Cinemark Holdings, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. Cinemark operates movie theatres in the U.S. and Latin America. Comparisons below are with Q1 2020 unless stated otherwise. Amounts are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $114.4 million | $543.6 million; down 79.0% |
| Operating loss | $169.4 million | $42.9 million loss; Q1 2021 operating margin was approximately -148% |
| Net loss attributable to Cinemark | $208.2 million; diluted loss per share $1.75 | $59.6 million; diluted loss per share $0.51 |
| Adjusted EBITDA | $(92.0) million | $66.2 million |
| Cash used for operating activities | $124.1 million | $15.6 million |
| Capital expenditures | $17.7 million | $34.1 million |
| Cash and cash equivalents | $512.8 million at March 31 | $655.3 million at December 31, 2020 |
Admissions revenue fell 80.8%, concession revenue 79.3%, and other revenue 69.0%. Attendance declined 83.2% to 7.7 million. Higher average ticket price ($7.25, up 13.5%) and concession revenue per patron ($5.10, up 22.6%) partly reflected mix, pricing, and recognition of previously deferred loyalty revenue; they did not offset the attendance decline.
Total debt was approximately $2.54 billion, excluding lease obligations. The balance sheet also showed $1.31 billion of operating lease obligations and $127.4 million of finance lease obligations. Current liabilities were $594.5 million versus current assets of $754.8 million. Cinemark had $100 million available on its revolving credit line and no revolver borrowings at quarter-end. It reported $21.1 million of restricted cash supporting international loan letters of credit.
Material changes and notable items
- The pandemic continued to suppress operations: at quarter-end, 301 U.S. and 78 international theatres had reopened, with limited releases, reduced hours, and some international theatres temporarily closing again. Cinemark operated 523 theatres worldwide, down from 531 at the start of the quarter.
- On March 16, Cinemark issued $405 million of 5.875% senior notes due 2026 and used proceeds to retire its $400 million of 5.125% notes. The transaction produced a $2.6 million extinguishment loss. The refinancing extended the maturity but introduced a higher coupon.
- Deferred rent and other lease payments totaled $65.2 million at March 31; approximately $48.3 million was due within one year. Cinemark continued negotiating payment extensions with landlords and vendors.
- No long-lived asset impairment was recorded in Q1 2021, compared with $16.6 million in Q1 2020. Q1 2021 included $4.5 million of asset-disposal and other losses, primarily from replacing certain recently received digital projectors.
- Adoption of convertible-debt accounting guidance reclassified amounts between equity and debt and reduced opening equity by $68.2 million, net of deferred taxes; this was an accounting change, not an operating cash outflow.
- The quarterly dividend remained suspended. Cinemark paid no shareholder dividends in Q1 2021, versus $42.3 million in Q1 2020.
Outlook, management commentary, and risks
Management said that, based on its current recovery estimates, it believed it had and would generate sufficient cash to sustain operations, while emphasizing that COVID-19 continued to adversely affect results, cash flows, and financial condition. The filing provides no specific revenue, earnings, or attendance guidance. Management planned to limit operating costs and capital spending to essential activities while reopening theatres. The 2021 film slate included major planned releases, but release timing could still shift because of the pandemic.
Cinemark received approximately $136.8 million of cash tax refunds after March 31 related to carried-back net operating losses. At quarter-end, it reported a $174.7 million current income-tax receivable, including a $171 million federal receivable. These refunds support liquidity but do not eliminate continuing cash burn or debt and lease commitments.
The credit-facility leverage-covenant waiver was extended through the quarter ending September 30, 2021, with modified testing provisions thereafter. Cinemark stated it was in compliance with its debt agreements at March 31. It disclosed substantial debt-service obligations, restrictive debt covenants, and exposure to interest rates and foreign currencies; a 100-basis-point rate increase was estimated to raise annual interest expense by approximately $0.7 million.
Risks include the pace of theatre reopening and audience recovery, government restrictions and further COVID-related closures, film availability and release delays, fixed lease costs, liquidity and refinancing needs, and litigation. The company’s COVID-related insurance coverage claim against Factory Mutual was in litigation; management said it could not predict the outcome and did not expect a material adverse effect. A separate patent-infringement case was also pending.
Most important facts for investors to verify
- Whether reopening, attendance, and film-release schedules recover quickly enough to reduce operating losses and cash burn.
- Cash runway after the reported $124.1 million quarterly operating cash outflow, including the timing and use of post-quarter tax refunds.
- Debt maturities, interest costs, covenant-waiver terms and expiry, and the company’s ability to refinance or otherwise meet obligations.
- Timing and repayment terms for $65.2 million of deferred lease payments, alongside ongoing lease obligations.
- Whether management’s cash-sufficiency assessment remains valid if recovery is slower or theatre restrictions recur.