<PAGE>
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 September 30, 2000
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
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 November 7, 2000, 1,500 shares of Class A Common Stock and 185,735
shares of Class B Common Stock (including options to acquire 8,358 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 September 30, 2000 (unaudited)
and December 31, 1999 3
Condensed Consolidated Statements of Operations
(unaudited) for the three and nine month
periods ended September 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash
Flows (unaudited) for the nine month
periods ended September 30, 2000 and 1999 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 18
PART II OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 24
2
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2000 1999
(Unaudited)
------------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,904,318 $ 8,872,157
Inventories 3,237,913 4,734,520
Co-op advertising and other receivables 7,832,123 12,067,471
Income tax receivable 151,230 2,036,146
Prepaid expenses and other 2,863,503 7,508,722
------------------------------------
Total current assets 20,989,087 35,219,016
THEATRE PROPERTIES AND EQUIPMENT 1,176,699,543 1,107,786,308
Less accumulated depreciation and amortization (224,731,425) (173,827,249)
------------------------------------
Theatre properties and equipment - net 951,968,118 933,959,059
OTHER ASSETS:
Investments in and advances to affiliates 9,618,193 2,289,553
Goodwill - net 17,514,510 18,619,715
Deferred charges and other - net 44,064,895 51,773,896
------------------------------------
Total other assets 71,197,598 72,683,164
------------------------------------
TOTAL $1,044,154,803 $1,041,861,239
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 15,135,852 $ 21,420,579
Accounts payable and accrued expenses 90,876,555 128,611,615
------------------------------------
Total current liabilities 106,012,407 150,032,194
LONG-TERM LIABILITIES:
Senior credit agreements 412,363,989 376,747,810
Senior subordinated notes 380,223,309 380,244,689
Deferred lease expenses 19,403,636 16,188,800
Deferred gain on sale leaseback 5,195,941 5,470,381
Deferred income taxes 12,096,358 18,088,004
Deferred revenues 20,446,813 1,426,472
------------------------------------
Total long-term liabilities 849,730,046 798,166,156
MINORITY INTERESTS IN SUBSIDIARIES 30,377,616 29,812,343
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, 234,622 and 234,073 shares issued, respectively 49,538,156 49,537,607
Additional paid-in-capital 13,641,431 13,733,221
Unearned compensation - stock options (2,275,808) (3,131,680)
Retained earnings 54,053,478 59,140,652
Treasury stock, 57,245 and 57,211 Class B shares at cost, respectively (24,232,890) (24,198,890)
Accumulated other comprehensive loss (32,689,648) (31,230,379)
------------------------------------
Total shareholders' equity 58,034,734 63,850,546
------------------------------------
TOTAL $1,044,154,803 $1,041,861,239
====================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 2000 1999
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 143,216,739 $ 136,571,435 $ 379,117,086 $ 343,608,982
Concessions 65,491,579 65,430,836 174,371,953 166,884,681
Other 11,371,605 8,551,785 29,435,165 23,194,450
--------------------------------- ---------------------------------
Total 220,079,923 210,554,056 582,924,204 533,688,113
COSTS AND EXPENSES:
Cost of operations:
Film rentals and advertising 76,481,575 73,130,909 199,560,346 183,490,925
Concession supplies 11,778,619 11,848,441 31,439,356 28,855,519
Salaries and wages 22,488,108 21,965,254 65,065,698 62,575,802
Facility leases 28,307,593 22,257,551 80,999,825 65,002,951
Utilities and other 26,393,697 27,202,248 76,990,954 74,134,044
--------------------------------- ---------------------------------
Total 165,449,592 156,404,403 454,056,179 414,059,241
General and administrative expenses 8,673,443 8,378,683 28,076,731 24,879,571
Depreciation and amortization 17,506,052 13,955,873 47,448,462 37,916,476
Asset impairment loss 231,980 1,550,000 1,846,980 1,550,000
(Gain) loss on sale of assets 2,454,493 891,712 2,569,302 891,475
--------------------------------- ---------------------------------
Total 194,315,560 181,180,671 533,997,654 479,296,763
OPERATING INCOME 25,764,363 29,373,385 48,926,550 54,391,350
OTHER INCOME (EXPENSE):
Interest expense (18,675,244) (15,289,827) (54,020,995) (41,764,049)
Amortization of debt issue cost (201,869) (225,175) (605,607) (632,845)
Amortization of bond discount (43,625) (43,625) (130,875) (130,875)
Interest income 363,708 550,260 845,302 1,834,129
Foreign currency exchange gain (loss) 101,986 121,730 80,273 121,350
Equity in income (loss) of affiliates 33,240 (35,771) 20,346 77,355
Minority interests in (income) loss of subsidiaries (609,684) (890,448) (766,611) 100,362
--------------------------------- ---------------------------------
Total (19,031,488) (15,812,856) (54,578,167) (40,394,573)
--------------------------------- ---------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF AN ACCOUNTING CHANGE 6,732,875 13,560,529 (5,651,617) 13,996,777
Income taxes (benefit) 2,407,950 5,253,301 (564,443) 6,179,605
--------------------------------- ---------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
AN ACCOUNTING CHANGE 4,324,925 8,307,228 (5,087,174) 7,817,172
Cumulative effect of a change in an accounting principle
- net of tax benefit of $417,570 - - - (2,968,637)
--------------------------------- ---------------------------------
NET INCOME (LOSS) $ 4,324,925 $ 8,307,228 $ (5,087,174) $ 4,848,535
================================= =================================
EARNINGS PER SHARE:
Basic:
Income (loss) before cumulative effect of an
accounting change $ 24.18 $ 46.58 $ (28.47) $ 43.83
Cumulative effect of an accounting change - - - (16.65)
--------------------------------- ---------------------------------
Net Income (loss) $ 24.18 $ 46.58 $ (28.47) $ 27.18
================================= =================================
Diluted:
Income (loss) before cumulative effect of an
accounting change $ 22.62 $ 43.32 $ (28.47) $ 40.76
Cumulative effect of an accounting change - - - (15.48)
--------------------------------- ---------------------------------
Net Income (loss) $ 22.62 $ 43.32 $ (28.47) $ 25.28
================================= =================================
</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)
NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (5,087,174) $ 4,848,535
Noncash items in net income:
Depreciation 46,049,130 37,145,230
Amortization - goodwill and other assets 1,399,332 1,404,091
Loss on impairment of assets 1,846,980 1,550,000
Amortization of gain on sale leaseback (274,440) (164,190)
Deferred lease expenses 3,214,836 1,207,541
Amortization of prepaid leases 1,913,045 758,756
Deferred income tax expense (5,991,646) 6,801,594
Amortization of debt discount and premium (21,380) (21,382)
Amortized compensation - stock options 728,074 887,662
Compensation expense related to repurchase of stock options 103,584 -
(Gain) loss on sale of assets 2,569,302 891,475
Equity in (income) loss of affiliates (20,346) (77,355)
Minority interests in income (loss) of subsidiaries 766,611 (100,362)
Cumulative effect of an accounting change - 3,386,207
Cash provided by (used for) operating working capital:
Inventories 1,496,607 (628,839)
Co-op advertising and other receivables 4,235,348 (6,692,976)
Prepaid expenses and other 4,645,219 (1,789,883)
Accounts payable and accrued expenses (37,735,060) 11,453,992
Income tax receivable/payable 1,884,916 (713,314)
------------------------------------
Net cash provided by (used for) operating activities 21,722,938 60,146,782
INVESTING ACTIVITIES:
Additions to Theatre properties and equipment (88,802,666) (169,383,765)
Sale of Theatre properties and equipment 18,962,925 1,472,410
Decrease in certificates of deposit - 4,056,096
Decrease (increase) in investments in and advances to affiliates (7,308,294) 9,394,870
Decrease (increase) in deferred charges and other 5,501,829 (18,727,756)
------------------------------------
Net cash provided by (used for) investing activities (71,646,206) (173,188,145)
FINANCING ACTIVITIES:
Decrease in long-term debt (72,775,354) (19,385,516)
Increase in long-term debt 102,106,806 136,576,424
Increase in deferred revenues 19,020,341 3,900,963
Purchase of treasury stock (34,000) -
Repurchase of stock options (67,452) -
Common stock issued for options exercised 425 -
Minority investment in subsidiaries, net (201,338) (21,103,840)
------------------------------------
Net cash provided by (used for) financing activities 48,049,428 99,988,031
EFFECT OF EXCHANGE RATE CHANGES ON CASH (93,999) (111,651)
------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,967,839) (13,164,983)
CASH AND CASH EQUIVALENTS:
Beginning of period 8,872,157 25,645,868
------------------------------------
End of period $ 6,904,318 $ 12,480,885
====================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company and Basis of Presentation
Cinemark USA, Inc. and its subsidiaries (the Company), is a world leader
in the motion picture exhibition industry that owns or leases and operates
motion picture theatres in 32 states, Canada, Mexico, Argentina, Brazil, Chile,
Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica and Colombia. The
Company operates 2,870 screens in 265 theatres and manages an additional three
theatres (23 screens) at September 30, 2000.
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. The consolidated
financial statements include the accounts of Cinemark USA, Inc. and its
subsidiaries. Majority-owned subsidiaries are consolidated while those
subsidiaries of which the Company owns between 20% and 50% are accounted for as
affiliates under the equity method. The results of these subsidiaries and
affiliates are included in the financial statements effective with their
formation or from their dates of acquisition. Significant intercompany balances
and transactions are eliminated in the consolidation. Certain reclassifications
have been made to September 30, 1999 and December 31, 1999 amounts to conform
with the September 30, 2000 presentation.
These financial statements should be read in conjunction with the audited
annual financial statements and the notes thereto for the year ended December
31, 1999, included in the Annual Report filed on Form 10-K by the Company under
the Securities Exchange Act of 1934 on March 30, 2000. Operating results for the
nine months ended September 30, 2000 are not necessarily indicative of the
results to be achieved for the full year.
2. Earnings Per Share
Earnings per share are computed using the weighted average number of
shares of Class A and Class B common stock outstanding during each period. The
following table sets forth the computation of basic and diluted earnings per
share.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
----------------------- ------------------------
<S> <C> <C> <C> <C>
Net income (loss) (in thousands) $4,325 $8,307 $(5,087) $4,848
====== ====== ======== ======
Basic:
Weighted average common shares outstanding 178,877 178,362 178,716 178,362
======= ======= ======= =======
Earnings (loss) per common share $24.18 $46.58 $(28.47) $27.18
====== ====== ======== ======
Diluted:
Weighted average common shares outstanding 178,877 178,362 178,716 178,362
Common equivalent shares for stock options 12,318 13,409 - 13,409
------- ------- ------- -------
Weighted average shares outstanding 191,195 191,771 178,716 191,771
======= ======= ======= =======
Earnings (loss) per common and common equivalent share $22.62 $43.32 $(28.47) $25.28
====== ====== ======== ======
</TABLE>
6
<PAGE>
Basic net income (loss) per share is computed by dividing the net income
(loss) by the weighted average number of shares of Common stock of all classes
outstanding during the period. Diluted net income (loss) per share is computed
by dividing the net income (loss) by the weighted average number of shares of
Common stock and potential Common stock outstanding and options to purchase
Common stock using the treasury stock method. The dilutive effect of the options
to purchase Common stock are excluded from the computation of diluted net income
(loss) per share if their effect is antidilutive.
3. FAS 130 - Comprehensive Income (Loss)
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 (loss) and its components in the financial
statements. The following components are reflected in the Company's
comprehensive loss:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------------------------ ---------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $4,324,925 $8,307,228 $(5,087,174) $ 4,848,535
Foreign currency translation adjustment 1,236,478 (1,701,936) (1,459,269) (15,111,651)
------------------------------ ---------------------------------
Comprehensive income (loss) $5,561,403 $6,605,292 $(6,546,443) $(10,263,116)
============================== =================================
</TABLE>
4. Foreign Currency Translation
The accumulated other comprehensive loss in shareholders' equity of
$32,689,648 and $31,230,379 at September 30, 2000 and December 31, 1999,
respectively, primarily relates to the unrealized adjustments from translating
the financial statements of Cinemark Brasil, S.A., Cinemark de Mexico, S.A. de
C.V. and Cinemark Chile, S.A. into U.S. dollars.
In 1999 and 2000, the Company was required to utilize the U.S. dollar as
the functional currency of Cinemark del Ecuador S.A. for U.S. reporting purposes
due to the highly inflationary economy of Ecuador. Thus, devaluations in the
sucre during 1999 and 2000 that affected the Company's investment were charged
to foreign currency exchange gain (loss) rather than to the accumulated other
comprehensive loss account as a reduction to shareholders' equity. In September
2000, the country of Ecuador officially switched to the U.S. dollar as the
functional currency effectively eliminating any exchange gain (loss) in the
sucre on a going forward basis. At September 30, 2000, the total assets of
Cinemark del Ecuador S.A. were approximately $4 million.
5. (Gain) Loss on Sale of Assets
In 1999, the Company adopted Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," requiring that gains and losses
on sale of assets be recorded as a component of operating income. The Company's
practice had been to classify these gains and losses as other income and
expense. As a result of the new accounting pronouncement, the Company has
reclassified the (gain) loss on sale of assets of $891,712 and $891,475 from
other income and expense to be included as a component of operating income for
the three and nine month periods ended September 30, 1999, respectively. The
comparable (gain) loss on sale of assets amount in the three and nine month
periods ended September 30, 2000 is $2,454,493 and $2,569,302, respectively.
7
<PAGE>
6. 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 and Canada $152,966
Mexico -
Brazil 552,488
Other Foreign Countries 2,263,183
----------
$2,968,637
==========
7. Supplemental Cash Flow Information
The following is provided as supplemental information to the consolidated
statements of cash flows:
Nine Months Ended September 30,
2000 1999
----------- -----------
Cash paid for interest $61,298,515 $53,093,218
Cash paid for income taxes 2,859,952 2,506,399
8. 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, Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru,
Honduras, El Salvador, Nicaragua, Costa Rica and Colombia. Revenues and
long-lived assets in the United States and Canada, Mexico, Brazil and other
foreign countries for the nine months ended September 30 are as follows:
<TABLE>
<CAPTION>
United States Other Foreign
and Canada Mexico Brazil Countries Eliminations Consolidated
--------------- --------------- --------------- --------------- --------------- ---------------
2000
----
<S> <C> <C> <C> <C> <C> <C>
Total revenues $436,658,403 $47,165,348 $46,974,660 $52,831,844 $(706,051) $582,924,204
=============== =============== =============== =============== =============== ===============
Long-lived assets,
net 742,573,052 67,104,671 69,477,639 72,812,756 - 951,968,118
=============== =============== =============== =============== =============== ===============
1999
Total revenues $416,200,279 $41,860,493 $29,081,211 $47,038,976 $(492,846) $533,688,113
=============== =============== =============== =============== =============== ===============
Long-lived assets,
net 721,399,017 58,760,210 50,162,857 61,887,917 - 892,210,001
=============== =============== =============== =============== =============== ===============
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Overview
The following is an analysis of the financial condition and results of
operations of the Company. This analysis should be read in conjunction with the
Company's condensed consolidated financial statements, including the notes
thereto, appearing elsewhere in this report.
Results of Operations
The Company's revenues are generated primarily from box office receipts
and concession sales. The Company's revenues are affected by changes in
attendance and average admission and concession revenues per patron. Attendance
is primarily affected by the commercial appeal of the films released during the
period or year reported. Since the Company's formation, attendance has grown
principally from the development and acquisition of theatres. The Company has
generally experienced increases in average admission revenues per patron from
ticket price increases as well as the development of theatres in markets that
can support higher ticket prices. Additional revenues related to theatre
operations are generated by screen advertising, pay phones, ATM charges and
electronic video games installed in video arcades located in some of the
Company's theatres.
Film rentals and advertising, concession supplies and salaries and wages
vary directly with changes in revenues. These expenses have historically
represented approximately 65% of all theatre operating expenses and
approximately 50% of revenues. Film rental costs are based on a percentage of
admissions revenues as determined by film license agreements. Advertising cost
is primarily fixed at the theatre level as daily movie directories placed in
newspapers represent the largest component of advertising costs. The monthly
cost of these ads is based on the size of the directory. However, advertising
costs have remained relatively constant when expressed as a percentage of
revenues as screen growth results in the addition of new or larger directory ads
which help drive revenues. The Company expenses concession supplies purchased as
they are sold. Although salaries and wages include a fixed component of cost
(i.e., the minimum staffing cost to operate a theatre facility during non-peak
periods), salaries and wages move in relation to revenues as theatre staffing is
adjusted to handle attendance volume.
Conversely, facility lease expense is primarily a fixed cost at the
theatre level as the Company's facility leases generally require a fixed monthly
minimum rent payment. Facility lease expense as a percentage of revenues is also
affected by the number of leased versus fee owned facilities. As a result of two
sale leaseback transactions which occurred in 1998, the addition of a larger
proportion of leased theatre properties has resulted in an increase in facility
lease expense as a percentage of revenues in 1999 and 2000 as compared to
earlier years.
Utilities and other costs include certain costs that are fixed such as
property taxes, certain costs which are variable such as liability insurance,
and certain costs that possess both fixed and variable components such as
utilities, repairs and maintenance and security services.
9
<PAGE>
The following table sets forth for the fiscal periods indicated the percentage
of total revenues represented by certain items reflected in the Company's
condensed consolidated statements of operations.
<TABLE>
<CAPTION>
% of Revenues % of Revenues
-------------------- --------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues:
Admissions 65.1 64.9 65.0 64.4
Concessions 29.8 31.1 29.9 31.3
Other 5.1 4.0 5.1 4.3
------- ------- ------- -------
Total revenues 100.0 100.0 100.0 100.0
Cost of operations 75.2 74.3 77.9 77.6
General and administrative expenses 3.9 4.0 4.8 4.7
Depreciation and amortization 8.0 6.6 8.2 7.1
Asset impairment loss 0.1 0.7 0.3 0.3
(Gain) loss on sale of assets 1.1 0.4 0.4 0.1
------- ------- ------- -------
Total operating expenses 88.3 86.0 91.6 89.8
------- ------- ------- -------
Operating income 11.7 14.0 8.4 10.2
Interest expense (8.5) (7.3) (9.3) (7.8)
Other income (expense) (0.1) (0.3) (0.1) 0.2
------- ------- ------- -------
Income (loss) before income taxes and
cumulative effect of an accounting change 3.1 6.4 (1.0) 2.6
Income taxes (benefit) 1.1 2.5 (0.1) 1.1
------- ------- ------- -------
Income (loss) before cumulative effect
of an accounting change 2.0 3.9 (0.9) 1.5
Cumulative effect of an accounting change - - - (0.6)
------- ------- ------- -------
Net income (loss) 2.0 3.9 (0.9) 0.9
======= ======= ======= =======
</TABLE>
Third quarter ended September 30, 2000 and 1999.
Revenues
Revenues for the third quarter ended September 30, 2000 increased to
$220.1 million from $210.6 million for the third quarter ended September 30,
1999, a 4.5% increase. The increase in revenues for the third quarter is
primarily attributable to a 3.2% increase in admissions and concession revenues
per patron in the third quarter of 2000 as compared to the third quarter of 1999
and a 33.0% increase in other revenues (primarily screen advertising) in the
third quarter of 2000 as compared to the third quarter of 1999. Attendance for
the third quarter of 2000 was flat in comparison with the third quarter of 1999.
10
<PAGE>
Cost of Operations
Cost of operations, as a percentage of revenues, increased to 75.2% in
the third quarter of 2000 from 74.3% in the third quarter of 1999. The increase
as a percentage of revenues resulted from an increase in facility lease expense
as a percentage of revenues to 12.9% in 2000 from 10.6% in 1999, partially
offset by a decrease in salaries and wages as a percentage of revenues to 10.2%
in 2000 from 10.4% in 1999 and a decrease in utilities and other expenses as a
percentage of revenues to 12.0% in 2000 from 12.9% in 1999.
General and Administrative Expenses
General and administrative expenses as a percentage of revenues for the
third quarter ended September 30, 2000 of 3.9% were relatively consistent with
the third quarter ended September 30, 1999.
The absolute level of general and administrative expenses increased to
$8.7 million in the third quarter of 2000 from $8.4 million in the third quarter
of 1999. The increase in general and administrative expenses is attributed to
costs associated with the worldwide growth (net addition of 346 screens) of the
Company since the third quarter ended September 30, 1999 and the additional rent
expense related to the Company's corporate office that was sold and leased back
in December 1999.
Depreciation and Amortization
Depreciation and amortization increased 25.0% to $17.5 million in the
third quarter of 2000 from $14.0 million in the third quarter of 1999. The
increase is a result of the net addition of $111 million in theatre property and
equipment since the third quarter of 1999, a 10.4% increase. The difference in
the percentage increase in depreciation and amortization compared to the
increase in theatre property and equipment is a result of the timing of when the
additions were placed in service during the period.
Asset Impairment Loss
The Company recorded asset impairment charges of $0.2 million and $1.6
million in the third quarter of 2000 and 1999, respectively, pursuant to
Statement of Financial Standards No. 121 (FASB 121). In accordance with FASB
121, the Company wrote down the assets of certain theatres to their fair value.
Interest Expense
Interest costs incurred, including amortization of debt issue cost and
bond discount, increased 15.2% during the third quarter of 2000 to $18.9 million
(including capitalized interest to properties under construction) from $16.4
million (including capitalized interest) in the third quarter of 1999. The
increase in interest costs incurred for the third quarter of 2000 was due
principally to an increase in average debt outstanding resulting from borrowings
under the Company's Credit Facility and increased interest rates on the
Company's variable rate debt.
Income Taxes
Income tax expense of $2.4 million was recorded for the third quarter of
2000 as compared to income tax expense of $5.3 million in the third quarter of
1999. The Company's effective rate for the third quarter of 2000 was 35.8% as
compared to 38.7% for the third quarter of 1999.
11
<PAGE>
Nine month period ended September 30, 2000 and 1999.
Revenues
The Company generated revenues for the nine month period ended September
30, 2000 (the "2000 period") of $582.9 million compared to $533.7 million for
the nine months ended September 30, 1999 (the "1999 period"), a 9.2% increase.
The increase in revenues for the 2000 period is primarily attributable to a 4.7%
increase in attendance for the 2000 period versus the 1999 period as a result of
the net addition of 346 screens since the third quarter ended September 30,
1999, a 3.5% increase in admissions and concession revenues per patron in the
2000 period as compared to the 1999 period and a 26.9% increase in other
revenues (primarily screen advertising) for the 2000 period as compared to the
1999 period.
Cost of Operations
Cost of operations, as a percentage of revenues, increased to 77.9% in
the 2000 period from 77.6% for the same period in 1999. The increase as a
percentage of revenues resulted from an increase in facility lease expense as a
percentage of revenues to 13.9% in the 2000 period from 12.2% in the 1999 period
and an increase in concession expense as a percentage of concession revenues to
18.0% in the 2000 period from 17.3% in the 1999 period as a result of the
greater number of international theatres in operation, partially offset by a
decrease in film rental and advertising costs as a percentage of admissions
revenues to 52.6% in the 2000 period from 53.4% in the 1999 period as a result
of lower film terms, a decrease in salaries and wages as a percentage of
revenues to 11.2% in 2000 from 11.7% in 1999 and a decrease in utilities and
other expenses as a percentage of revenues to 13.2% in 2000 from 13.9% in 1999.
General and Administrative Expenses
General and administrative expenses as a percentage of revenues for the
2000 period of 4.8% were relatively consistent with the 1999 period.
The absolute level of general and administrative expenses increased to
$28.1 million in the 2000 period from $24.9 million in the 1999 period. The
increase in general and administrative expenses is attributed to costs
associated with the worldwide growth (net addition of 346 screens) of the
Company between the 1999 period end and the 2000 period end and the additional
rent expense related to the Company's corporate office that was sold and leased
back in December 1999.
Depreciation and Amortization
For the 2000 period, depreciation and amortization increased 25.1% to
$47.4 million from $37.9 million in the 1999 period. The increase is a result of
the net addition of $111 million in theatre property and equipment since the
third quarter of 1999, a 10.4% increase. The difference in the percentage
increase in depreciation and amortization compared to the increase in theatre
property and equipment is a result of the timing of when the additions were
placed in service during the period.
Asset Impairment Loss
The Company has recorded asset impairment charges of $1.8 million and
$1.6 million in the 2000 period and 1999 period, respectively, pursuant to
Statement of Financial Standards No. 121 (FASB 121). In accordance with FASB
121, the Company wrote down the assets of certain theatres to their fair value.
12
<PAGE>
Interest Expense
Interest costs incurred in the 2000 period, including amortization of
debt issue cost and bond discount, increased 20.2% to $55.3 million (including
capitalized interest to properties under construction) from $46.0 million
(including capitalized interest) in the 1999 period. The increase in interest
costs incurred for the 2000 period was due principally to an increase in average
debt outstanding resulting from borrowings under the Company's Credit Facility
and increased interest rates on the Company's variable rate debt.
Income Taxes
An income tax benefit of $0.6 million was recorded for the 2000 period
as compared to income tax expense of $6.2 million in the 1999 period. The
Company's effective tax rate for the 2000 period was 10.0% as compared to 44.2%
for the 1999 period. The decrease in the effective tax rate from the 1999 period
to the 2000 period is a result of the decrease in the percentage of foreign
disallowed losses to total worldwide income (loss).
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 87% of the screens operated by the Company
having been built since January 1, 1990. The Company's investing activities have
been principally in connection with new theatre openings and acquisitions of
existing theatres and theatre circuits. As of November 7, 2000, the Company has
opened 6 theatres (102 screens) during 2000 and has 2 theatres (29 screens)
under construction and scheduled to open in the United States by the end of
2000. The Company is presently committed to opening an additional 41 screens in
the U.S. in 2001 and 2002 combined. As of November 7, 2000, the Company
estimates that its remaining capital expenditures for the development of these
172 screens in the U.S. in 2000, 2001 and 2002 will be approximately $30
million. Actual expenditures for theatre development and acquisitions during
2000, 2001 and 2002 are subject to change based upon the availability of
attractive opportunities for expansion of the Company's theatre circuit.
Additionally, the Company and/or its affiliates may from time to time, subject
to compliance with the Company's debt instruments, purchase on the open market
the Company's debt securities depending upon the availability and prices of such
securities. The Company plans to fund capital expenditures for its continued
development and/or the purchase of debt securities, if any, from cash flow from
operations, borrowings under the Credit Facility, proceeds from sale leaseback
transactions and/or sales of excess real estate. As of November 7, 2000, the
Company owned approximately $300 million of real estate and improvements
resulting from the development of megaplex facilities over the last several
years.
In August 1996, the Company issued $200 million principal amount of
Series B Senior Subordinated Notes due 2008 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. 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.
13
<PAGE>
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. The net proceeds to the Company from the issuance of the Series D Notes
(net of fees and expenses) were approximately $77.1 million.
In January 1998, the Company issued $105 million principal amount of Series
B Senior Subordinated Notes due 2008 which bear interest at a rate of 8 1/2% 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 99.0% of the principal face
amount. The net proceeds to the Company from the issuance of the Series B Notes
(net of discount, fees and expenses) were approximately $103.8 million.
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 2.5%, 3.75%, 5.0%,
6.25% and 6.25% of the aggregate $350 million in calendar year 2001, 2002, 2003,
2004 and 2005, respectively. The Company is required to prepay all loans
outstanding under the Credit Facility 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 maintain certain
financial ratios; restricts the payment of dividends, payment of subordinated
debt prior to maturity and issuance of preferred stock and other indebtedness;
and contains other restrictive covenants typical for agreements of this type.
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 November 7, 2000,
the Company has outstanding $337.5 million under the Credit Facility. The
effective interest rate on such borrowings as of November 7, 2000 is 8.8% per
annum.
In December 1999, the Company completed a sale leaseback transaction
pursuant to which the Company sold the land, building and site improvements of
its corporate office property to a special purpose entity for an aggregate
purchase price equal to approximately $20.3 million. Simultaneously with the
sale, the Company entered into an operating lease for approximately 60% of the
property for a base term equal to 10 years at a fixed monthly rental payment of
$114,000 or $1.4 million annually for the first seven years and $123,000 or $1.5
million annually for the final three years.
14
<PAGE>
In 1992, the Company formed Cinemark International to develop and
acquire theatres in international markets. As of November 7, 2000, the Company
and Cinemark International, through its affiliates, operated 77 theatres (682
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 November 7, 2000 and the
number of theatres and screens under construction in 2000.
<TABLE>
<CAPTION>
Year of Operating Planned Openings Through 2000
Country Formation Ownership % Theatres/Screens Theatres/Screens
---------------- ----------- ------------- --------------------------- -------------------------------
<S> <C> <C> <C> <C>
Mexico 1992 95% 22 theatres (217 screens) 2 theatres (11 screens)
Chile 1992 98% 12 theatres (88 screens)
Argentina 1995 100% 8 theatres (69 screens) 1 theatre (10 screens)
Brazil 1996 60% 23 theatres (216 screens) 2 theatres (19 screens)
Ecuador 1996 60% 2 theatres (16 screens)
Peru 1996 100% 2 theatres (21 screens)
Central America 1997 50% 7 theatres (45 screens)
Colombia 1998 51% 1 theatre (10 screens) 1 theatre (6 screens)
United Kingdom 1998 100% N/A
Taiwan 1998 51% N/A
Germany 1999 100% N/A
Total 77 theatres (682 screens) 6 theatres (46 screens)
</TABLE>
The Company and Cinemark International, through its affiliates, plans to
invest up to an additional $75 million in international ventures, principally in
Latin America, over the next three years. The Company anticipates that
investments in excess of Cinemark International and its affiliates available
cash will be funded by the Company, its joint venture partners or other
debt/equity financing to be provided by third parties directly to the Company,
Cinemark International or its affiliates as appropriate.
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 proceeds of which were
used to purchase fixed rate notes issued by Cinemark Brasil S.A. bearing
interest at 13.25%. 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 November 7, 2000, Cinemark Investments Corporation has
outstanding $20 million under the Cinemark Investments Credit Agreement. The
effective interest rate on such borrowings as of November 7, 2000 is 9.2% 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. Construction on its first theatre has begun and Cinemark Theatres U.K.
Ltd. anticipates opening the theatre (10 screens) in 2001.
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 50.1% owned by Cinemark
International and 49.9% owned by BES Engineering Corporation, successor to Core
Pacific Ltd. Construction on its first theatre has begun and Cinemark-Core
Pacific Ltd. anticipates opening the theatre (13 screens) in 2001.
15
<PAGE>
In November 1998, Cinemark Mexico executed a credit agreement with Bank
of America National Trust and Savings Association (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. In
September 2000, the Cinemark Mexico Credit Agreement was amended. The amended
Cinemark Mexico Credit Agreement requires the aggregate $30 million commitment
be reduced each calendar quarter by 1.67%, 1.67%, 5.0%, 5.0%, 5.0% and 5.0%
beginning in the third calendar quarter 2001 until the amended Cinemark Mexico
Credit Agreement matures in January 2003. As of November 7, 2000, Cinemark
Mexico has outstanding $30 million under the Cinemark Mexico Credit Agreement.
The effective interest rate on such borrowings as of November 7, 2000 is 9.7%
per annum.
Cinemark Chile, S.A. became a consolidated subsidiary of the company
effective January 1, 1999. Prior to that date, Cinemark Chile, S.A. had executed
four senior note payable agreements with a local bank for the U.S. dollar
equivalent of $6.0 million, $3.0 million, $4.5 million and $3.5 million in
December 1997, July 1998, November 1998 and December 1998, respectively. These
notes were each in Chilean pesos, adjusted for inflation, at the respective
borrowing dates. Interest is assessed for three notes at the 90-day TAB rate
(Chile's Central Bank interbank rate) plus 1.5% per annum, adjusted for
inflation, and for the other note (December 1998) at the 180-day TAB rate plus
1.5% per annum, adjusted for inflation, and is paid quarterly for three of the
notes and semi-annually for the December 1998 note. The term on all four notes
is five years with a two year grace period on principal. All four notes are
directly or indirectly guaranteed by Cinemark International. At September 30,
2000, $15.9 million had been borrowed and remained outstanding on these four
notes. The effective interest rates on the four notes are approximately 6.9% per
annum.
In September 1999, Cinemark International, through its wholly owned
subsidiary Cinemark Germany GmbH, executed a lease agreement for a movie theatre
in Herne, Germany. The landlord for the project in Herne, Germany has initiated
insolvency proceedings in Berlin. The Company is unable to determine at this
time whether the project will be completed. The Company has filed claims against
the landlord in the bankruptcy proceedings.
In September 1999, Cinemark International acquired all of the shares of
its Argentine joint venture partner, Prodecine S.A., which held the remaining
50% of the shares of Cinemark Argentina S.A. Cinemark International paid $2.8
million in cash and delivered the following promissory notes bearing interest at
the rate of 10% per annum: (a) totaling US$2.5 million due January 2000, (b)
totaling US$2.5 million due April 2000, (c) totaling A$2.5 million pesos due
July 2000, (d) totaling A$3.5 million pesos due October 2000. The 100% interests
in Prodecine S.A., Cinemark Investments Argentina, S.A. and Cinemark Argentina,
S.A. held by Cinemark International were transferred to one of the Company's
subsidiaries in December 1999. At September 30, 2000 the promissory notes for
A$3.5 million pesos due October 20, 2000 plus accrued interest of A$0.4 million
remained outstanding.
16
<PAGE>
New Accounting Pronouncements
During fiscal 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for
Derivative Instruments and Hedging Activities. The statement requires companies
to recognize all derivatives as either assets or liabilities, with the
instruments measured at fair value. The accounting for changes in fair value of
a derivative depends on the intended use of the derivative and the resulting
designation. The statement is effective for all fiscal years beginning after
June 15, 2000. The statement will become effective for the Company in fiscal
year 2001. Management is currently assessing the impact of this statement on the
consolidated financial statements.
Seasonality
The Company's revenues have historically been seasonal, coinciding with
the timing of releases of motion pictures by the major distributors. Generally,
the most successful motion pictures have been released during the summer
extending from Memorial Day to Labor Day and during the holiday season extending
from Thanksgiving through year-end. The unexpected emergence of a hit film
during other periods can alter this seasonality trend. The timing of such film
releases can have a significant effect on the Company's results of operations,
and the results of one quarter are not necessarily indicative of results for the
next quarter or for the same period in the following year.
Other Issues
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.
17
<PAGE>
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 September 30, 2000.
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 such variable rate credit facilities.
At September 30, 2000, there was an aggregate of approximately $423 million of
variable rate debt outstanding under these facilities. The Company has no
interest rate swaps or other hedging facilities relating to these credit
facilities. These facilities represent approximately 52% of the Company's
outstanding long-term debt. Changes in interest rates do not have a direct
impact on interest expense relating to the remaining fixed rate debt facilities.
The table below provides information about the Company's fixed rate and
variable rate long-term debt agreements:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 2000 December 31, 1999 December 31, 1999
(in millions) Carrying Amount Fair Market Value Carrying Amount Fair Market Value
------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Long-term debt:
Fixed rate $385 $408 $392 $439
==== ==== ==== ====
Average interest rate 9.3% 9.3%
==== ====
Variable rate $423 $424 $386 $394
==== ==== ==== ====
Average interest rate 9.0% 8.2%
==== ====
Long-term debt $808 $832 $778 $833
==== ==== ==== ====
</TABLE>
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 gains or losses
or foreign currency translation adjustments relating to its international
subsidiaries depending on the inflationary environment of the country in which
the Company operates.
18
<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 (the
"ADA") relating to the accessibility of certain theatre seating to patrons using
wheelchairs. In August 1998, the federal district judge presiding over a case in
El Paso, TX (Lara, et al versus Cinemark USA, Inc.) granted plaintiffs motion
for summary judgement ruling the Company's stadium theatre design is in
violation of the ADA. The Company appealed this ruling to the Fifth Circuit
Court of Appeals. In April 2000, the Fifth Circuit Court of Appeals reversed the
ruling of the federal district judge and rendered judgement in favor of the
Company holding that the Company's theatre subject to the Lara lawsuit complied
with the ADA. As a result of the Lara decision by the Fifth Circuit Court of
Appeals, one case in Houston, TX (Drey, et al versus Cinemark USA, Inc.) has
been dismissed with prejudice. The Company is now seeking dismissals of similar
cases pending in Texas. Although the Company cannot predict the final resolution
of this case 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, 1999.
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
The only matter submitted to a vote of security holders during the first
nine months of 2000 was the unanimous re-election of the existing slate of
Company directors on August 16, 2000. There have not been any other matters
submitted to a vote of security holders during the first nine months of 2000
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 theater
strategy. Actual results could differ materially from those indicated by such
forward-looking statements due to a number of factors.
19
<PAGE>
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 September 30, 2000
Condensed Consolidating Statement of
Operations (unaudited) for the nine months
ended September 30, 2000
Condensed Consolidating Statement of
Cash Flow (unaudited) for the nine months
ended September 30, 2000
b) Reports on Form 8-K
No reports have been filed by Registrant during the
quarter for which this report is filed.
20
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2000
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 256,609 $ 6,647,709 $ - $ 6,904,318
Inventories 2,763,275 474,638 - 3,237,913
Co-op advertising and other receivables (7,523,731) 15,794,648 (438,794) 7,832,123
Tax receivable (101,171) 252,401 - 151,230
Prepaid expenses and other 2,470,848 392,655 - 2,863,503
--------------------------------------------------------------------
Total current assets (2,134,170) 23,562,051 (438,794) 20,989,087
THEATRE PROPERTIES AND EQUIPMENT 1,044,159,445 132,540,098 - 1,176,699,543
Less accumulated depreciation and amortization (200,314,050) (24,417,375) - (224,731,425)
--------------------------------------------------------------------
Theatre properties and equipment - net 843,845,395 108,122,723 - 951,968,118
OTHER ASSETS:
Investments in and advances to affiliates 117,334,041 6,295,696 (114,011,544) 9,618,193
Goodwill - net 9,578,769 7,935,741 - 17,514,510
Deferred charges and other - net 36,079,681 7,985,214 - 44,064,895
--------------------------------------------------------------------
Total other assets 162,992,491 22,216,651 (114,011,544) 71,197,598
--------------------------------------------------------------------
TOTAL $1,004,703,716 $ 153,901,425 $(114,450,338) $1,044,154,803
====================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 637,579 $ 14,498,273 $ - $ 15,135,852
Current income taxes payable (47,531) 47,531 - -
Accounts payable and accrued expenses 77,161,695 14,153,654 (438,794) 90,876,555
--------------------------------------------------------------------
Total current liabilities 77,751,743 28,699,458 (438,794) 106,012,407
LONG-TERM LIABILITIES:
Senior credit agreements 368,068,433 44,295,556 - 412,363,989
Senior subordinated debt 380,223,309 - - 380,223,309
Deferred lease expenses 18,981,104 422,532 - 19,403,636
Deferred gain on sale leaseback 5,195,941 - - 5,195,941
Deferred income taxes 12,141,971 (45,613) - 12,096,358
Deferred revenues 20,290,658 156,155 - 20,446,813
--------------------------------------------------------------------
Total long-term liabilities 804,901,416 44,828,630 - 849,730,046
MINORITY INTERESTS IN SUBSIDIARIES 6,461,798 23,915,818 - 30,377,616
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, 234,622 shares issued 49,538,156 10,901,000 (10,901,000) 49,538,156
Additional paid-in-capital 17,111,431 99,640,544 (103,110,544) 13,641,431
Unearned compensation - stock options (2,275,808) - - (2,275,808)
Retained earnings 87,823,832 (33,035,354) (735,000) 54,053,478
Treasury stock, 57,245 Class B shares at cost (24,232,890) - - (24,232,890)
Distributions - (735,000) 735,000 -
Accumulated other comprehensive loss (12,375,977) (20,313,671) - (32,689,648)
--------------------------------------------------------------------
Total shareholders' equity 115,588,759 56,457,519 (114,011,544) 58,034,734
--------------------------------------------------------------------
TOTAL $1,004,703,716 $ 153,901,425 $(114,450,338) $1,044,154,803
====================================================================
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
21
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 323,853,933 $ 55,263,153 $ - $ 379,117,086
Concessions 156,902,669 17,469,284 - 174,371,953
Other 26,564,098 3,577,118 (706,051) 29,435,165
--------------------------------------------------------------------
Total 507,320,700 76,309,555 (706,051) 582,924,204
COSTS AND EXPENSES:
Cost of operations:
Film rentals and advertising 172,290,040 27,270,306 - 199,560,346
Concession supplies 25,962,727 5,476,629 - 31,439,356
Salaries and wages 58,755,387 6,310,311 - 65,065,698
Facility leases 68,396,285 12,603,540 - 80,999,825
Utilities and other 69,385,686 8,311,319 (706,051) 76,990,954
--------------------------------------------------------------------
Total 394,790,125 59,972,105 (706,051) 454,056,179
General and administrative expenses 22,315,048 5,761,683 - 28,076,731
Depreciation and amortization 37,580,636 9,867,826 - 47,448,462
Asset impairment loss 1,846,980 - - 1,846,980
(Gain) loss on sale of assets 2,580,343 (11,041) - 2,569,302
--------------------------------------------------------------------
Total 459,113,132 75,590,573 (706,051) 533,997,654
OPERATING INCOME 48,207,568 718,982 - 48,926,550
OTHER INCOME (EXPENSE)
Interest expense (49,606,613) (4,414,382) - (54,020,995)
Amortization of debt issue cost (580,607) (25,000) - (605,607)
Amortization of bond discount (130,875) - - (130,875)
Dividend income 735,000 - (735,000) -
Interest income 440,082 405,220 - 845,302
Foreign currency exchange gain (loss) 299,432 (219,159) - 80,273
Equity in income (loss) of affiliates (16,039) 36,385 - 20,346
Minority interests in (income) loss of subsidiaries (1,268,950) 502,339 - (766,611)
-------------------------------------------------------------------
Total (50,128,570) (3,714,597) (735,000) (54,578,167)
-------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE (1,921,002) (2,995,615) (735,000) (5,651,617)
Income taxes (benefit) (482,317) (82,126) - (564,443)
-------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF AN ACCOUNTING CHANGE (1,438,685) (2,913,489) (735,000) (5,087,174)
Cumulative effect of a change in accounting principle
- net of tax benefit - - - -
-------------------------------------------------------------------
NET INCOME (LOSS) $ (1,438,685) $ (2,913,489) $ (735,000) $ (5,087,174)
===================================================================
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
22
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
Restricted Unrestricted
Group Group Eliminations TOTAL
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (1,438,685) $ (2,913,489) $ (735,000) $ (5,087,174)
Noncash items in net income:
Depreciation 36,766,666 9,282,464 - 46,049,130
Amortization - goodwill and other assets 813,970 585,362 - 1,399,332
Loss on impairment of assets 1,846,980 - - 1,846,980
Amortization of gain on sale leaseback (274,440) - - (274,440)
Deferred lease expenses 3,084,141 130,695 - 3,214,836
Amortization of prepaid leases 1,254,299 658,746 - 1,913,045
Deferred income tax expense (5,939,282) (52,364) - (5,991,646)
Amortization of debt discount and premium (21,380) - - (21,380)
Amortized compensation - stock options 728,074 - - 728,074
Compensation expense related to repurchase of stock options 103,584 - - 103,584
Gain on sale of assets 2,580,343 (11,041) - 2,569,302
Equity in (income) loss of affiliates 16,039 (36,385) - (20,346)
Minority interests in income (loss) of subsidiaries 1,268,950 (502,339) - 766,611
Cash provided by (used for) operating working capital:
Inventories 668,831 827,776 - 1,496,607
Co-op advertising and other receivables (14,776,758) 19,012,106 - 4,235,348
Prepaid expenses and other 4,889,292 (244,073) - 4,645,219
Accounts payable and accrued expenses (40,403,584) 2,668,524 - (37,735,060)
Income tax receivable/payable 2,089,786 (204,870) - 1,884,916
----------------------------------------------------------------
Net cash provided by (used for) operating activities (6,743,174) 29,201,112 (735,000) 21,722,938
INVESTING ACTIVITIES:
Additions to Theatre properties and equipment (71,609,211) (17,193,455) - (88,802,666)
Sale of Theatre properties and equipment 18,671,374 291,551 - 18,962,925
Decrease (increase) in other assets, investments in
and advances to affiliates 6,816,056 (9,357,521) 735,000 (1,806,465)
----------------------------------------------------------------
Net cash provided by (used for) investing activities (46,121,781) (26,259,425) 735,000 (71,646,206)
FINANCING ACTIVITIES:
Decrease in long-term debt (60,839,870) (11,935,484) - (72,775,354)
Increase in long-term debt 93,618,853 8,487,953 - 102,106,806
Increase in deferred revenues 18,897,331 123,010 - 19,020,341
Purchase of treasury stock (34,000) - - (34,000)
Repurchase of stock options (67,452) - - (67,452)
Common stock issued for options exercised 425 - - 425
Minority investment in subsidiaries, net (983,202) 781,864 - (201,338)
----------------------------------------------------------------
Net cash provided by (used for) financing activities 50,592,085 (2,542,657) - 48,049,428
EFFECT OF EXCHANGE RATE CHANGES ON CASH 19,113 (113,112) - (93,999)
----------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,253,757) 285,918 - (1,967,839)
CASH AND CASH EQUIVALENTS:
Beginning of period 2,510,366 6,361,791 - 8,872,157
----------------------------------------------------------------
End of period $ 256,609 $ 6,647,709 $ - $ 6,904,318
================================================================
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the
Indenture for the Senior Subordinated Notes.
23
<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: November 7, 2000
/s/Alan W. Stock
Alan W. Stock
President
/s/Robert Copple
Robert Copple
Chief Financial Officer
24
<PAGE>
