Cinemark Holdings, Inc. - 10-Q Summary (Period Ended Sept 30, 2009)
Business Context and Reporting Period
This report covers the quarterly period ended September 30, 2009, for Cinemark Holdings, Inc., the second-largest motion picture exhibitor globally by attendance and screen count. The company operates in the U.S., Canada, and 13 Latin American countries. The financial statements are unaudited.
Key Financial Metrics
| Metric | Three Months Ended Sept 30, 2009 | Nine Months Ended Sept 30, 2009 |
|---|---|---|
| Total Revenues | $496.8 million | $1,440.1 million |
| Net Income (Consolidated) | $22.1 million | $60.2 million |
| Net Income (Attributable to Cinemark) | $21.0 million | $57.2 million |
| Diluted EPS | $0.19 | $0.52 |
| Operating Income | $55.7 million | $176.8 million |
| Adjusted EBITDA | $104.8 million | $323.6 million |
| Cash and Equivalents | $359.1 million (as of Sept 30, 2009) | |
| Total Debt (Carrying Value) | $1,546.6 million | |
| Operating Cash Flow (9 months) | $30.7 million |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 4.3% in Q3 and 7.9% for the nine-month period compared to 2008. This was driven primarily by a 4.5% increase in attendance in Q3 and a 9.1% increase for the nine months.
- Profitability: Net income attributable to Cinemark increased 2.8% in Q3 and 38.9% for the nine months ended Sept 30, 2009, compared to the prior year periods.
- Debt Restructuring: The company issued $470 million in 8.625% senior notes due 2019. Proceeds were used to repurchase approximately $419.4 million of 9 3/4% senior discount notes due 2014. This resulted in a one-time loss on early retirement of debt of $27.9 million for the nine-month period.
- Acquisitions: The company acquired four U.S. theaters (82 screens) for $49.0 million and one Brazilian theater for $9.1 million during the nine-month period.
- Foreign Currency Impact: Unfavorable exchange rates negatively impacted international revenues per patron and ticket prices, particularly in Brazil, Mexico, and Chile, though the strengthening of the Brazilian Real provided a significant translation gain to equity.
Guidance, Outlook, and Risks
- Capital Expenditures: The company estimates remaining capital expenditures of approximately $34 million for 96 domestic screens and $23 million for 46 international screens committed as of Sept 30, 2009.
- Dividends: A quarterly dividend of $0.18 per share was declared on Nov 4, 2009, payable Dec 10, 2009. Total dividends paid in the first nine months of 2009 were $58.9 million.
- Liquidity: The company maintains approximately $121.5 million in available borrowing capacity under its revolving credit facility, though the insolvency of one lender creates uncertainty regarding a $28.5 million portion of that commitment.
- Risks: Key risks include the quality and quantity of film releases, foreign currency exchange rate fluctuations, and the ability to refinance debt. The company is subject to covenants limiting asset sales, dividends, and additional indebtedness.
Investor Verification Checklist
- Debt Covenants: Verify compliance with the 2.0x coverage ratio required by the new senior notes indenture (actual ratio was 5.6x as of Sept 30, 2009).
- Revolving Credit Facility: Confirm the status of the insolvent lender and the certainty of the $28.5 million commitment under the $150 million revolving line.
- Foreign Exchange Sensitivity: Assess the impact of a 10% unfavorable change in exchange rates, which management estimates would decrease international net income by approximately $5 million for the nine-month period.
- NCM Investment: Review the performance of National CineMedia (NCM), a joint venture, which contributed $15.8 million in distributions during the nine-month period.
- Impairment Charges: Monitor future impairment charges, as $8.1 million was recorded in the nine-month period primarily due to U.S. theater competition.