operations
effective January 1, 1999. The assets and liabilities of these former equity
interests that are included in the consolidation as of January 1, 1999 are as
follows:
Theatre properties and equipment, net $4,306,176
Net other assets 693,824
Minority interest (2,495,000)
-----------
Investment in affiliate $2,505,000
===========
7
<PAGE>
7. Reporting Segments
The Company operates in a single industry as a motion picture exhibitor.
The Company is a multinational corporation with consolidated operations in the
United States, Mexico, Canada, Argentina, Brazil, Central America, Chile,
Ecuador and Peru. Revenues and long-lived assets in the United States and other
countries for the six months ended June 30 are as follows:
<TABLE>
<CAPTION>
Other Foreign
United States Mexico Brazil Countries Eliminations Consolidated
1999
<S> <C> <C> <C> <C> <C> <C>
Total revenues $254,734,932 $25,049,632 $18,326,554 $26,627,231 $(1,604,292) $323,134,057
=============== =============== =============== ================ ============== ==================
Long-lived assets,
net 665,480,668 56,659,155 50,227,815 76,059,624 - 848,427,262
=============== =============== =============== ================ ============== ==================
1998
Total revenues $220,330,154 $21,796,491 $11,780,773 $2,636,746 $(1,348,381) $255,195,783
=============== =============== =============== ================ ============== ==================
Long-lived assets,
net 491,608,821 33,962,820 54,228,000 10,107,599 - 589,907,240
=============== =============== =============== ================ ============== ==================
</TABLE>
8
<PAGE>
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 % of Revenues
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Admissions 64.3 63.5 64.1 63.3
Concessions 31.5 33.9 31.4 34.0
Other 4.2 2.6 4.5 2.7
..... ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Cost of operations 80.2 78.9 79.7 75.9
General and administrative expenses 4.9 6.0 5.1 5.8
Depreciation and amortization 7.3 6.2 7.4 6.2
Operating income 7.7 8.9 7.7 12.0
Interest expense 7.8 8.5 8.3 7.4
Income (loss) before income taxes and
Cumulative effect of an accounting change 0.4 2.1 0.1 5.9
Income (loss) before cumulative effect
Of an accounting change (0.2) 1.7 (0.2) 3.7
Net income (loss) (0.2) 1.7 (1.1) 3.7
</TABLE>
Revenues
Revenues for the quarter ended June 30, 1999 increased to $173.9 million
from $131.0 million for the quarter ended June 30, 1998, a 32.7% increase. The
Company generated revenues for the six month period ended June 30, 1999 (the
"1999 period") of $323.1 million compared to $255.2 million for the six months
ended June 30, 1998 (the "1998 period"), a 26.6% increase. The increase in
revenues are primarily attributable to a 19.3% increase in attendance in the
second quarter of 1999 as compared to the second quarter of 1998 and a 14.7%
increase in attendance for the 1999 period versus the 1998 period as the result
of the net addition of 604 screens since the second quarter of 1998. The
increase in revenues is also due to a 9.5% increase in admissions and concession
revenues per patron in the second quarter of 1999 as compared to the second
quarter of 1998, and an 8.3% increase in admissions and concession revenues per
patron in the 1999 period as compared to the 1998 period. Revenues per average
screen have decreased 5.6% to $136,459 for the 1999 period from $144,493 for the
1998 period. Revenues per average screen for the second quarter of 1999 remained
stable at approximately $72,000 as compared to the second quarter of 1998.
Cost of Operations
Cost of operations, as a percentage of revenues, increased to 80.2% in
the second quarter of 1999 from 78.9% in the second quarter of 1998. The
increase as a percentage of revenues resulted from an increase in concession
supplies as a percentage of concession revenues to 17.4% in the second quarter
of 1999 from 15.7% in the second quarter of 1998 as a result of the greater
number of international theatres in operation, an increase in facility lease
expense as a percentage of revenues to 12.8% in the second quarter of 1999 from
11.4% in the second quarter of 1998 and an increase in utilities and other
expenses as a percentage of revenues to 14.5% in the second quarter of 1999 from
13.9% in the second quarter of 1998. These increases were partially offset by a
9
<PAGE>
decrease in film rental and advertising expense as a percentage of admissions
revenues to 54.7% in the second quarter of 1999 from 55.9% in the second quarter
of 1998 and a decrease in salaries and wages expense as a percentage of revenues
to 12.2% in the second quarter of 1999 from 12.8% in the second quarter of 1998.
Cost of operations, as a percentage of revenues, increased to 79.7% in
the 1999 period from 75.9% for the same period in 1998. The increase as a
percentage of revenues resulted from an increase in concession expense as a
percentage of concession revenues to 16.8% in the 1999 period from 15.6% in the
1998 period as a result of the greater number of international theatres in
operation, an increase in facility lease expense as a percentage of revenues to
13.2% in the 1999 period from 10.8% in the 1998 period partially as a result of
the two sale leaseback transactions which occurred in the first and fourth
quarters of 1998, an increase in salaries and wages expense as a percentage of
revenues to 12.6% in 1999 from 12.3% in 1998 and an increase in utilities and
other expenses as a percentage of revenues to 14.5% in 1999 from 13.5% in 1998.
These increases were partially offset by a decrease in film rental and
advertising costs as a percentage of admissions revenues to 53.3% in the 1999
period from 53.9% in the 1998 period.
General and Administrative Expenses
General and administrative expenses, as a percentage of revenues,
declined to 4.9% in the second quarter of 1999 as compared to 6.0% in the second
quarter of 1998. General and administrative expenses as a percentage of revenues
also decreased in the six month period ended June 30, 1999 to 5.1% from 5.8% for
the same period in 1998. The decrease in general and administrative expenses as
a percentage of revenues is reflective of the Company's expanding base of
theatre operations.
The absolute level of general and administrative expenses increased to
$16.5 million in the 1999 period from $14.9 million in the 1998 period. The
increase in the absolute level of general and administrative expenses is
attributed to costs (primarily salaries and wages) associated with the Company's
expansion program.
Depreciation and Amortization
Depreciation and amortization increased 53.7% to $12.6 million in the
second quarter of 1999 from $8.2 million in the second quarter of 1998. For the
1999 period, depreciation and amortization increased 50.9% to $24.0 million from
$15.9 million in the 1998 period. The increase is a result of the net addition
of $312.4 million in theatre property and equipment since the second quarter of
1998, a 44.6% 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
bond discount, increased 16.4% during the second quarter of 1999 to $14.9
million (including capitalized interest to properties under construction) from
$12.8 million (including capitalized interest). Interest costs incurred in the
1999 period, including amortization of debt issue cost and bond discount,
increased 36.4% to $29.6 million (including capitalized interest to properties
under construction) from $21.7 million (including capitalized interest) in the
1998 period. The increase in interest costs incurred for the second quarter of
1999 and the 1999 period was due principally to an increase in average debt
outstanding resulting from borrowings under the Company's Credit Facility.
Income Taxes
Income tax expense of $0.9 million was recorded for the 1999 period as
compared to income tax expense of $5.5 million in the 1998 period. The Company's
effective tax rate for the 1999 period was 212% compared to 37%
10
<PAGE>
in the 1998 period. The effective tax rate in the 1999 period results from the
local foreign country income and withholding taxes exceeding the tax benefits of
the domestic loss as well as the losses in foreign countries being subject to a
valuation allowance.
Cumulative Effect of a Change in an Accounting Principle
The Company recorded a cumulative effect of a change in accounting
principle of $3.0 million (net of tax) in the first quarter of 1999 resulting
from the write off of the unamortized start-up activities and organization costs
due to the adoption of Statement of Position (SOP) 98-5.
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 80% of the screens operated by the Company
having been built in the 1990's. The Company's investing activities have been
principally in connection with new theatre openings and acquisitions of existing
theatres and theatre circuits. As of August 11, 1999, the Company has opened 9
theatres (165 screens) and has 10 theatres (172 screens) under construction or
scheduled to open in the United States by the end of 1999. Certain of these
theatres will be megaplexes which may cost in excess of $15 million per theatre.
The Company also plans to open approximately 190 screens in the U.S. in 2000.
The Company currently estimates that its capital expenditures for the
development of these approximately 525 screens in the U.S. in 1999 and 2000 will
be approximately $235 million. As of August 11, 1999, the Company had expended
approximately $79 million toward the development of these screens. The Company
plans to fund capital expenditures for its development from cash flow from
operations, sale leaseback transactions and borrowings under the Credit
Facility. Actual expenditures for theatre development and acquisitions during
1999 and 2000 are subject to change based upon the availability of attractive
opportunities for expansion of the Company's theatre circuit.
In August 1996, the Company issued $200 million principal amount of
Series B Senior Subordinated Notes which bear interest at a rate of 9-5/8% per
annum (the "Series B Notes"), payable semi-annually on February 1 and August 1
of each year. The Series B Notes were 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 Series B Notes (net of discount, fees and
expenses) were approximately $193.2 million. The proceeds from the Series B
Notes were used to repurchase 98.7% of the Company's $125 million aggregate
principal amount 12% Senior Notes due 2002 ( the "Senior Notes") pursuant to a
tender offer which expired on August 15, 1996. The Senior Notes were purchased
at a premium of $1,098.33 (including a consent fee of $25) per $1,000 principal
amount, plus accrued and unpaid interest up to the date of repurchase. Excess
proceeds were utilized to reduce borrowings under the Company's Credit Facility
and for general corporate purposes. On June 2, 1997 the Company redeemed the
remaining outstanding Senior Notes ($1.6 million). The Senior Notes were
redeemed at a premium of $1,060 per $1,000 principal amount, plus accrued and
unpaid interest up to the date of redemption.
In June 1997, the Company issued $75 million principal amount of Series
D Senior Subordinated Notes due 2008 which bear interest at a rate of 9-5/8% per
annum (the "Series D Notes"), payable semi-annually on February 1 and August 1
of each year. The Series D Notes were issued at 103% of the principal face
amount (a premium of $30.00 per $1,000 principal amount). The net proceeds to
the Company from the issuance of the Series D Notes (net of fees and expenses)
were approximately $77.1 million. The proceeds of the Series D Notes were
utilized to reduce the Company's indebtedness under the Credit Facility.
11
<PAGE>
In January 1998, the Company issued $105 million aggregate principal
amount of 8-1/2% Series A Senior Subordinated Notes due 2008 which bear interest
at a rate of 8-1/2% per annum (the "Series A Notes"), payable semi-annually on
February 1 and August 1 of each year pursuant to Rule 144A (the "Offering"). The
Series A Notes were issued at 99.0% of the principal face amount (a discount of
$10.00 per $1,000 principal amount). The net proceeds of the Offering of $103.9
million (net of discount, fees and expenses) were utilized by the Company to
reduce the Company's indebtedness under the Credit Facility. The Company
exchanged the Series A Notes on March 17, 1998 for 8-1/2% Series B Senior
Subordinated Notes (the "8-1/2% Series B Notes") which have been registered
under the Securities Act of 1933, as amended.
In February 1998, the Company replaced its existing credit facility with
a reducing, revolving credit agreement (the "Credit Facility") through a group
of banks for which Bank of America National Trust and Savings Association acts
as Administrative Agent. The Credit Facility provides for loans to the Company
of up to $350 million in the aggregate.
The Credit Facility is a reducing revolving credit facility, with
commitments automatically reduced each calendar quarter by $8,750,000,
$11,812,500, $13,125,000, $12,031,000 and $6,562,500 in calendar year 2001,
2002, 2003, 2004 and 2005, respectively. The Company is required to prepay all
loans outstanding in excess of the aggregate commitment as reduced pursuant to
the terms of the Credit Facility. Borrowings are secured by a pledge of a
majority of the issued and outstanding capital stock of the Company, and the
credit agreement requires that the Company maintains certain financial ratios;
restricts the payment of dividends, payment of subordinated debt prior to
maturity and issuance of preferred stock and other indebtedness; and other
restrictive covenants. Pursuant to the terms of the Credit Facility, funds
borrowed bear interest at a rate per annum equal to the Offshore Rate (as
defined in the Credit Facility) or the Base Rate (as defined in the Credit
Facility, as the case may be), plus the Applicable Margin (as defined in the
Credit Facility). As of August 11, 1999, the Company had borrowed $292 million
under the Credit Facility. The effective interest rate on such borrowings as of
August 11, 1999 is 7.3% per annum.
In February 1998, the Company completed a sale leaseback transaction
(the "Sale Leaseback") pursuant to which the Company sold the land, buildings
and site improvements of 12 theatre properties to special purpose entities for
an aggregate purchase price equal to approximately $131.5 million.
Simultaneously with the sale, the Company entered into operating leases for such
properties for a base term equal to approximately 20 years at a fixed aggregate
monthly rental payment of $1.1 million or $13.4 million annually.
In October 1998, the Company completed another sale leaseback
transaction (the "Second Sale Leaseback") pursuant to which the Company sold the
land, buildings and site improvements of one theatre property to a special
purpose entity for an aggregate purchase price equal to approximately $13.9
million. Simultaneously with the sale, the Company entered into an operating
lease for the property for a base term equal to approximately 20 years at a
fixed monthly rental payment of $119,000 or $1.4 annually.
12
<PAGE>
In 1992, the Company formed Cinemark International to develop and
acquire theatres in international markets. As of August 11, 1999, Cinemark
International, through its affiliates, operated 63 theatres (564 screens)
principally in Latin America. The following table summarizes the Company's and
Cinemark International's holdings in each international market, the number of
theatres and screens in such market as of August 11, 1999 and the number of
theatres and screens under construction in 1999.
<TABLE>
<CAPTION>
Year of Operating 1999 Planned Openings
Country Formation Ownership % Theatres/Screens Theatres/Screens
<S> <C> <C> <C> <C>
Mexico 1992 95% 19 theatres (187 screens) 1 theatre (5 screens)
Chile 1992 98% 11 theatres (89 screens) -
Argentina 1995 50% 5 theatres (44 screens) -
Argentina 1997 100% 2 theatres (15 screens) -
Brazil 1996 60% 15 theatres (147 screens) 2 theatres (16 screens)
Ecuador 1996 60% 2 theatres (16 screens) existing theatre (3 screens)
Peru 1996 100% 2 theatres (21 screens) -
Central America 1997 50% 7 theatres (45 screens) -
Colombia 1998 50% N/A -
Taiwan 1998 51% N/A -
United Kingdom 1998 100% N/A -
Total 63 theatres (564 screens) 3 theatres (24 screens)
</TABLE>
The Company, through Cinemark International and its affiliates, plans to
invest up to an additional $100 million in international ventures, principally
in Latin America, over the next 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 August 1998, the Company formed Cinemark Investments Corporation for
the purpose of financing its Brazilian operations by investing in foreign fixed
rate notes issued by Cinemark Brasil S.A., an indirect Brazilian subsidiary of
the Company. In September 1998, Cinemark Investments Corporation executed a
credit agreement with Bank of America that provides Cinemark Investments
Corporation up to $20 million in the aggregate under a revolving line of credit
facility (the Cinemark Investments Credit Agreement). The Cinemark Investments
Credit Agreement is secured by an assignment of certain fixed rate notes issued
by Cinemark Brasil S.A. to Cinemark Investments Corporation and an unconditional
guaranty by the Company. Pursuant to the terms of the Cinemark Investments
Credit Agreement, funds borrowed bear interest at a rate per annum equal to the
Offshore Rate or the Base Rate (both defined in the Cinemark Investments Credit
Agreement) as the case may be. As of August 11, 1999, Cinemark Investments
Corporation had borrowed $20 million under the Cinemark Investments Credit
Agreement, the proceeds of which were used to purchase fixed rate notes issued
by Cinemark Brasil S.A. bearing interest at 13.25%. The effective interest rate
on such borrowings as of August 11, 1999 is 7.8% per annum.
In September 1998, the Company incorporated Cinemark Theatres U.K.
Ltd., an English company, to develop state-of-the-art multiplex theatres
in the United Kingdom. Cinemark Theatres U.K. Ltd. is a wholly-owned
subsidiary of the Company. Cinemark Theatres U.K. Ltd. expects to begin
construction on 1 theatre (10 screens) in 1999.
In September 1998, Cinemark International entered into a joint venture
agreement with Core Pacific Ltd. to develop state-of-the-art multiplex theatres
in Taiwan, Republic of China. The joint venture will conduct its business
through Cinemark-Core Pacific Ltd. which is 50.5% owned by Cinemark
International and 49.5% owned by Core Pacific Ltd. Cinemark-Core Pacific Ltd.
expects to begin construction on four theatres (32 screens) during 2000.
13
<PAGE>
In November 1998, Cinemark Mexico executed a credit agreement with Bank
of America National Trust and Savings Association for itself and as
Administrative Agent (the Cinemark Mexico Credit Agreement). The Cinemark Mexico
Credit Agreement is a revolving credit facility and provides for a loan to
Cinemark Mexico of up to $30 million in the aggregate. The Cinemark Mexico
Credit Agreement is secured by a pledge of 65% of the stock of Cinemark de
Mexico S.A. de C.V. and an unconditional guaranty by the Company. Pursuant to
the terms of the Cinemark Mexico Credit Agreement, funds borrowed bear interest
at a rate per annum equal to the Offshore Rate (as defined in the Cinemark
Mexico Credit Agreement) or the Base Rate (as defined in the Cinemark Mexico
Credit Agreement), as the case may be, plus the Applicable Margin (as defined in
the Cinemark Mexico Credit Agreement). Cinemark Mexico borrowed $30 million
under the Cinemark Mexico Credit Agreement, the proceeds of which were used to
repay an intercompany loan of Cinemark Mexico from Cinemark International.
Cinemark International used the proceeds of such repayment to repay all
outstanding indebtedness under its then existing credit facility. The effective
interest rate on such borrowings as of August 11, 1999 is 6.6% per annum.
In December 1998, Cinemark International entered entered into a
joint venture agreement with Casa Editorial El Tiempo S.A., Tempora S.A. and
Prodiscos S.A. to develop state-of-the-art multiplex theatres in Colombia.
The joint venture will conduct its business through Cinemark Colombia S.A.
which is owned 50.1% by Cinemark International, and the remaining 49.9% is
collectively owned by Casa Editorial El Tiempo S.A., Tempora S.A. and
Prodiscos S.A. Cinemark Colombia S.A. expects to begin construction on one
theatre (10 screens) during 1999.
Year 2000 Compliance
The Company recognizes that the arrival of the Year 2000 poses a unique
worldwide challenge to the ability of all systems to recognize the date change
from December 31, 1999 to January 1, 2000, and like other companies, has been
assessing and updating its computer applications and business processes to
ensure their continued functionality.
The Year 2000 compliance effort is underway across the Company and is
following a process of assessment, modification and testing. At the present
time, the necessary modifications to the day-to-day operating and reporting
systems for all theatres have been successfully completed to ensure Year 2000
compliance. With respect to the financial reporting and operational databases
associated with the U.S. corporate office and the various international
corporate offices, the necessary modifications to ensure Year 2000 compliance
are expected to be completed by September 30, 1999. The costs to modify the
existing systems to ensure Year 2000 compliance are expected to be less than
$100,000 at the completion of the project.
Since the core business of the Company centers around the collection of
cash at the theatre box office, an unanticipated Year 2000 computer failure
should not have an adverse impact on the Company's ability to continue with
day-to-day operations. The impact from a system failure from a practical
standpoint should only affect the financial reporting and operational analysis
that is presently performed at the corporate office.
In the most reasonably likely worst case scenario, the Company could
return to a manual system of recording daily admissions revenues from a
day-to-day operating standpoint.
The Company operates a large number of geographically dispersed theatres
and has a large supplier base and believes that this will mitigate any adverse
impact. The Company has initiated formal communications with its significant
suppliers, customers and critical business partners to determine the extent to
which the Company may be vulnerable in the event that those parties fail to
properly remediate their own Year 2000 issues. The Company has taken steps to
monitor the progress made by those parties and intends to test critical system
interfaces as the Year 2000 approaches. The Company has developed appropriate
contingency plans in the event that a significant exposure is identified
relative to the dependencies on third-party systems. While the Company is not
presently aware of any such significant exposure, there can be no guarantee that
the systems of third parties on which the Company relies will be converted in a
timely manner or that a failure to properly convert by another company would not
have a material adverse effect on the Company.
14
<PAGE>
The Company also purchased a new Year 2000 compliant financial reporting
and distribution system that was made operational on January 4, 1999. The
decision to purchase this new system at a cost of more than $1 million was made
by management in order to effectively handle the increasing financial reporting
and analysis needs of the Company in the years to come as the Company continues
at its rapid growth rate.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has limited exposure to financial market risks, including
changes in interest rates and other relevant market prices. The Company does not
have any derivative financial instruments in place as of June 30, 1999.
An increase or decrease in interest rates would affect interest costs
relating to the Company's variable rate credit facilities. The Company and/or
its subsidiaries are currently parties to three such credit facilities. At June
30, 1999, there was an aggregate of approximately $325 million of variable rate
debt outstanding under these facilities. The facilities are priced with a
variable rate based on LIBOR or a base rate, plus, in each case, an applicable
margin. The Company has no interest rate swaps or other hedging facilities
relating to these credit facilities. These facilities represent approximately
45% of the Company's outstanding long-term debt. Changes in interest rate do not
have a direct impact on interest expense relating to the remaining fixed rate
debt facilities.
The Company is also exposed to market risk arising from changes in
foreign currency exchange rates as a result of its international operations.
Currency fluctuations result in the Company's reporting exchange gain or losses
or cumulative unrealized translation adjustments relating to its international
subsidiaries depending on the inflationary environment of the country in which
the Company operates.
15
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings
The Company currently is a defendant in certain litigation proceedings
alleging certain violations of the Americans with Disabilities Act of 1990
relating to the accessibility of certain theatre seating to patrons using
wheelchairs. In August 1998, the judge presiding over one of these cases granted
plaintiffs motion for summary judgement ruling the Company's stadium theatre
design is in violation of the ADA. The Company is appealing this ruling.
Although the Company cannot predict the outcome of the appeal or the outcome of
the other cases, management believes that the Company's potential liability with
respect to such proceedings is not material in the aggregate to the Company's
financial position, results of operations and cash flows.
Reference is also made to Item 3 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.
Item 2. Change in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
There have not been any matters submitted to a vote of security holders
during the first six months of 1999 through the solicitation of proxies or
otherwise.
Item 5. Other Information
The Company intends that this report be governed by the "safe harbor"
provision of the Private Securities Litigation Reform Act of 1995 (the "PSLR
Act") with respect to statements that may be deemed to be forward-looking
statements under the PSLR Act. Such forward-looking statements may include, but
are not limited to, the Company and any of its subsidiaries' long-term theatre
strategy. Actual results could differ materially from those indicated by such
forward-looking statements due to a number of factors.
Item 6. Exhibits and Reports on Form 8-K
a) Supplemental schedules specified by the Senior Notes indenture:
Condensed Consolidating Balance Sheet
(unaudited) as of June 30, 1999
Condensed Consolidating Statement of
Income (unaudited) for the six months
ended June 30, 1999
Condensed Consolidating Statement of
Cash Flow (unaudited) for the six months
ended June 30, 1999
b) Reports on Form 8-K
No reports have been filed by Registrant during the
quarter for which this report is filed.
16
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
----------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,716,297 $ 5,212,603 $ - $ 7,928,900
Inventories 3,128,356 934,672 - 4,063,028
Co-op advertising and other receivables (14,788,778) 35,462,259 (235,441) 20,438,040
Tax receivable 5,488,846 - - 5,488,846
Prepaid expenses and other 1,782,631 532,214 - 2,314,845
----------------------------------------------------------------
Total current assets (1,672,648) 42,141,748 (235,441) 40,233,659
THEATRE PROPERTIES AND EQUIPMENT 897,525,951 115,214,210 - 1,012,740,161
Less accumulated depreciation and amortization (152,098,153) (12,214,746) - (164,312,899)
----------------------------------------------------------------
Theatre properties and equipment - net 745,427,798 102,999,464 - 848,427,262
OTHER ASSETS:
Certificates of deposit - 209,275 - 209,275
Investments in and advances to affiliates 111,107,685 2,374,277 (110,265,439) 3,216,523
Goodwill - net 10,676,993 5,799,962 - 16,476,955
Deferred charges and other - net 37,401,042 15,582,186 - 52,983,228
----------------------------------------------------------------
Total other assets 159,185,720 23,965,700 (110,265,439) 72,885,981
----------------------------------------------------------------
TOTAL $902,940,870 $ 169,106,912 $(110,500,880) $ 961,546,902
================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 276,718 $ 1,512,453 $ - 1,789,171
Accounts payable and accrued expenses 76,612,357 12,872,571 - 89,484,928
----------------------------------------------------------------
Total current liabilities 76,889,075 14,385,024 - 91,274,099
LONG-TERM LIABILITIES:
Senior credit agreements 312,728,991 38,058,306 - 350,787,297
Senior subordinated debt 380,258,943 - - 380,258,943
Deferred lease expenses 15,338,461 204,707 - 15,543,168
Deferred gain on sale leaseback 6,626,667 - - 6,626,667
Deferred income taxes 21,147,600 - - 21,147,600
----------------------------------------------------------------
Total long-term liabilities 736,100,662 38,263,013 - 774,363,675
MINORITY INTERESTS IN SUBSIDIARIES 5,647,501 30,622,684 - 36,270,185
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, 234,073 shares issued 49,537,607 10,901,000 (10,901,000) 49,537,607
Additional paid-in-capital 13,790,731 99,599,880 (99,599,880) 13,790,731
Unearned compensation - stock options (3,530,631) - - (3,530,631)
Retained earnings 60,560,955 (5,389,431) (525,000) 54,646,524
Treasury stock, 57,211 Class B shares at cost (24,198,890) - - (24,198,890)
Distributions - (525,000) 525,000 -
Other accumulated comprehensive income (11,856,155) (18,750,258) - (30,606,413)
----------------------------------------------------------------
Total shareholders' equity 84,303,632 85,836,191 (110,500,880) 59,638,943
----------------------------------------------------------------
TOTAL $902,940,870 $ 169,106,912 $(110,500,880) $ 961,546,902
================================================================
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
17
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
-------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 177,049,476 $29,988,071 $ - $207,037,547
Concessions 92,691,358 8,762,487 - 101,453,845
Other 13,402,641 1,508,540 (268,516) 14,642,665
-----------------------------------------------------------------
Total 283,143,475 40,259,098 (268,516) 323,134,057
COSTS AND EXPENSES:
Cost of operations
Film rentals and advertising 95,777,515 14,582,501 - 110,360,016
Concession supplies 14,105,605 2,901,473 - 17,007,078
Salaries and wages 35,877,133 4,733,415 - 40,610,548
Facility leases 36,346,983 6,398,417 - 42,745,400
Utilities and other 41,941,103 5,259,209 (268,516) 46,931,796
-----------------------------------------------------------------
Total 224,048,339 33,875,015 (268,516) 257,654,838
General and administrative expenses 12,747,851 3,753,037 - 16,500,888
Depreciation and amortization 19,179,400 4,781,203 - 23,960,603
-----------------------------------------------------------------
Total 255,975,590 42,409,255 (268,516) 298,116,329
OPERATING INCOME 27,167,885 (2,150,157) - 25,017,728
OTHER INCOME (EXPENSE)
Interest expense (24,693,933) (1,780,289) - (26,474,222)
Amortization of debt issue cost (359,753) (47,917) - (407,670)
Amortization of bond discount (87,250) - - (87,250)
Dividend income 525,000 - (525,000) -
Interest income 747,701 536,168 - 1,283,869
Gain on sale of assets and other (5,136) 5,373 - 237
Foreign currency exchange gain (loss) (299) (81) - (380)
Equity in income of affiliates 45,631 67,495 - 113,126
Minority interests in subsidiaries (154,086) 1,144,896 - 990,810
-----------------------------------------------------------------
Total (23,982,125) (74,355) (525,000) (24,581,480)
-----------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 3,185,760 (2,224,512) (525,000) 436,248
Income taxes (benefit) 1,560 924,744 - 926,304
-----------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF AN ACCOUNTING CHANGE 3,184,200 (3,149,256) (525,000) (490,056)
Cumulative effect of a change in accounting principle
- net of tax benefit (500,857) (2,467,780) - (2,968,637)
-----------------------------------------------------------------
NET INCOME (LOSS) $ 2,683,343 $ (5,617,036) $ (525,000) $ (3,458,693)
=================================================================
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
18
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income (loss) $ 2,683,343 $ (5,617,036) $ (525,000) $ (3,458,693)
Noncash items in net income:
Depreciation 18,846,668 5,125,357 - 23,972,025
Amortization - goodwill and other assets 692,484 (296,236) - 396,248
Amortization of gain on sale leaseback (176,875) - - (176,875)
Deferred lease expenses 877,291 87,130 - 964,421
Amortization of prepaid leases 183,546 211,228 394,774
Deferred income tax expense 5,242,144 (208,886) - 5,033,258
Amortization of debt discount and premium (14,255) - - (14,255)
Amortized compensation - stock options 712,275 - - 712,275
Gain on sale of assets 5,136 (5,373) - (237)
Equity in income of affiliates (45,631) (67,495) - (113,126)
Minority interests in income (loss) of subsidiaries 154,086 (1,144,896) - (990,810)
Cumulative effect of an accounting change 500,857 2,885,350 - 3,386,207
Cash provided by (used for) operating working capital:
Inventories (31,521) (439,802) - (471,323)
Co-op advertising and other receivables (730,601) (7,293,151) - (8,023,752)
Prepaid expenses and other (177,353) (176,278) - (353,631)
Accounts payable and accrued expenses (11,483,953) 6,243,065 - (5,240,888)
Income tax receivable/payable (2,456,204) - - (2,456,204)
----------------------------------------------------------------
Net cash used for operating activities 14,781,437 (697,023) (525,000) 13,559,414
INVESTING ACTIVITIES:
Additions to Theatre properties and equipment (98,991,119) (6,706,658) - (105,697,777)
Sale of Theatre properties and equipment 288,209 359,519 - 647,728
Decrease in certificates of deposit 2,244,854 1,601,967 - 3,846,821
Decrease (increase) in other assets, investments in
and advances to affiliates (15,581,382) 10,146,387 525,000 (4,909,995)
----------------------------------------------------------------
Net cash provided by (used for) investing activities (112,039,438) 5,401,215 525,000 (106,113,223)
FINANCING ACTIVITIES:
Decrease in long-term debt (14,245,775) (676,898) (14,922,673)
Increase in long-term debt 98,013,844 391,340 - 98,405,184
Minority investment in subsidiaries, net (1,119,688) (7,116,267) - (8,235,955)
----------------------------------------------------------------
Net cash provided by (used for) financing activities 82,648,381 (7,401,825) - 75,246,556
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (409,715) - (409,715)
----------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (14,609,620) (3,107,348) - (17,716,968)
CASH AND CASH EQUIVALENTS:
Beginning of period 17,325,917 8,319,951 - 25,645,868
----------------------------------------------------------------
End of period $ 2,716,297 $ 5,212,603 $ - $ 7,928,900
================================================================
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
19
<PAGE>
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 11, 1999
/s/Jeffrey J. Stedman
Jeffrey J. Stedman
Senior Vice President and
Chief Financial Officer
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 7,928,900
<SECURITIES> 0
<RECEIVABLES> 20,438,040
<ALLOWANCES> 0
<INVENTORY> 4,063,028
<CURRENT-ASSETS> 40,233,659
<PP&E> 1,012,740,161
<DEPRECIATION> 164,312,899
<TOTAL-ASSETS> 961,546,902
<CURRENT-LIABILITIES> 91,274,099
<BONDS> 380,258,943
0
0
<COMMON> 49,537,622
<OTHER-SE> 10,101,321
<TOTAL-LIABILITY-AND-EQUITY> 961,546,902
<SALES> 323,134,057
<TOTAL-REVENUES> 323,134,057
<CGS> 17,007,078
<TOTAL-COSTS> 257,654,838
<OTHER-EXPENSES> 40,461,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,474,222
<INCOME-PRETAX> 436,248
<INCOME-TAX> 926,304
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 2,968,637
<NET-INCOME> (3,458,693)
<EPS-BASIC> (19.39)
<EPS-DILUTED> (19.39)
</TABLE>
