Cinemark(US:CNK)2024-05-02 10:45PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company presents unaudited Q1 2024 financial statements for both the holding and operating entities Cinemark Holdings, Inc. Financial Statements The holding company reported a net income of $25.3 million on revenues of $579.2 million for Q1 2024 Cinemark Holdings, Inc. - Condensed Consolidated Statement of Income (Loss) | (in millions, except per share data) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenue | $579.2 | $610.7 | | Operating income | $17.6 | $28.5 | | Loss before income taxes | $(2.4) | $(6.4) | | Income tax benefit | $(27.7) | $(3.9) | | Net income (loss) | $25.3 | $(2.5) | | Net income (loss) attributable to Cinemark Holdings, Inc. | $24.8 | $(3.1) | | Basic EPS | $0.20 | $(0.03) | | Diluted EPS | $0.19 | $(0.03) | Cinemark Holdings, Inc. - Condensed Consolidated Balance Sheet Highlights | (in millions) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $788.6 | $849.1 | | Total Assets | $4,780.1 | $4,836.8 | | Long-term debt, less current portion | $2,391.6 | $2,391.3 | | Total Liabilities | $4,444.7 | $4,518.0 | | Total Equity | $335.4 | $318.8 | Cinemark Holdings, Inc. - Condensed Consolidated Statement of Cash Flows | (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(22.7) | $7.9 | | Net cash used for investing activities | $(23.3) | $(26.3) | | Net cash used for financing activities | $(10.4) | $(4.9) | | Decrease in cash and cash equivalents | $(60.5) | $(24.4) | Cinemark USA, Inc. Financial Statements The primary operating subsidiary posted a net income of $27.9 million on revenues of $579.2 million Cinemark USA, Inc. - Condensed Consolidated Statement of Income | (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenue | $579.2 | $610.7 | | Operating income | $18.5 | $29.4 | | Income before income taxes | $1.3 | $(2.2) | | Income tax benefit | $(26.6) | $(8.5) | | Net income | $27.9 | $6.3 | | Net income attributable to Cinemark USA, Inc. | $27.4 | $5.7 | Cinemark USA, Inc. - Condensed Consolidated Balance Sheet Highlights | (in millions) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $558.2 | $612.4 | | Total Assets | $4,612.4 | $4,655.9 | | Long-term debt, less current portion | $1,936.3 | $1,936.8 | | Total Liabilities | $3,989.1 | $4,055.6 | | Total Equity | $623.3 | $600.3 | Cinemark USA, Inc. - Condensed Consolidated Statement of Cash Flows | (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(16.4) | $15.7 | | Net cash used for investing activities | $(23.3) | $(26.3) | | Net cash used for financing activities | $(10.4) | $(4.9) | | Decrease in cash and cash equivalents | $(54.2) | $(16.6) | Notes to Condensed Consolidated Financial Statements Notes detail revenue disaggregation, debt structure, segment performance, and a significant tax benefit Disaggregation of Revenue by Segment (in millions) | Segment | Q1 2024 Revenue | Q1 2023 Revenue | | :--- | :--- | :--- | | U.S. Operating Segment | $457.0 | $479.1 | | International Operating Segment | $122.2 | $131.6 | | Total | $579.2 | $610.7 | Long-Term Debt Carrying Value (in millions) | (As of March 31, 2024) | Cinemark Holdings, Inc. | Cinemark USA, Inc. | | :--- | :--- | :--- | | Total long-term debt | $2,430.0 | $1,970.0 | | Less: Current portion | $7.8 | $7.8 | | Less: Debt issuance costs, net | $30.6 | $25.9 | | Long-term debt, net | $2,391.6 | $1,936.3 | - The company recorded a significant deferred tax benefit of $33.7 million in Q1 2024 related to the release of valuation allowances in certain foreign jurisdictions, which was a primary driver of the quarter's net income178240 - Subsequent to the quarter's end, on May 1, 2024, CUSA redeemed the remaining $150.0 million outstanding principal of its 8.75% Senior Secured Notes38124 - The company's investment in National CineMedia, Inc. (NCMI) is accounted for at fair value, resulting in a recognized unrealized gain of $4.4 million for the quarter7197 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 5.2% revenue decline due to lower attendance from Hollywood strike impacts Results of Operations Q1 revenue decreased 5.2% to $579.2 million, driven by a 7.5% decline in attendance Consolidated Revenue and Key Performance Indicators | Metric (in millions, except per patron data) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Admissions revenue | $289.8 | $311.0 | (6.8%) | | Concession revenue | $224.2 | $235.8 | (4.9%) | | Total revenue | $579.2 | $610.7 | (5.2%) | | Attendance | 39.7 | 42.9 | (7.5%) | | Average ticket price | $7.30 | $7.25 | 0.7% | | Concession revenue per patron | $5.65 | $5.50 | 2.7% | - The decrease in attendance was attributed to less carryover benefit from prior year releases and the reduced scale of new film releases due to the impact of the Hollywood strikes176 Adjusted EBITDA Reconciliation (in millions) | | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (loss) | $25.3 | $(2.5) | | Add back: Taxes, Interest, D&A, etc. | $45.4 | $88.7 | | Adjusted EBITDA | $70.7 | $86.2 | Liquidity and Capital Resources The company maintains strong liquidity despite using $22.7 million in cash from operations - Cash used for operating activities was $(22.7) million for Holdings, a decrease from cash provided by operating activities of $7.9 million in Q1 2023, driven by timing of revenue and vendor payments134 - Capital expenditures totaled $23.5 million, with $20.3 million invested in existing theatres and $3.2 million for new theatres152 - On May 1, 2024, the company redeemed the remaining $150.0 million principal amount of its 8.75% Secured Notes, which fully satisfied and discharged the related indenture128165 - As of March 31, 2024, the company was in full compliance with all covenants governing its outstanding debt167 Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risks include interest rate fluctuations on variable-rate debt and foreign currency - The company is exposed to interest rate risk on its variable rate debt; a 100 basis point increase in interest rates would increase annual interest expense by $2.0 million168 - The company uses three interest rate swap agreements to hedge a portion of the interest rate risk associated with its variable rate term loan168169 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024 - Management concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective196214 - No material changes to the company's internal control over financial reporting were identified during the first quarter of 2024172 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in several legal proceedings, none of which are deemed financially material - The company is appealing a summary judgment in favor of its insurer, Factory Mutual, regarding claims for losses sustained due to COVID-19 theatre closures95 - A new putative nationwide class action lawsuit was filed on April 16, 2024, alleging mislabeling of twenty-four ounce draft beer cups257 - The company is appealing a confirmation order from the NCM bankruptcy case related to its Exhibitor Services Agreement95 Item 1A. Risk Factors No material changes to risk factors were reported from the previous annual report - The company reported no material changes to its risk factors from the most recent Form 10-K filing216 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 253,720 shares to satisfy employee tax-withholding obligations Share Repurchases in Q1 2024 | Period | Total Shares Purchased (in thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | 0.52 | $13.93 | | February 2024 | 252.99 | $16.48 | | March 2024 | 0.21 | $17.97 | | Total | 253.72 | N/A | - Share repurchases were conducted to satisfy employee tax-withholding obligations upon vesting of share-based awards199 Item 5. Other Information Supplemental financial statements for Cinemark USA, Inc. are provided for debt covenant compliance - Supplemental financial schedules are provided for CUSA to comply with the requirements of its senior notes indentures, separating restricted and unrestricted subsidiaries220 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including SOX certifications - The report includes CEO and CFO certifications as required by Sections 302 and 906 of the Sarbanes-Oxley Act207 - Financial statements and notes are provided in iXBRL format as part of Exhibit 101207