Cinemark Holdings, Inc. Q1 2009 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2009. Cinemark Holdings, Inc. is a leader in the motion picture exhibition industry with operations in the U.S., Canada, and various Latin American countries. The company operates two reportable segments: U.S. and International. The quarter included the acquisition of four U.S. theatres with 82 screens from Muvico Entertainment L.L.C. for approximately $49 million.
Key Financial Metrics
| Metric | Q1 2009 | Q1 2008 |
|---|---|---|
| Total Revenues | $425.8 million | $401.0 million |
| Net Income | $18.4 million | $6.4 million |
| Net Income (Attributable to Cinemark) | $17.6 million | $5.3 million |
| Earnings Per Share (Diluted) | $0.16 | $0.05 |
| Operating Cash Flow | $51.5 million | $24.7 million |
| Adjusted EBITDA | $98.0 million | $84.2 million |
| Cash and Equivalents (End of Period) | $305.5 million | $305.0 million |
| Total Debt (Long-term + Current) | $1,513.5 million | $1,508.5 million |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 6.2% year-over-year, driven by an 8.9% increase in total attendance (54.1 million patrons vs. 49.7 million). This was partially offset by a 2.1% decrease in average ticket price due to unfavorable foreign exchange rates.
- Segment Performance:
- U.S. Segment: Revenues increased 10.6% due to higher attendance and ticket prices.
- International Segment: Revenues decreased 8.5% primarily due to significant currency devaluation in Mexico, Brazil, and Chile, which reduced the U.S. dollar value of local revenues despite higher attendance.
- Profitability: Net income more than doubled to $18.4 million. Operating income rose to $50.6 million from $34.1 million. Interest expense decreased significantly to $25.5 million from $32.1 million due to debt repurchases and lower variable rates.
- Impairment Charges: Impairment of long-lived assets dropped to $1.0 million from $4.5 million in the prior year.
- Capital Expenditures: Cash used for investing activities increased to $71.3 million, primarily due to the $49 million Muvico acquisition.
Guidance, Outlook, and Risks
- Capital Expenditure Outlook: Management estimates remaining capital expenditures for 124 committed domestic screens will be approximately $41 million, and $12 million for 27 international screens.
- Debt Obligations: Semi-annual cash interest payments on the 9 3/4% senior discount notes (approx. $20 million per payment) are scheduled to commence on September 15, 2009. Prior to this date, interest has been accreted.
- Liquidity Risk: The availability of the $150 million revolving credit facility may be impacted by the insolvency of one lender with a $28.5 million commitment. While currently only $0.1 million is outstanding, the funding of the remaining commitment is uncertain.
- Foreign Exchange Risk: Continued volatility in foreign currencies (specifically the Brazilian Real and Mexican Peso) negatively impacts reported revenues and earnings from international operations.
- Seasonality: Results are subject to seasonality based on film release schedules, with peak periods typically in summer and the holiday season.
Investor Verification Checklist
- Debt Service Capacity: Verify the company's ability to service the upcoming $20 million semi-annual cash interest payments on senior discount notes starting September 2009.
- Credit Facility Status: Confirm the status of the insolvent lender's commitment under the revolving credit facility and its impact on liquidity.
- Foreign Exchange Exposure: Monitor exchange rate trends in Brazil, Mexico, and Chile, as these significantly impact the valuation of international assets and revenues.
- Acquisition Integration: Assess the performance of the newly acquired Muvico theatres (Florida and Maryland) in subsequent quarters.
- Film Slate Dependency: Evaluate the impact of the 2009 film release schedule (e.g., Harry Potter, Transformers) on attendance projections.