Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
CNK > SEC Filings for CNK > Form 10-Q on 7-Nov-2013All Recent SEC Filings

Show all filings for CINEMARK HOLDINGS, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for CINEMARK HOLDINGS, INC.


7-Nov-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes and schedules included elsewhere in this report.

We are a leader in the motion picture exhibition industry, with theatres in the U.S., Brazil, Mexico, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala. As of September 30, 2013, we managed our business under two reportable operating segments - U.S. markets and international markets. See Note 18 to our condensed consolidated financial statements.

We generate revenues primarily from box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as vendor marketing promotions, meeting rentals and electronic video games located in some of our theatres. Our contracts with NCM have assisted us in expanding our offerings to domestic advertisers and broadening ancillary revenue sources such as digital video monitor advertising, third party branding, and the use of our domestic theatres for alternative entertainment, such as live and pre-recorded sports programs, concert events, the opera, and other special presentations. Our revenues are affected by changes in attendance and concession revenues per patron. Attendance is primarily affected by the quality and quantity of films released by motion picture studios. Films leading the box office during the nine months ended September 30, 2013 included Iron Man 3, Despicable Me 2, Man of Steel, Monsters University, Fast & Furious 6, Oz: The Great and Powerful, Star Trek Into Darkness, World War Z, The Croods, The Heat, The Great Gatsby and We're The Millers, among other films. Films currently scheduled for release during the remainder of 2013 include sequels such as The Hunger Games: Catching Fire, The Hobbit: The Desolation of Smaug, Thor: The Dark World and highly anticipated original titles such as Gravity, Ender's Game, Walking with Dinosaurs, Saving Mr. Banks, American Hustle, The Secret Life of Walter Mitty and Frozen, among other films.

Film rental costs are variable in nature and fluctuate with our admissions revenues. Film rental costs as a percentage of revenues are generally higher for periods in which more blockbuster films are released. Film rental costs can also vary based on the length of a film's run. Film rental rates are generally negotiated on a film-by-film and theatre-by-theatre basis. Advertising costs, which are expensed as incurred, are 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 advertisements is based on, among other things, the size of the directory and the frequency and size of the newspaper's circulation.

Concession supplies expense is variable in nature and fluctuates with our concession revenues. We purchase concession supplies to replace units sold. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates.

Although salaries and wages include a fixed cost component (i.e. the minimum staffing costs to operate a theatre facility during non-peak periods), salaries and wages move in relation to revenues as theatre staffing is adjusted to respond to changes in attendance.

Facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment. Certain of our leases are subject to percentage rent only while others are subject to percentage rent in addition to their fixed monthly rent if a target annual revenue level is achieved. Facility lease expense as a percentage of revenues is also affected by the number of theatres under operating leases, the number of theatres under capital leases and the number of fee-owned theatres.

Utilities and other costs include certain costs that have both fixed and variable components such as utilities, property taxes, janitorial costs, repairs and maintenance and security services.


Table of Contents

Results of Operations

The following table sets forth, for the periods indicated, certain operating data and the percentage of revenues represented by certain items reflected in our condensed consolidated statements of income. On May 29, 2013, we completed the Rave Acquisition, which consisted of 32 theatres with 483 screens. The results of operations for these 32 theatres are reflected as of the date of acquisition.

                                               Three Months Ended               Nine Months Ended
                                                  September 30,                   September 30,
                                              2013            2012            2013             2012
Operating data (in millions):
Revenues
Admissions                                  $   479.6       $   402.4       $ 1,293.5        $ 1,194.3
Concession                                      242.3           200.1           643.4            581.3
Other                                            35.7            31.1            94.1             86.4

Total revenues                              $   757.6       $   633.6       $ 2,031.0        $ 1,862.0
Cost of operations
Film rentals and advertising                    254.8           214.0           692.2            636.7
Concession supplies                              39.0            33.0           104.0             93.2
Salaries and wages                               73.2            63.7           198.8            184.5
Facility lease expense                           85.1            72.9           230.8            213.1
Utilities and other                              84.7            74.3           229.8            210.4
General and administrative expenses              42.4            37.0           120.7            107.0
Depreciation and amortization                    42.4            36.9           120.2            110.1
Impairment of long-lived assets                   0.2             1.0             2.1              1.5
(Gain) loss on sale of assets and other           0.6             6.7            (2.5 )            8.0

Total cost of operations                        622.4           539.5         1,696.1          1,564.5

Operating income                            $   135.2       $    94.1       $   334.9        $   297.5

Operating data as a percentage of total
revenues:
Revenues
Admissions                                       63.3 %          63.5 %          63.7 %           64.1 %
Concession                                       32.0 %          31.6 %          31.7 %           31.2 %
Other                                             4.7 %           4.9 %           4.6 %            4.7 %

Total revenues                                  100.0 %         100.0 %         100.0 %          100.0 %

Cost of operations (1)
Film rentals and advertising                     53.1 %          53.2 %          53.5 %           53.3 %
Concession supplies                              16.1 %          16.5 %          16.2 %           16.0 %
Salaries and wages                                9.7 %          10.1 %           9.8 %            9.9 %
Facility lease expense                           11.2 %          11.5 %          11.4 %           11.4 %
Utilities and other                              11.2 %          11.7 %          11.3 %           11.3 %
General and administrative expenses               5.6 %           5.8 %           5.9 %            5.7 %
Depreciation and amortization                     5.6 %           5.8 %           5.9 %            5.9 %
Impairment of long-lived assets                   0.0 %           0.2 %           0.1 %            0.1 %
(Gain) loss on sale of assets and other           0.1 %           1.1 %          (0.1 )%           0.4 %
Total cost of operations                         82.2 %          85.1 %          83.5 %           84.0 %
Operating income                                 17.8 %          14.9 %          16.5 %           16.0 %

Average screen count (month end average)        5,793           5,207           5,524            5,189

Revenues per average screen (dollars)       $ 130,772       $ 121,677       $ 367,661        $ 358,856

(1) All costs are expressed as a percentage of total revenues, except film rentals and advertising, which are expressed as a percentage of admissions revenues and concession supplies, which are expressed as a percentage of concession revenues.


Table of Contents

Three months ended September 30, 2013 versus September 30, 2012

Revenues. Total revenues increased $124.0 million to $757.6 million for the three months ended September 30, 2013 ("third quarter of 2013") from $633.6 million for the three months ended September 30, 2012 ("third quarter of 2012), representing a 19.6% increase. The table below, presented by reportable operating segment, summarizes our period-over-period revenue performance and certain key performance indicators that impact our revenues.

                                                                                  International
                                        U.S. Operating Segment                  Operating Segment                       Consolidated
                                          Three Months Ended                   Three Months Ended                    Three Months Ended
                                            September 30,                         September 30,                         September 30,
                                                               %                                    %                                     %
                                     2013        2012       Change        2013        2012       Change         2013        2012       Change
Admissions revenues (1)            $  337.9     $ 265.3        27.4 %    $ 141.7     $ 137.1         3.4 %     $ 479.6     $ 402.4        19.2 %
Concession revenues (1)            $  171.1     $ 135.6        26.2 %    $  71.2     $  64.5        10.4 %     $ 242.3     $ 200.1        21.1 %
Other revenues (1) (2)             $   16.8     $  12.1        38.8 %    $  18.9     $  19.0        (0.5 )%    $  35.7     $  31.1        14.8 %
Total revenues (1) (2)             $  525.8     $ 413.0        27.3 %    $ 231.8     $ 220.6         5.1 %     $ 757.6     $ 633.6        19.6 %
Attendance (1)                         50.6        41.2        22.8 %       30.4        28.5         6.7 %        81.0        69.7        16.2 %

(1) Amounts in millions.

(2) U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 18 of our condensed consolidated financial statements.

U.S. The increase in admissions revenues of $72.6 million was attributable to a 22.8% increase in attendance and a 3.7% increase in average ticket price from $6.44 for the third quarter of 2012 to $6.68 for the third quarter of 2013. The increase in concession revenues of $35.5 million was attributable to the 22.8% increase in attendance and a 2.7% increase in concession revenues per patron from $3.29 for the third quarter of 2012 to $3.38 for the third quarter of 2013. The increase in attendance was partly due to the solid slate of films released during the third quarter of 2013. Our revenues and attendance for the third quarter of 2013 also benefited from the inclusion of the 32 Rave theatres acquired on May 29, 2013 (see Note 6 to the condensed consolidated financial statements). The increase in average ticket price was primarily due to the pricing at acquired theatres and price increases. The increase in concession revenues per patron was primarily due to incremental sales and price increases. The increase in other revenues was primarily attributable to the 22.8% increase in attendance, which resulted in increases in screen advertising, video game and other promotional revenues.

International. The increase in admissions revenues of $4.6 million was attributable to a 6.7% increase in attendance partially offset by a 3.1% decrease in average ticket price from $4.81 for the third quarter of 2012 to $4.66 for the third quarter of 2013. The increase in concession revenues of $6.7 million was attributable to the 6.7% increase in attendance and a 3.5% increase in concession revenues per patron from $2.26 for the third quarter of 2012 to $2.34 for the third quarter of 2013. The decrease in average ticket price was primarily due to the unfavorable impact of exchange rates in certain countries in which we operate. The increase in concession revenues per patron was primarily due to incremental sales and price increases, partially offset by the unfavorable impact of exchange rates in certain countries in which we operate.

Cost of Operations. The table below summarizes certain of our period-over-period theatre operating costs by reportable operating segment (in millions).

                                                 U.S.                    International
                                           Operating Segment           Operating Segment             Consolidated
                                          Three Months Ended          Three Months Ended          Three Months Ended
                                             September 30,               September 30,               September 30,
                                           2013          2012          2013           2012         2013          2012
Film rentals and advertising            $     185.3     $ 146.9     $     69.5       $ 67.1     $    254.8      $ 214.0
Concession supplies                            23.0        17.9           16.0         15.1           39.0         33.0
Salaries and wages                             53.0        44.1           20.2         19.6           73.2         63.7
Facility lease expense                         58.5        47.4           26.6         25.5           85.1         72.9
Utilities and other                            57.5        47.8           27.2         26.5           84.7         74.3


Table of Contents
U.S. Film rentals and advertising costs were $185.3 million, or 54.8% of admissions revenues, for the third quarter of 2013 compared to $146.9 million, or 55.4% of admissions revenues, for the third quarter of 2012. The increase in film rentals and advertising costs was due to the $72.6 million increase in admissions revenues, partially offset by a decrease in the film rentals and advertising rate. The decrease in the film rentals and advertising rate was primarily due to the mix of films released during the third quarter of 2013 compared to the third quarter of 2012. Concession supplies expense was $23.0 million, or 13.4% of concession revenues, for the third quarter of 2013 compared to $17.9 million, or 13.2% of concession revenues, for the third quarter of 2012. The increase in the concession supplies rate was primarily due to increases in inventory procurement costs on certain concession products and the impact of special concession promotions that help drive incremental concession sales.

Salaries and wages increased to $53.0 million for the third quarter of 2013 from $44.1 million for the third quarter of 2012. Facility lease expense increased to $58.5 million for the third quarter of 2013 from $47.4 million for the third quarter of 2012. Utilities and other costs increased to $57.5 million for the third quarter of 2013 from $47.8 million for the third quarter of 2012. All of the above-mentioned theatre operating costs for the third quarter of 2013 increased due to the inclusion of the 32 Rave theatres acquired on May 29, 2013 (see Note 6 to the condensed consolidated financial statements). Salaries and wages were also impacted by higher staffing levels to support the 22.8% increase in attendance.

International. Film rentals and advertising costs were $69.5 million, or 49.0% of admissions revenues, for the third quarter of 2013 compared to $67.1 million, or 48.9% of admissions revenues, for the third quarter of 2012. Concession supplies expense was $16.0 million, or 22.5% of concession revenues, for the third quarter of 2013 compared to $15.1 million, or 23.4% of concession revenues, for the third quarter of 2012. The decrease in the concession supplies rate is primarily due to concession sales price increases.

Salaries and wages increased to $20.2 million for the third quarter of 2013 from $19.6 million for the third quarter of 2012 primarily due to increased wage rates and new theatres. Facility lease expense increased to $26.6 million for the third quarter of 2013 from $25.5 million for the third quarter of 2012 primarily due to new theatres. Utilities and other costs increased to $27.2 million for the third quarter of 2013 from $26.5 million for the third quarter of 2012 primarily due to new theatres.

General and Administrative Expenses. General and administrative expenses increased to $42.4 million for the third quarter of 2013 from $37.0 million for the third quarter of 2012. The increase was primarily due to increased salaries and incentive compensation expense of approximately $3.4 million, increased service charges of approximately $1.7 million related to increased credit card transactions and increased professional fees of approximately $0.8 million.

Depreciation and Amortization. Depreciation and amortization expense was $42.4 million during the third quarter of 2013 compared to $36.9 million during the third quarter of 2012. The increase was primarily due to new theatres, including the 32 Rave theatres acquired on May 29, 2013.

Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $0.2 million during the third quarter of 2013 compared to $1.0 million during the third quarter of 2012. Impairment charges for the third quarter of 2013 consisted of U.S. theatre properties, impacting two of our twenty-six reporting units. Impairment charges for the third quarter of 2012 consisted of U.S. and international theatre properties, impacting seven of our twenty-four reporting units. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre.

Loss on Sale of Assets and Other. We recorded a loss on sale of assets and other of $0.6 million during the third quarter of 2013 compared to $6.7 million during the third quarter of 2012. The loss recorded during the third quarter of 2013 was primarily due to the retirement of theatre equipment replaced during the period. The loss recorded during the third quarter of 2012 was primarily due to a lease termination reserve recorded for a planned theatre closure.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, were $29.5 million during the third quarter of 2013 compared to $30.9 million during the third quarter of 2012.

Distributions from NCM. We recorded distributions from NCM of $5.6 million during the third quarter of 2013 compared to $4.7 million during the third quarter of 2012, which were in excess of the carrying value of our Tranche 1 investment. See Note 8 to our condensed consolidated financial statements.


Table of Contents

Equity in Income of Affiliates. We recorded equity in income of affiliates of $11.7 million during the third quarter of 2013 compared to $6.8 million during the third quarter of 2012. The equity in income of affiliates recorded during the third quarter of 2013 primarily included income of approximately $4.6 million related to our equity investment in DCIP (see Note 9 to our condensed consolidated financial statements) and income of approximately $7.1 million related to our equity investment in NCM (see Note 8 to our condensed consolidated financial statements). The equity in income of affiliates recorded during the third quarter of 2012 primarily included income of approximately $3.1 million related to our equity investment in DCIP and income of approximately $3.7 million related to our equity investment in NCM.

Income Taxes. Income tax expense of $43.4 million was recorded for the third quarter of 2013 compared to $29.5 million for the third quarter of 2012. The effective tax rate was 35.0% for the third quarter of 2013 compared to 38.0% for the third quarter of 2012. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

Nine months ended September 30, 2013 versus September 30, 2012

Revenues. Total revenues increased $169.0 million to $2,031.0 million for the nine months ended September 30, 2013 ("the 2013 period") from $1,862.0 million for the nine months ended September 30, 2012 ("the 2012 period"), representing a 9.1% increase. The table below, presented by reportable operating segment, summarizes our period-over-period revenue performance and certain key performance indicators that impact our revenues.

                                                  U.S.                               International
                                            Operating Segment                      Operating Segment                        Consolidated
                                            Nine Months Ended                      Nine Months Ended                      Nine Months Ended
                                              September 30,                          September 30,                          September 30,
                                                                  %                                    %                                        %
                                     2013          2012        Change        2013        2012       Change         2013          2012        Change
Admissions revenues (1)            $   908.4     $   819.1        10.9 %    $ 385.1     $ 375.2         2.6 %    $ 1,293.5     $ 1,194.3         8.3 %
Concession revenues (1)            $   453.3     $   408.7        10.9 %    $ 190.1     $ 172.6        10.1 %    $   643.4     $   581.3        10.7 %
Other revenues (1) (2)             $    41.4     $    35.4        16.9 %    $  52.7     $  51.0         3.3 %    $    94.1     $    86.4         8.9 %
Total revenues (1) (2)             $ 1,403.1     $ 1,263.2        11.1 %    $ 627.9     $ 598.8         4.9 %    $ 2,031.0     $ 1,862.0         9.1 %
Attendance (1)                         132.2         123.0         7.5 %       79.6        77.0         3.4 %        211.8         200.0         5.9 %

(1) Amounts in millions.

(2) U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 18 of our condensed consolidated financial statements.

U.S. The increase in admissions revenues of $89.3 million was attributable to a 7.5% increase in attendance and a 3.2% increase in average ticket price from $6.66 for the 2012 period to $6.87 for the 2013 period. The increase in concession revenues of $44.6 million was attributable to the 7.5% increase in attendance and a 3.3% increase in concession revenues per patron from $3.32 for the 2012 period to $3.43 for the 2013 period. Our revenues and attendance for the 2013 period also benefited from the inclusion of the 32 Rave theatres acquired on May 29, 2013 (see Note 6 to the condensed consolidated financial statements). The increase in average ticket price was primarily due to price increases and the pricing at acquired theatres. The increase in concession revenues per patron was primarily due to incremental sales and price increases. The increase in other revenues was primarily attributable to the 7.5% increase in attendance, which resulted in increases in screen advertising, video game and other promotional revenues.

International. The increase in admissions revenues of $9.9 million was attributable to a 3.4% increase in attendance partially offset by a 0.6% decrease in average ticket price from $4.87 for the 2012 period to $4.84 for the 2013 period. The increase in concession revenues of $17.5 million was attributable to the 3.4% increase in attendance and a 6.7% increase in concession revenues per patron from $2.24 for the 2012 period to $2.39 for the 2013 period. The increase in attendance was due to new theatres. The decrease in average ticket price was primarily due to the unfavorable impact of exchange rates in certain countries in which we operate. The increase in concession revenues per patron was primarily due to incremental sales and price increases, partially offset by the unfavorable impact of exchange rates in certain countries in which we operate.


Table of Contents

Cost of Operations. The table below summarizes certain of our period-over-period theatre operating costs by reportable operating segment (in millions).

                                                  U.S.                  International
                                           Operating Segment          Operating Segment             Consolidated
                                           Nine Months Ended          Nine Months Ended          Nine Months Ended
                                             September 30,              September 30,              September 30,
                                            2013         2012          2013         2012          2013         2012
Film rentals and advertising             $    502.6     $ 453.7     $    189.6     $ 183.0     $    692.2     $ 636.7
Concession supplies                            62.3        52.8           41.7        40.4          104.0        93.2
Salaries and wages                            140.2       130.0           58.6        54.5          198.8       184.5
Facility lease expense                        157.2       143.1           73.6        70.0          230.8       213.1
Utilities and other                           150.9       139.0           78.9        71.4          229.8       210.4

U.S. Film rentals and advertising costs were $502.6 million, or 55.3% of admissions revenues for the 2013 period compared to $453.7 million, or 55.4% of admissions revenues, for the 2012 period. Concession supplies expense was $62.3 million, or 13.7% of concession revenues, for the 2013 period compared to $52.8 million, or 12.9% of concession revenues, for the 2012 period. The increase in the concession supplies rate was primarily due to increased inventory procurement costs on certain concession products and the impact of special concession promotions that help drive incremental concession sales.

Salaries and wages increased to $140.2 million for the 2013 period from $130.0 million for the 2012 period. Facility lease expense increased to $157.2 million for the 2013 period from $143.1 million for the 2012 period. Utilities and other costs increased to $150.9 million for the 2013 period from $139.0 million for the 2012 period. All of the above-mentioned theatre operating costs for the 2013 period increased primarily due to the inclusion of the 32 Rave theatres acquired on May 29, 2013 (see Note 6 to the condensed consolidated financial statements).

International. Film rentals and advertising costs were $189.6 million, or 49.2% of admissions revenues, for the 2013 period compared to $183.0 million, or 48.8% of admissions revenues, for the 2012 period. Concession supplies . . .

  Add CNK to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for CNK - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.