Cinemark(CNK) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Cinemark Holdings, Inc. and Cinemark USA, Inc., covering balance sheets, income, and cash flows, along with accounting policy notes Cinemark Holdings, Inc. Financial Statements Cinemark Holdings, Inc. reported a significant turnaround for the nine months ended September 30, 2023, with net income of $209.1 million and operating cash flow increasing to $335.8 million Cinemark Holdings, Inc. Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $1,011.0 | $863.6 | | Total Assets | $4,811.2 | $4,817.7 | | Total Current Liabilities | $651.9 | $708.5 | | Long-term debt, less current portion | $2,390.6 | $2,474.0 | | Total Liabilities | $4,476.1 | $4,698.2 | | Total Equity | $335.1 | $119.5 | Cinemark Holdings, Inc. Condensed Consolidated Statement of Income (Loss) Highlights (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $874.8 | $650.4 | $2,427.8 | $1,855.0 | | Operating Income (Loss) | $145.8 | $18.8 | $342.7 | $(32.8) | | Net Income (Loss) | $91.2 | $(23.9) | $209.1 | $(169.2) | | Diluted EPS | $0.61 | $(0.20) | $1.43 | $(1.43) | Cinemark Holdings, Inc. Condensed Consolidated Statement of Cash Flows Highlights (in millions) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $335.8 | $27.7 | | Net cash used for investing activities | $(74.9) | $(53.3) | | Net cash used for financing activities | $(118.0) | $(32.6) | | Increase (decrease) in cash | $131.4 | $(75.4) | | Cash and cash equivalents, end of period | $805.9 | $631.9 | Cinemark USA, Inc. Financial Statements Cinemark USA, Inc. (CUSA) achieved strong performance for the nine months ended September 30, 2023, reporting $226.6 million net income and $347.9 million in operating cash flow Cinemark USA, Inc. Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $834.7 | $669.2 | | Total Assets | $4,634.9 | $4,623.3 | | Long-term debt, less current portion | $1,937.0 | $2,023.0 | | Total Liabilities | $4,018.3 | $4,241.4 | | Total Equity | $616.6 | $381.9 | Cinemark USA, Inc. Condensed Consolidated Statement of Income (Loss) Highlights (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $874.8 | $650.4 | $2,427.8 | $1,855.0 | | Operating Income (Loss) | $146.5 | $19.5 | $345.2 | $(30.6) | | Net Income (Loss) | $98.8 | $(14.6) | $226.6 | $(140.9) | Cinemark USA, Inc. Condensed Consolidated Statement of Cash Flows Highlights (in millions) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $347.9 | $47.0 | | Net cash used for investing activities | $(74.9) | $(53.3) | | Net cash used for financing activities | $(118.0) | $(32.6) | | Increase (decrease) in cash | $143.5 | $(56.1) | | Cash and cash equivalents, end of period | $570.8 | $386.6 | Notes to Condensed Consolidated Financial Statements These notes detail the company's accounting policies, covering presentation basis, lease accounting, revenue recognition, debt, investments, share-based compensation, and impairment charges - The company's ongoing recovery from the COVID-19 pandemic is contingent on factors like the volume of new film content, box office performance, and the duration of exclusive theatrical release windows[70] - In September 2023, the company completed the sale of its Ecuador subsidiary, recognizing a gain of $6.9 million[95][102] - On May 26, 2023, CUSA amended its senior secured credit facility, resulting in a $650.0 million term loan and a $125.0 million revolving credit facility, with net proceeds used to repay the previous term loan[13] - On May 1, 2023, CUSA redeemed $100.0 million in principal of its 8.75% Secured Notes, resulting in a loss on extinguishment of debt of $3.4 million[11] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial recovery, driven by strong film performance, detailing revenue, operating costs, segment performance, and liquidity, including recent debt activities Results of Operations The company's results dramatically improved in 2023, with Q3 total revenue growing 34.5% to $874.8 million and nine-month revenue increasing 30.9% to $2.43 billion, driven by higher attendance and prices Q3 2023 vs Q3 2022 Performance Highlights (in millions) | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $874.8 | $650.4 | +34.5% | | Operating Income | $145.8 | $18.8 | +675.5% | | Attendance | 61.9 | 48.4 | +27.9% | Nine Months 2023 vs 2022 Performance Highlights (in millions) | Metric | Nine Months 2023 | Nine Months 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $2,427.8 | $1,855.0 | +30.9% | | Operating Income (Loss) | $342.7 | $(32.8) | N/A | | Attendance | 169.2 | 133.5 | +26.7% | - The U.S. segment saw a 27.1% increase in attendance and a 7.0% increase in average ticket price in Q3 2023, while the International segment's attendance grew by 29.1%[185] - Impairment charges for the nine months of 2023 were significantly lower at $12.1 million compared to $107.5 million in the same period of 2022, which included a large impairment on the NCM investment[191] Liquidity and Capital Resources The company's liquidity strengthened, with operating cash flow for Holdings increasing to $335.8 million for the first nine months of 2023, supported by debt refinancing and $89.7 million in capital expenditures - Cash provided by operating activities for Holdings was $335.8 million for the nine months ended September 30, 2023, a substantial increase from $27.7 million in the prior-year period[193] Capital Expenditures (in millions) | Category | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | New theatres | $5.4 | $24.8 | | Existing theatres | $84.3 | $40.5 | | Total | $89.7 | $65.3 | - In May 2023, CUSA amended its senior secured credit facility, establishing a $650.0 million term loan due 2030 and a $125.0 million revolving credit facility due 2028[244] - CUSA redeemed $100.0 million of its 8.75% Secured Notes on May 1, 2023, leaving $150.0 million outstanding[220] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate and foreign currency fluctuations, with a 100 basis point interest rate increase potentially raising annual interest expense by $2.0 million on $204.0 million of unhedged variable debt - The company utilizes interest rate swap agreements to hedge a portion of the interest rate risk on its variable-rate term loan debt[253] - A 100 basis point increase in interest rates would increase annual interest expense by $2.0 million on the $204.0 million of unhedged variable rate debt[253] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of September 30, 2023, disclosure controls and procedures were effective[126] - No material changes to internal control over financial reporting were identified during the third quarter of 2023[274] PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings, notably appealing a confirmation order in the National CineMedia LLC Bankruptcy regarding its Exhibitor Services Agreement, with an uncertain outcome - The company has appealed a confirmation order from the NCM bankruptcy proceedings concerning its Exhibitor Services Agreement and a 'most favored nations' clause, with an uncertain outcome[128][142] - No other material changes in legal proceedings were reported since the last Annual Report on Form 10-K[257] Risk Factors There have been no material changes in the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes in risk factors from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022[275] Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2023, Holdings repurchased 6,210 shares of common stock to satisfy employee tax-withholding obligations upon vesting of restricted and performance stock units Issuer Purchases of Equity Securities (in thousands, except per share data) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2023 | 3.23 | $15.74 | | August 2023 | 2.98 | $17.53 | | September 2023 | 0 | N/A | | Total Q3 2023 | 6.21 | N/A | Other Information This section provides supplemental unaudited condensed consolidating financial statements for Cinemark USA, Inc., separating its financial information into 'Restricted Group' and 'Unrestricted Group' subsidiaries - Supplemental consolidating financial schedules are provided for CUSA as required by the indentures for its senior notes, separating subsidiaries into Restricted and Unrestricted groups[278] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley and financial statements in iXBRL format - Exhibits include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906[283] - The financial statements and notes are provided in iXBRL format as Exhibit 101[267]