# Cinemark Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [Cinemark Holdings, Inc.](/companies/cnk.md) (CIK 1385280)
- Form: 10-Q
- Filed: 2022-05-06
- Accepted by EDGAR: May 6, 2022, 06:46 ET
- Period: 2022-03-31
- Accession: 0000950170-22-007987
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1385280/000095017022007987/cnk-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1385280/000095017022007987/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $460.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$33.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $38.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | −$1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$74.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.62 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.62 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 117,900,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | −$118.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $18.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-03-31 | $568.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $719.8m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $5.02bn | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $645.6m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2022-03-31 | $2.48bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-03-31 | $27.2m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-03-31 | $286.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 48,152 characters.

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. Amounts included in the following discussion, except for screens, average screens, average ticket price and concessions per patron, are rounded in millions.

We are a leader in the motion picture exhibition industry, with theatres in the U.S., Brazil, Argentina, Chile, Colombia, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. As of March 31, 2022, we managed our business under two reportable operating segments – U.S. markets and international markets. See Note 17 to our condensed consolidated financial statements.

#### Recent Developments

The COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry with widespread social and economic effects. We temporarily closed our theatres in the U.S. and Latin America during March of 2020 at the onset of the COVID-19 outbreak. During that time, we implemented various cash preservation strategies, including, but not limited to, temporary personnel and salary reductions, halting non-essential operating and capital expenditures, negotiating modified timing and/or abatement of contractual payments with landlords and other major suppliers, and the suspension of our quarterly dividend.

Throughout 2020 and 2021 we reopened theatres as local restrictions and the status of the COVID-19 pandemic would allow. All of our domestic and international theatres were reopened by the end of the fourth quarter of 2021. The industry’s recovery from the COVID-19 pandemic is still underway and is contingent upon the volume of new film content available, as well as the box office performance of new film content released, consumer sentiment in returning to move theaters and government restrictions. The industry is also adjusting to the evolution of the exclusive theatrical window, competition from streaming platforms, supply chain constraints, inflationary impacts pressures and other economic factors.

#### Revenues and Expenses

We generate revenue primarily from filmed entertainment box office receipts and concession sales with additional revenue from screen advertising, screen rental and other revenue streams, such as transactional fees, vendor marketing promotions, studio trailer placements, meeting rentals and electronic video games located in some of our theatres. We also offer alternative entertainment, such as the Metropolitan Opera, concert events, in-theatre gaming, live and pre-recorded sports programs and other special events in our theatres through Fathom Entertainment (operated by AC JV, LLC). NCM provides our domestic theatres with various forms of in-theatre advertising. Our Flix Media subsidiaries provide screen advertising and alternative content for our international circuit and to other international exhibitors.

Films leading the box office during the three months ended March 31, 2022 included the carryover of *Spider-Man: No Way Home* as well as new releases including *The Batman, Uncharted, The Lost City* and *Scream.* Films currently scheduled for release during the remainder of 2022 include *Sonic the Hedgehog 2, Doctor Strange in the Multiverse of Madness, Top Gun: Maverick, Jurassic World: Dominion, Lightyear, Minions: The Rise of Gru, Thor: Love and Thunder, Black Adam, Black Panther: Wakanda Forever* and the highly anticipated sequel, *Avatar: The Way of Water,* among other films. There are several key factors impacting the industry box office's recovery from the COVID-19 pandemic, including the availability and quality of new films released, the duration of the exclusive theatrical windows and evolving consumer behavior with competition from streaming and other forms of entertainment.

Film rental costs are variable in nature and fluctuate with our admissions revenue. Film rental costs as a percentage of revenue are generally higher for periods in which more blockbuster films are released. The Company received virtual print fees from studios for certain of its international locations, which are included as a contra-expense in film rental and advertising costs on the condensed consolidated statements of income. However, these costs were fully recovered during 2021 and virtual print fees will not be received in future periods. Advertising costs, which are expensed as incurred, are primarily related to our loyalty and subscription programs, brand advertising, reengaging our audiences as our theatres reopened and new film content was released as well as campaigns for new and remodeled theatres. These expenses vary depending on the timing and length of such campaigns.

Concession supplies expense is variable in nature and fluctuates with our concession revenue and product mix. Supply chain interruptions and inflationary pressures have impacted, and may continue to impact, product costs and product availability in the near term. We source products from a variety of partners around the world to minimize supply chain interruptions and price increases, wherever possible.

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 tend to move in relation to revenue as theatre staffing is adjusted to respond to changes in attendance. Staffing levels may vary based on the amenities offered at a location, such as full-service restaurants, bars or expanded food and beverage options. In certain international locations, staffing levels are also subject to local regulations. Labor market conditions and inflationary pressures have driven increases in wages across our labor base and increases may continue in the future.

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 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 performance level is achieved. Facility lease expense as a percentage of revenue is also affected by the number of theatres under operating leases, the number of theatres under finance leases and the number of owned theatres.

Utilities and other costs include both fixed and variable costs and primarily consist of utilities, property taxes, janitorial costs, credit card fees, third party ticket sales commissions, repairs and maintenance expenses, security services and expenses for the maintenance and monitoring of projection and sound equipment.

General and administrative expenses to support the overall management of the Company are primarily fixed in nature with certain variable expenses. Fixed expenses include salaries and wages and benefits costs for our corporate office personnel, facility expenses for our corporate and other offices, software maintenance costs and audit fees. Some variable expenses may include incentive compensation, consulting and legal fees, supplies and other costs that are not specifically associated with the operations of our theatres.

### Results of Operations

The following table sets forth, for the periods indicated, the amounts for certain items reflected in our condensed consolidated statements of income along with each of those items as a percentage of revenues.

| Operating data (in millions): Revenues | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Admissions | $235.8 | $56.1 |
| Concession | 173.0 | 39.5 |
| Other | 51.7 | 18.8 |
| Total revenues | $460.5 | $114.4 |
| Cost of operations |  |  |
| Film rentals and advertising | 127.6 | 23.2 |
| Concession supplies | 30.0 | 7.2 |
| Salaries and wages | 79.8 | 31.2 |
| Facility lease expense | 73.7 | 64.8 |
| Utilities and other | 86.9 | 49.1 |
| General and administrative expenses | 40.7 | 35.9 |
| Depreciation and amortization | 61.7 | 68.2 |
| Restructuring costs | — | (0.2) |
| (Gain) loss on disposal of assets and other | (6.9) | 4.5 |
| Total cost of operations | 493.5 | 283.9 |
| Operating loss | $(33.0) | $(169.5) |
| **Operating data as a percentage of total revenues:** |  |  |
| Revenues |  |  |
| Admissions | 51.2% | 49.0% |
| Concession | 37.6% | 34.5% |
| Other | 11.2% | 16.5% |
| Total revenues | 100.0% | 100.0% |
| Cost of operations (1) |  |  |
| Film rentals and advertising | 54.1% | 41.4% |
| Concession supplies | 17.3% | 18.2% |
| Salaries and wages | 17.3% | N/A |
| Facility lease expense | 16.0% | N/A |
| Utilities and other | 18.9% | N/A |
| General and administrative expenses | 8.8% | N/A |
| Depreciation and amortization | 13.4% | N/A |
| Restructuring costs | —% | N/A |
| (Gain) loss on disposal of assets and other | (1.5)% | N/A |
| Total cost of operations | 107.2% | N/A |
| Operating loss | (7.2)% | N/A |
| Average screen count (month end average) | 5,859 | 5,916 |

28

(1) All costs are expressed as a percentage of total revenues, except film rentals and advertising, which are expressed as a percentage of admissions revenue and concession supplies, which are expressed as a percentage of concession revenue. Certain values for the 2021 period are considered not applicable (“N/A”) as they are not comparable due to limited film content and certain ongoing theatre closures as a result of the COVID-19 pandemic.

### Three months ended March 31, 2022 (the “2022 period”) versus the three months ended March 31, 2021 (the “2021 period”)

As noted above at *Recent Developments*, the COVID-19 pandemic has had an ongoing impact on the movie exhibition industry. When comparing the results for the 2022 period with the 2021 period, the following should be noted:

- All of our domestic and international theatres were open during the 2022 period while certain of our domestic and international theatres were temporarily closed for portions of the 2021 period.
- The North American Industry box office exceeded $1.3B during the 2022 period, which included blockbuster films such as *The Batman* and *Uncharted,* as well as the sustained performance of the 2021 release of *Spider-Man: No Way Home.*
- The North American Industry box office totaled less than $0.3B during the 2021 period with a limited number of new releases including *Tom and Jerry, Raya and the Last Dragon* and *Croods: A New Age* in addition to library content.

*Revenues.* The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.

|  | U.S. Operating Segment 2022 | 2021 | International Operating Segment 2022 | 2021 | Constant Currency (3) 2022 | Consolidated 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Admissions revenues (1) | $191.8 | $48.5 | $44.0 | $7.6 | $46.4 | $235.8 | $56.1 |
| Concession revenues (1) | 141.1 | 33.0 | 31.9 | 6.5 | 33.9 | 173.0 | 39.5 |
| Other revenues (1)(2) | 39.1 | 15.6 | 12.6 | 3.2 | 13.1 | 51.7 | 18.8 |
| Total revenues (1)(2) | $372.0 | $97.1 | $88.5 | $17.3 | $93.4 | $460.5 | $114.4 |
| Attendance (1) | 20.7 | 5.2 | 12.4 | 2.5 |  | 33.1 | 7.7 |
| Average ticket price (1) | $9.27 | $9.25 | $3.55 | $3.05 | $3.74 | $7.12 | $7.25 |
| Concession revenues per patron (1) | $6.82 | $6.30 | $2.57 | $2.58 | $2.73 | $5.23 | $5.10 |

(1) Average ticket price is calculated as admissions revenues divided by attendance. Concession revenues per patron is calculated as concession revenues divided by attendance.

(2) U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 17 to our condensed consolidated financial statements.

(3) Constant currency revenue amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2021. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.

- *U.S.* Average ticket price increased to $9.27 during the 2022 period compared with $9.25 during the 2021 period. The 2021 period reflected limited operating hours and therefore fewer matinee showtimes. The 2021 period also benefited from Private Watch Parties, which carried a higher ticket price per patron. The 2022 period benefited from favorable ticket type mix, strategic pricing actions and a higher mix of premium large format box office. Concession revenues per patron increased 8.3% to $6.82 during the 2022 period compared with $6.30 during the 2021 period driven by higher incidence, audience mix and operating hours that are more conducive to concession purchases. Other revenues for the 2022 period increased 150.6% to $39.1 million compared with $15.6 million during the 2021 period primarily as a result of growth in attendance, which drove an increase in transaction fees, screen advertising and promotional revenues.
- *International.* Average ticket price was $3.55 as reported, $3.74 in constant currency, compared with the 2021 period of $3.05. The increase in average ticket price in constant currency was primarily the result of the impact of inflation and higher premium ticket mix. Concession revenues per patron was $2.57 as reported, $2.73 in constant currency, for the 2022 period compared with $2.58 in the 2021 period. The increase in concession revenues per patron in constant currency was a result of the impact of inflation coupled with higher purchase incidence. Other revenues for the 2022 period increased 293.8% to $12.6 million compared with $3.2 million during the 2021 period primarily as a result of growth in attendance, which drove an increase in transaction fees, screen advertising and promotional revenues.

*Cost of Operations.* The table below, presented by reportable operating segment, summarizes our year-over-year theatre operating costs.

|  | U.S. Operating Segment 2022 | 2021 | International Operating Segment 2022 | 2021 | Constant Currency (1) 2022 | Consolidated 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Film rentals and advertising | $106.2 | $19.3 | $21.4 | $3.9 | $22.6 | $127.6 | $23.2 |
| Concession supplies | $22.9 | $5.5 | $7.1 | $1.7 | $7.6 | $30.0 | $7.2 |
| Salaries and wages | $67.1 | $24.9 | $12.7 | $6.3 | $13.4 | $79.8 | $31.2 |
| Facility lease expense | $62.5 | $59.0 | $11.2 | $5.8 | $11.7 | $73.7 | $64.8 |
| Utilities and other | $68.1 | $40.0 | $18.8 | $9.1 | $19.7 | $86.9 | $49.1 |

(1) Constant currency expense amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2021. We translate the results of our international operating segment from local currencies into U.S. dollars using currency rates in effect at different points in time in accordance with U.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported results. We are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance that excludes the impact of foreign currency fluctuations.

- *U.S.* Film rentals and advertising costs for the 2022 period were 55.4% of admissions revenue compared with 39.8% for the 2021 period. The rate for the 2022 period reflected the success of new film releases as discussed above. The rate for the 2021 period reflected the release of limited new films which skewed lower on our negotiated film rental scales, and the impact of library content. Concession supplies expenses for the 2022 period was 16.2% of concessions revenue compared with 16.7% of concession revenues for the 2021 period.

Salaries and wages increased to $67.1 million for the 2022 period expanded operating hours, significantly higher attendance volumes and wage rate pressures with average hourly rates increasing approximately 14% compared with the 2021 period. Facility lease expense, which is primarily fixed in nature, increased to $62.5 million primarily due to new theatres and an increase in percentage rent expense and common area maintenance costs. Utilities and other costs increased to $68.1 million, as many of these costs, such as janitorial costs, utilities costs, credit card fees and repairs and maintenance, are variable in nature and were impacted by the expansion of operating hours and significant increase in attendance.

- *International.* Film rentals and advertising costs for the 2022 period were 48.6% of admissions revenue compared with 51.3% for the 2021 period. The decrease in the film rentals and advertising rate was a result of decreased promotional and advertising costs as a percentage of revenue. Concession supplies expenses were 22.3% of concessions revenue compared with 26.2% of concession revenues for the 2021 period. The decrease in concessions supplies rate was driven by the disposal of perishable goods during the 2021 period due to temporary theatre closures.

Salaries and wages increased to $12.7 million as reported for the first quarter of 2022 due to expanded operating hours, increased staffing to service the significant increase in attendance volumes and inflationary impacts. Facility lease expense increased to $11.2 million as reported due to increased percentage rent driven by increases in revenue and the return of minimum rent thresholds that were temporarily adjusted while theatres were reopening during the 2021 period. Utilities and other costs increased to $18.8 million as reported, as many of these costs are variable in nature, such as credit card fees, security expenses, janitorial costs and repairs and maintenance, and were impacted by the expansion of operating hours and the significant increase in attendance. These expenses, as reported, were also impacted by exchange rates in each of the countries in which we operate.

*General and Administrative Expenses.* General and administrative expenses increased to $40.7 million for the 2022 period compared with $35.9 million for the 2021 period. The increase is primarily due to increased consulting fees and salaries to support our strategic initiatives and increased legal fees.

*Depreciation and Amortization.* Depreciation and amortization expense decreased to $61.7 million for the 2022 period compared with $68.2 million for the 2021 period primarily due to the impairment of theatre assets during 2021.

*(Gain) Loss on Disposal of Assets and Other.* A gain on disposal of assets and other of $6.9 million was recorded during the 2022 period compared with a loss of $4.5 million during the 2021 period. Activity for the 2022 period was primarily related to the sales of excess land parcels. Activity for the 2021 period was primarily related to the write-off of certain digital projectors received from DCIP in a non-cash distribution during November 2020 that were replaced with laser projectors. See Note 10 for discussion of the distribution of digital projectors from DCIP.

*Interest Expense.* Interest expense, which includes amortization of debt issue costs and amortization of accumulated losses for swap amendments, increased to $38.1 million during the 2022 period compared with $36.6 million for the 2021 period. The increase was primarily due to the issuance of notes (the 5.875% Senior Notes and 5.25% Senior Notes) to refinance certain notes that had lower interest rates (5.125% Senior Notes and 4.875% Senior Notes) during 2021. See further discussion at *Financing Activities* below.

*Loss on Extinguishment of Debt.* We recorded a loss on extinguishment of debt of $2.6 million during the 2021 period related to the early retirement of our 5.125% Senior Notes and 4.875% Senior Notes, including the write-off of unamortized debt issuance costs and legal and other fees paid.

*Equity in Loss of Affiliates.* An equity in loss of affiliates of $2.2 million was recorded during the 2022 period compared with $6.8 million during the 2021 period. The decrease in equity loss of affiliates is due to the recovery of our equity investees’ performance as the industry continues to recover. See Notes 9 and 10 to our condensed consolidated financial statements for information about our equity investments.

*Income Taxes.* An income tax benefit of $(1.8) million was recorded for the 2022 period compared with an income tax benefit of $(14.7) million for the 2021 period. The effective tax rate was approximately 2.4% for the 2022 period compared with 6.6% for the 2021 period. The effective tax rate for the 2022 period was impacted by valuation allowances related to deferred tax assets and foreign tax credits for which the ultimate realization is uncertain. For the 2022 period, we utilized the discrete effective tax rate method (“discrete method”), as allowed by ASC Topic 740-270-30-18, *Income Taxes — Interim Reporting*, to calculate our interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. We believe that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as the estimated annual effective tax rate method is not reliable due to significant variations in income tax expense relative to changes (increases or decreases) in estimated pretax earnings.

### Liquidity and Capital Resources

#### Operating Activities

We primarily collect our revenue in cash, mainly through box office receipts and the sale of concessions. Our revenues are generally received in cash prior to the payment of related expenses; therefore, we have an operating “float” and historically have not required traditional working capital financing. We temporarily closed all of our theatres during March 2020 and funded operating expenses with cash on hand and new financing discussed below under *Financing Activities* while theatres were closed and as we reopened our theatres. During the latter part of 2021, as we began to show a steady stream of new film content and our theatres were returning to more consistent operating hours, we began to generate positive cash flows from operations and transition back to our historical working capital “float” position. However, our working capital position will continue to fluctuate based on seasonality, the level of new film content, the timing of interest payments on our long-term debt as well as timing of payment of other operating expenses that are paid annually or semi-annually, such as property and other taxes and incentive bonuses. We believe our existing cash and expected cash flows from operations will be sufficient to meet our working capital, capital expenditures, and expected cash requirements from known contractual obligations for the next twelve months and beyond.

Cash used for operating activities was $118.8 million for the three months ended March 31, 2022 compared with $124.1 million for the three months ended March 31, 2021. The decrease in cash used for operating activities was primarily a result of the timing and level of revenues earned during each period and the timing of payments to vendors for expenses incurred during each period.

As discussed in Note 4 to our condensed consolidated financial statements, we negotiated the deferral of rent and other lease-related payments in 2020 and early 2021 with some of our landlords. As of March 31, 2022, approximately $22.1 million in deferred lease payments remain outstanding, the majority of which will be repaid during 2022.

#### Investing Activities

Our investing activities have been principally related to the development, remodel and acquisition of theatres. New theatre openings, remodels and acquisitions historically have been financed with internally generated cash and by debt financing, including borrowings under our senior secured credit facility. Cash used for investing activities was $8.1 million for the three months ended March 31, 2022 compared with $17.7 million for the three months ended March 31, 2021. The decrease in cash used for investing activities was primarily due to proceeds from the sale of excess land parcels recognized during the three months ended March 31, 2022.

Capital expenditures for the three months ended March 31, 2022 and 2021 were as follows (in millions):

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| New theatres | $6.6 | $2.3 |
| Existing theatres | $12.1 | $15.4 |
| Total capital expenditures | $18.7 | $17.7 |

31

We operated 520 theatres with 5,849 screens worldwide as of March 31, 2022. Theatres and screens acquired, built and closed during the three months ended March 31, 2022 were as follows:

| U.S (42 states) | January 1, 2022 | Built | Closed | March 31, 2022 |
| --- | ---: | ---: | ---: | ---: |
| Theatres | 321 | — | (1) | 320 |
| Screens | 4,408 | — | (12) | 4,396 |
| International (15 countries) |  |  |  |  |
| Theatres | 201 | — | (1) | 200 |
| Screens | 1,460 | 5 | (12) | 1,453 |
| Worldwide |  |  |  |  |
| Theatres | 522 | — | (2) | 520 |
| Screens | 5,868 | 5 | (24) | 5,849 |

As of March 31, 2022, we had the following signed commitments:

| Remainder of 2022 | Theatres | Screens | Estimated Cost (1) |
| --- | ---: | ---: | ---: |
| U.S. | 2 | 28 | $20.4 |
| International | 1 | 14 | 4.2 |
| Total | 3 | 42 | $24.6 |
| Subsequent to 2022 |  |  |  |
| U.S. | 3 | 34 | $20.8 |
| International | 6 | 36 | 16.2 |
| Total | 9 | 70 | $37.0 |
| Total commitments at March 31, 2022 | 12 | 112 | $61.6 |

(1) We expect approximately $24.6 million during the remainder of 2022 and $31.1 million and $5.9 million to be paid during 2023 and 2024, respectively. The timing of payments is subject to change as a result of construction or other delays.

Actual expenditures for continued theatre development, remodels and acquisitions are subject to change based upon the availability of attractive opportunities. During the next twelve months and the foreseeable future, we plan to fund capital expenditures for our continued development with cash flow from operations and, if needed, borrowings under our senior secured credit facility, proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.

#### Financing Activities

Cash used for financing activities was $8.6 million for the three months ended March 31, 2022 compared with cash provided by financing activities of $0.8 million for the three months ended March 31, 2021. During the three months ended March 31, 2021, we issued 5.875% Senior Notes, the proceeds of which were used to redeem the 5.125% Senior Notes, as discussed further below.

We, at the discretion of the board of directors and subject to applicable law, may pay dividends on our common stock. The amount, if any, of the dividends to be paid in the future will depend upon our then available cash balance, anticipated cash needs, overall financial condition, loan agreement restrictions as discussed below, future prospects for earnings and cash flows, as well as other relevant factors. As a result of the impact of the COVID-19 pandemic, we have suspended our quarterly dividend.

We may from time to time, subject to compliance with our debt instruments, purchase our debt securities on the open market depending upon the availability and prices of such securities. Long-term debt consisted of the following as of March 31, 2022 (in millions):

|  | March 31, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Cinemark Holdings, Inc. 4.500% convertible senior notes due 2025 | $460.0 | $460.0 |
| Cinemark USA, Inc. term loan due 2025 | 631.5 | 633.1 |
| Cinemark USA, Inc. 8.750% senior secured notes due 2025 | 250.0 | 250.0 |
| Cinemark USA, Inc. 5.875% senior notes due 2026 | 405.0 | 405.0 |
| Cinemark USA, Inc. 5.250% senior notes due 2028 | 765.0 | 765.0 |
| Other | 32.4 | 30.2 |
| Total long-term debt | $2,543.9 | $2,543.3 |
| Less: Current portion | 27.2 | 24.3 |
| Less: Debt issuance costs, net of accumulated amortization | 40.1 | 42.7 |
| Long-term debt, less current portion, net of unamortized debt issuance costs | $2,476.6 | $2,476.3 |

As of March 31, 2022, $100 million was available for borrowing under the revolving line of credit.

#### Contractual Obligations

There have been no material changes in our contractual obligations previously disclosed in “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed February 25, 2022.

#### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

#### Senior Secured Credit Facility

Cinemark USA, Inc. has a senior secured credit facility that includes a $700.0 million term loan and a $100.0 million revolving credit line (the “Credit Agreement”). Under the amended Credit Agreement, quarterly principal payments of $1.6 million are due on the term loan through December 31, 2024, with a final principal payment of $613.4 million due on March 29, 2025. Cinemark USA, Inc. had $100.0 million available borrowing capacity on the revolving credit line as of March 31, 2022.

Interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or, if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin of 0.75% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 1.75% per annum. Interest on the revolving credit line accrues, at our option, at: (A) a base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin that ranges from 0.50% to 1.25% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 1.50% to 2.25% per annum. The margin of the revolving credit line is determined by the consolidated net senior secured leverage ratio as defined in the Credit Agreement.

Cinemark USA, Inc.’s obligations under the Credit Agreement are guaranteed by Cinemark Holdings, Inc. and certain of Cinemark USA, Inc.’s domestic subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of Cinemark USA, Inc.’s and the guarantors’ personal property, including, without limitation, pledges of all of Cinemark USA, Inc.’s capital stock, all of the capital stock of certain of Cinemark USA, Inc.’s domestic subsidiaries and 65% of the voting stock of certain of its foreign subsidiaries.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on Cinemark USA, Inc.’s ability, and in certain instances, its subsidiaries’ and our ability, to consolidate or merge or liquidate, wind up or dissolve; substantially change the nature of its business; sell, transfer or dispose of assets; create or incur indebtedness; create liens; pay dividends or repurchase stock; and make capital expenditures and investments. If Cinemark USA, Inc. has borrowings outstanding on the revolving credit line, it is required to satisfy a consolidated net senior secured leverage ratio covenant as defined in the Credit Agreement, not to exceed 4.25 to 1. See below for discussion of recent covenant waivers.

The dividend restriction contained in the Credit Agreement prevents the Company and any of its subsidiaries from paying a dividend or otherwise distributing cash to its stockholders unless (1) the Company is not in default, and the distribution would not cause Cinemark USA, Inc. to be in default, under the Credit Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Credit Agreement, and (c) certain other defined amounts, or collectively, the Applicable Amount. As of March 31, 2022, Cinemark USA, Inc. could have distributed up to approximately $2.75 billion to its parent company and sole stockholder, Cinemark Holdings, Inc.

On April 17, 2020, in conjunction with the issuance of the 8.750% Secured Notes discussed below, we obtained a waiver of the leverage covenant from the majority of revolving lenders under the Credit Agreement for the fiscal quarters ending September 30, 2020 and December 31, 2020. The waiver is subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount.

On August 21, 2020, in conjunction with the issuance of the 4.50% Convertible Senior Notes discussed below, we further amended the waiver of the leverage covenant through the fiscal quarter ending September 30, 2021. The amendment also i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period ended December 31, 2021, ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending on December 31, 2021, March 31, 2022 and June 30, 2022, permits us to substitute Consolidated EBITDA for the first three fiscal quarters of 2019 in lieu of Consolidated EBITDA for the corresponding fiscal quarters of 2021, (iii) modifies the restrictions imposed by the covenant waiver and (iv) makes such other changes to permit the issuance of the 4.50% Convertible Senior Notes discussed below.

On June 15, 2021, in conjunction with the issuance of the 5.25% Senior Notes discussed below, the Credit Agreement was amended to, among other things, extend the maturity of the revolving credit line from November 28, 2022 to November 28, 2024.

We have three interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with the variable interest rates on the term loan outstanding under the Credit Agreement. See Note 7 of our condensed consolidated financial statements for discussion of the interest rate swaps.

As of March 31, 2022, there was $631.5 million outstanding under the term loan and no borrowings were outstanding under the $100.0 million revolving line of credit. The average interest rate on outstanding term loan borrowings under the Credit Agreement as of March 31, 2022 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed above.

#### 5.875% Senior Notes

On March 16, 2021, Cinemark USA, Inc. issued $405 million aggregate principal amount of 5.875% senior notes due 2026, at par value (the “5.875% Senior Notes”). Proceeds, after payment of fees, were used to fund a cash tender offer to purchase any and all of Cinemark USA’s 5.125% Senior Notes (the “5.125% Senior Notes”) and to redeem any of the 5.125% Notes that remained outstanding after the tender offer. See further discussion of the tender offer below. Interest on the 5.875% Senior Notes is payable on March 15 and September 15 of each year, beginning September 15, 2021. The 5.875% Senior Notes mature on March 15, 2026. The Company incurred debt issue costs of approximately $6.0 million in connection with the issuance, which are recorded as a reduction of long-term debt, less current on the condensed consolidated balance sheet.

The 5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.875% Senior Notes and the guarantees are senior unsecured obligations and rank equally in right of payment with all of Cinemark USA, Inc.’s and its guarantor’s existing and future senior debt and senior in right of payment to all of Cinemark USA, Inc.’s and its guarantors’ existing and future senior subordinated debt. The 5.875% Senior Notes and the guarantees are effectively subordinated to all of Cinemark USA, Inc.’s and its guarantor’s existing and future secured debt to the extent of the value of the collateral securing such debt, including all borrowings under Cinemark USA, Inc.’s amended senior secured credit facility. The 5.875% Senior Notes and the guarantees are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA, Inc.’s subsidiaries that do not guarantee the 5.875% Senior Notes.

Prior to March 15, 2023, Cinemark USA, Inc. may redeem all or any part of the 5.875% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.875% Senior Notes to the date of redemption. After March 15, 2023, Cinemark USA, Inc. may redeem the 5.875% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to March 15, 2023, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.875% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture.

#### 5.25% Senior Notes

On June 15, 2021, Cinemark USA, Inc. issued $765 million aggregate principal amount of 5.25% senior notes due 2028, at par value (the “5.25% Senior Notes”). Proceeds, after payment of fees, were used to redeem all of Cinemark USA’s 4.875% $755 million aggregate principal amount of Senior Notes due 2023 (the “4.875% Senior Notes”). Interest on the 5.25% Senior Notes is payable on January 15 and July 15 of each year, beginning January 15, 2022. The 5.25% Senior Notes mature on July 15, 2028.

The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of Cinemark USA, Inc.’s subsidiaries that guarantee, assume or become liable with respect to any of Cinemark USA, Inc.’s or a guarantor’s debt. The 5.25% Senior Notes and the guarantees will be Cinemark USA’s and the guarantors’ senior unsecured obligations and (i) rank equally in right of payment to Cinemark USA’s and the guarantors’ existing and future senior debt, including borrowings under Cinemark USA’s Credit Agreement (as defined below) and Cinemark USA’s existing senior notes, (ii) rank senior in right of payment to Cinemark USA’s and the guarantors’ future subordinated debt, (iii) are effectively subordinated to all of Cinemark USA’s and the guarantors’ existing and future secured debt, including all obligations under the Credit Agreement and Cinemark USA’s 8.750% senior secured notes due 2025, in each case to the extent of the value of the collateral securing such debt, (iv) are structurally subordinated to all existing and future debt and other liabilities of Cinemark USA’s non-guarantor subsidiaries, and (v) are structurally senior to the 4.50% convertible senior notes due 2025 issued by Cinemark Holdings.

Prior to July 15, 2024, Cinemark USA, Inc. may redeem all or any part of the 5.25% Senior Notes at its option at 100% of the principal amount plus a make-whole premium plus accrued and unpaid interest on the 5.25% Senior Notes to the date of redemption. On or after July 15, 2024, Cinemark USA, Inc. may redeem the 5.25% Senior Notes in whole or in part at redemption prices specified in the indenture. In addition, prior to July 15, 2024, Cinemark USA, Inc. may redeem up to 40% of the aggregate principal amount of the 5.25% Senior Notes from the net proceeds of certain equity offerings at the redemption price set forth in the indenture, so long as at least 60% of the principal amount of the 5.25% Senior Notes remains outstanding immediately after each such redemption.

#### 8.750% Secured Notes

On April 20, 2020, Cinemark USA, Inc. issued $250 million 8.750% senior secured notes (the “8.750% Secured Notes”). The 8.750% Secured Notes will mature on May 1, 2025. Interest on the 8.750% Secured Notes is payable on May 1 and November 1 of each year. Cinemark USA, Inc. may redeem the 8.750% Secured Notes in whole or in part at redemption prices specified in the indenture.

The 8.750% Secured Notes are fully and unconditionally guaranteed on a joint and several senior basis by certain of the Company’s subsidiaries that guarantee, assume or in any other manner become liable with respect to any of the Company’s or its guarantors’ other debt. If the Company cannot make payments on the 8.750% Secured Notes when they are due, the Company’s guarantors must make them instead. Under certain circumstances, the guarantees may be released without action by, or the consent of, the holders of the 8.750% Secured Notes.

#### 4.50% Convertible Senior Notes

On August 21, 2020, Cinemark Holdings, Inc. issued $460 million 4.50% convertible senior notes (the “4.50% Convertible Senior Notes”). The notes will mature on August 15, 2025, unless earlier repurchased or converted. Interest on the notes will be payable on February 15 and August 15 of each year, beginning on February 15, 2021.

Holders of the 4.50% Convertible Senior Notes may convert their 4.50% Convertible Senior Notes at their option at any time prior to the close of business on the business day immediately preceding May 15, 2025 only under the following circumstances: (1) during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (2) if we distribute to all or substantially all stockholders (i) rights options or warrants entitling them to purchase shares at a discount to the recent average trading price of our common stock (including due to a stockholder rights plan) or (ii) our assets or securities or rights, options or warrants to purchase the same with a per share value exceeding 10% of the trading price of our common stock, (3) upon the occurrence of specified corporate events as described further in the indenture. Beginning May 15, 2025, holders may convert their notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, or (4) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price (initially $14.35 per share), on each applicable trading day. Upon conversion of the notes, we will pay or deliver cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

The initial conversion rate is 69.6767 shares of our common stock per one thousand dollars principal amount of the 4.50% Convertible Senior Notes. The conversion rate will be subject to adjustment upon the occurrence of certain events. If a make-whole fundamental change as defined in the indenture occurs prior to the maturity date, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with such make-whole fundamental change.

The 4.50% Convertible Notes are effectively subordinated to any of our, or our subsidiaries’, existing and future secured debt to the extent of the value of the assets securing such indebtedness, including obligations under the Credit Agreement. The 4.50% Convertible Notes are structurally subordinated to all existing and future debt and other liabilities, including trade payables, including Cinemark USA’s 8.750% Secured Notes due 2025, 5.25% Senior Notes due 2028 and 5.875% Senior Notes due 2026, or, collectively, Cinemark USA’s senior notes (but excluding all obligations under the Credit Agreement which are guaranteed by Cinemark Holdings, inc.). The 4.50% Convertible Notes rank equally in right of payment with all of our existing and future unsubordinated debt, including all obligations under the Cinemark USA, Inc. Credit Agreement, which such Credit Agreement is guaranteed by Cinemark Holdings, Inc., and senior in right of payment to any future debt that is expressly subordinated in right of payment to the notes. The 4.50% Convertible Notes are not guaranteed by any of Cinemark Holdings, Inc.’s subsidiaries.

#### Borrowings of International Subsidiaries

As of March 31, 2022, certain of the Company’s international subsidiaries have an aggregate borrowing of $32.4 outstanding under various local bank loans. The Company has deposited cash into a collateral account to support the issuance of letters of credit to the lenders for certain of these international bank loans. The total amount deposited as of March 31, 2022 was $25.8 and is considered restricted cash.

During the year ended December 31, 2021, we obtained a waiver of the maintenance covenant related to the bank loans in Chile through June 30, 2022.

#### Covenant Compliance

The indentures governing the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes ("the indentures") contain covenants that limit, among other things, the ability of Cinemark USA, Inc. and certain of its subsidiaries to (1) make investments or other restricted payments, including paying dividends, making other distributions or repurchasing subordinated debt or equity, (2) incur additional indebtedness and issue preferred stock, (3) enter into transactions with affiliates, (4) enter new lines of business, (5) merge or consolidate with, or sell all or substantially all of its assets to, another person and (6) create liens. As of March 31, 2022, Cinemark USA, Inc. could have distributed up to approximately $2.98 billion to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indentures, subject to its available cash and other borrowing restrictions outlined in the indentures. Upon a change of control, as defined in the indentures, Cinemark USA, Inc. would be required to make an offer to repurchase the 5.875% Senior Notes, the 5.25% Senior Notes and the 8.750% Secured Notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest, if any, through the date of repurchase. The indentures allow Cinemark USA, Inc. to incur additional indebtedness if we satisfy the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of March 31, 2022 was 1.5.

As of March 31, 2022, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.

## Market risk

As filed, 2,220 characters.

We have exposure to financial market risks, including changes in interest rates, foreign currency exchange rates and other relevant market prices.

#### Interest Rate Risk

We currently have variable rate debt. An increase or decrease in interest rates would affect our interest expense related to this variable rate debt. We have three interest rate swap agreements that are used to hedge a portion of the interest rate risk associated with our term loan, covering $450 million of the $631.5 million outstanding at March 31, 2022. At March 31, 2022, we had an aggregate of approximately $213.9 million of variable rate debt outstanding, and a 100 basis point increase in market interest rates would increase our annual interest expense by $2.1 million.

The table below provides information about our fixed rate and variable rate long-term debt agreements as of March 31, 2022:

*(in millions)*

|  | Expected Maturity for the Twelve-Month Periods Ending March 31, 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | Fair Value | Average Interest Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fixed rate | $— | $— | $450.0 | $1,115.0 | $— | $765.0 | $2,330.0 | $2,468.9 | 5.3% |
| Variable rate | 27.2 | 12.1 | 169.8 | 1.4 | 1.2 | 2.2 | 213.9 | 209.4 | 3.1% |
| Total debt (1) | $27.2 | $12.1 | $619.8 | $1,116.4 | $1.2 | $767.2 | $2,543.9 | $2,678.3 |  |

(1) Amounts are presented before adjusting for debt issuance costs.

#### Interest Rate Swap Agreements

All of our interest rate swap agreements qualify for cash flow hedge accounting. The fair values of the interest rate swaps are recorded on our condensed consolidated balance sheet as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. See Note 7 to the condensed consolidated financial statements for further discussion of the interest rate swap agreements.

#### Foreign Currency Exchange Rate Risk

There have been no material changes in foreign currency exchange rate risk previously disclosed in “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed February 25, 2022.

## Controls and procedures

As filed, 1,528 characters.

#### Evaluation of the Effectiveness of Disclosure Controls and Procedures

As of March 31, 2022, we carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

#### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 that occurred during the quarter ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 128 characters.

See discussion in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed February 25, 2022.

Filed May 6, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-007987. Last ingested by Listed: Nov 3, 2026, 08:34 ET. No prices; not investment advice.