CINEMARK HOLDINGS, INC. 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.
Recent Developments
As we have previously disclosed, the COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry. The social and economic effects have been widespread. As a movie exhibitor that operates spaces where patrons gather in close proximity, we continue to be impacted by the pandemic. To comply with government mandates at the initial outbreak of the COVID-19 pandemic, we temporarily closed all of our theatres in theU.S. andLatin America in March of 2020, implemented temporary personnel and salary reductions, halted non-essential operating and capital expenditures, and negotiated modified timing and/or abatement of contractual payments with landlords and other major suppliers until our theatres reopened. In addition, we suspended our quarterly dividend. As ofSeptember 30, 2021 , all of our domestic and international theatres were open. Theatre staffing levels remain reduced as compared to pre-COVID levels due to reduced operating hours in certain locations as well as our focus on initiatives to enhance productivity. We continue to limit capital expenditures to essential activities and projects. We worked with landlords and other vendors during the nine months endedSeptember 30, 2021 to extend payment terms as it reopened theatres and continues to recover from the impacts of the COVID-19 pandemic.
Based on our current estimates of recovery, we believe we have, and will generate, sufficient cash to sustain operations. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on our business, results of operations, cash flows and financial condition.
General Information
We are a leader in the motion picture exhibition industry, with theatres in theU.S. ,Brazil ,Argentina ,Chile ,Colombia ,Ecuador ,Peru ,Honduras ,El Salvador ,Nicaragua ,Costa Rica ,Panama ,Guatemala ,Bolivia ,Curacao andParaguay . As ofSeptember 30, 2021 , we managed our business under two reportable operating segments -U.S. markets and international markets. See Note 17 to our condensed consolidated financial statements. We generate revenues primarily from filmed entertainment box office receipts and concession sales with additional revenues from screen advertising sales 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 live and pre-recorded sports programs, concert events, theMetropolitan Opera , in-theatre gaming and other special events in our theatres. In-theatre advertising for our domestic theatres is provided by National CineMedia. In our international locations, 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 nine months endedSeptember 30, 2021 included new releases Shang-Chi and the Legend of the Ten Rings, Black Widow, F9: The Fast Saga, A Quiet Place Part II, Jungle Cruise, Free Guy, Godzilla vs. Kong, Cruella, Space Jam: A New Legacy and The Conjuring: The Devil Made Me Do It. Films currently scheduled for release during the remainder of 2021 include Venom: Let There Be Carnage, Eternals, Ghostbusters: Afterlife, The Matrix Resurrections, No Time to Die, Encanto, Sing 2,Halloween Kills, Dune,West Side Story and the Marvel sequel Spider-man; No Way Home, among other films. Film rental and advertising costs are variable in nature and fluctuate with admissions revenues. Film rental costs as a percentage of revenues are generally higher for periods in which more blockbuster films are released. The Company also receives virtual print fees from studios for certain of its international locations, which are included as a contra-expense in film rentals and advertising costs. Promotional expenses are generally variable in nature and primarily include the placement of film-specific social and digital media spots promoting film content currently playing in our theatres. Advertising costs, which are expensed as incurred, are primarily related to campaigns for new and renovated theatres, loyalty and membership programs and brand advertising that vary depending on the timing of such campaigns.
Concession supplies expenses are variable in nature and fluctuate with our concession revenues and product mix. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates.
Salaries and wages for our theatres generally move in relation to revenues as
theatre staffing is adjusted to respond to changes in attendance and also
include a fixed cost component (i.e. the minimum staffing costs to operate a
theatre during non-peak periods). In some international locations, staffing
levels are also subject to local regulations.
Facility lease expenses are primarily fixed costs at the theatre level as most
of our facility leases require fixed monthly minimum rent payments. 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 expenses as a percentage of
revenues are also affected by the number of theatres under operating leases, the
number of theatres under finance leases and the number of owned theatres.
32
--------------------------------------------------------------------------------
Utilities and other costs include both fixed and variable costs and primarily
consist of utilities, expenses for projection and sound equipment maintenance
and monitoring, credit card fees, third party ticket sales commissions, property
taxes, janitorial costs, repairs, maintenance and security services.
General and administrative expenses are primarily fixed in nature and consist of
the costs to support the overall management of the Company, including base,
incentive compensation and benefits for our corporate office personnel, facility
expenses for our corporate offices, consulting fees, professional fees,
cloud-based software licensing fees, travel expenses, 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, certain operating
data and the percentage of revenues represented by certain items reflected in
our condensed consolidated statements of income.
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Operating data (in millions):
Revenues
Admissions $ 225.5 $ 14.9 $ 435.1 $ 307.4
Concession 164.2 9.1 313.5 199.6
Other 45.1 11.5 95.2 81.1
Total revenues $ 434.8 $ 35.5 $ 843.8 $ 588.1
Cost of operations
Film rentals and advertising 117.0 8.2 216.8 165.2
Concession supplies 28.2 2.7 54.2 39.9
Salaries and wages 67.6 20.2 149.2 116.6
Facility lease expense 68.8 67.1 200.8 214.5
Utilities and other 81.7 43.3 192.0 178.7
General and administrative
expenses 38.6 30.4 111.8 99.4
Depreciation and amortization 67.2 62.6 202.3 191.4
Impairment of long-lived assets 7.5 24.6 7.5 41.2
Restructuring costs (0.3 ) 0.6 (1.3 ) 20.1
(Gain) loss on disposal of assets
and other 1.0 (13.3 ) 7.9 (11.0 )
Total cost of operations 477.3 246.4 1,141.2 1,056.0
Operating loss $ (42.5 ) $ (210.9 ) $ (297.4 ) $ (467.9 )
Operating data as a percentage of
total revenues:
Revenues
Admissions 51.9 % 42.0 % 51.6 % 52.3 %
Concession 37.8 % 25.6 % 37.2 % 33.9 %
Other 10.3 % 32.4 % 11.2 % 13.8 %
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of operations (1)
Film rentals and advertising 51.9 % NM 49.8 % 53.7 %
Concession supplies 17.2 % NM 17.3 % 20.0 %
Salaries and wages 15.5 % NM 17.7 % 19.8 %
Facility lease expense 15.8 % NM 23.8 % 36.5 %
Utilities and other 18.8 % NM 22.8 % 30.4 %
General and administrative
expenses 8.9 % NM 13.2 % 16.9 %
Total cost of operations 109.8 % NM 135.2 % 179.6 %
Operating income (loss) (9.8 )% NM (35.2 )% (79.6 )%
Average screen count (month end
average) 5,876 5,975 5,890 6,068
(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.
Certain values are considered not meaningful ("NM") as they are not comparable
due to the temporary theatre closures effective in March 2020 .
33
--------------------------------------------------------------------------------
Three months ended
Three months ended
Three months endedSeptember 30, 2020 - All of our domestic and international theatres were temporarily closed effectiveMarch 17, 2020 andMarch 18, 2020 , respectively, as a result of the COVID-19 pandemic. We began reopening our domestic theatres inJune 2020 and operated under a test-and-learn strategy to define training, communication, implementation and execution of enhanced health and safety protocols. These theatres opened to reduced operating hours with library content and "welcome back" pricing for tickets and concession products to encourage patrons to return to the movies. As ofSeptember 30, 2020 , we had 252 domestic theatres and 15 international theatres reopened.
As a result of theatre closures during the three months ended
U.S. Operating Segment International Operating Segment Consolidated
Constant
Currency (3)
2021 2020 2021 2020 2021 2021 2020
Admissions
revenues (1) $ 195.3 $ 14.9 $ 30.2 $ 0.1 $ 32.2 $ 225.5 $ 15.0
Concession
revenues (1) $ 142.6 $ 8.9 $ 21.6 $ 0.3 $ 23.0 $ 164.2 $ 9.2
Other revenues
(1)(2) $ 37.6 $ 10.8 $ 7.5 $ 0.7 $ 7.9 $ 45.1 $ 11.5
Total revenues
(1)(2) $ 375.5 $ 34.6 $ 59.3 $ 1.1 $ 63.1 $ 434.8 $ 35.7
Attendance (1) 21.5 1.9 9.2 - 30.7 1.9
Average ticket
price (1) $ 9.08 $ 8.01 $ 3.28 NM $ 3.50 $ 7.35 $ 7.96
Concession
revenues per
patron (1) $ 6.63 $ 4.79 $ 2.35 NM $ 2.50 $ 5.35 $ 4.87
(1)
Revenues and attendance amounts in millions. 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 2020.
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. The third quarter of 2021 included new releases such as Shang-Chi and the
Legend of the Ten Rings, Black Widow, Jungle Cruise, Free Guy, F9: The Fast Saga
and Space Jam: A New Legacy. Average ticket price was $9.08 , which was impacted
by ticket type mix and a reduced number of weekday and matinee showtimes.
Concession revenues per patron was $6.63 , which was impacted by core concession
product sales, the reintroduction of enhanced food and beverage options and the
recognition of previously deferred loyalty revenues. Other revenues for the
third quarter of 2021 included the amortization of NCM screen advertising
advances, screen rental revenue, promotional and trailer placement income
related to new film releases and transactional fees. Other revenues for the
third quarter of 2020 primarily included the amortization of NCM screen
advertising advances.
?
International. We offered new releases and some library content in our
international theatres during the third quarter of 2021, resulting in 9.2
million in attendance, $30.2 million of admissions revenue and $21.6 million of
concessions revenue. Our average ticket price was $3.28 as reported and $3.50 in
constant currency. Concession revenues per patron of $2.35 as reported, and
$2.50 in constant currency, which was impacted by purchase incidence of our core
concession items, inflation, new premium combo offerings, and the volume of
retail concession sales. Other revenues primarily included screen advertising
and loyalty membership revenues.
Cost of Operations. The table below summarizes our theatre operating costs (in
millions) by reportable operating segment for the three months ended September
30, 2021 and 2020.
U.S. Operating Segment International Operating Segment Consolidated
Constant
Currency (1)
2021 2020 2021 2020 2021 2021 2020
Film rentals and
advertising $ 101.9 $ 8.1 $ 15.1 $ 0.1 $ 16.2 $ 117.0 $ 8.2
Concession
supplies $ 23.0 $ 2.3 $ 5.2 $ 0.4 $ 5.6 $ 28.2 $ 2.7
Salaries and
wages $ 58.0 $ 15.9 $ 9.6 $ 4.3 $ 10.1 $ 67.6 $ 20.2
Facility lease
expense $ 58.8 $ 60.8 $ 10.0 $ 6.3 $ 10.4 $ 68.8 $ 67.1
Utilities and
other $ 68.1 $ 36.5 $ 13.6 $ 6.8 $ 14.4 $ 81.7 $ 43.3
(1)
Constant currency expense amounts, which are non-GAAP measurements, were
calculated using the average exchange rate for the corresponding month for 2020.
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
34
-------------------------------------------------------------------------------- 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 third quarter of 2021 were 52.2% of admissions revenue. New films released during the third quarter of 2021 had lower performing box office as a result of the current environment, which skewed lower on our negotiated film rental scales. Concession supplies expenses for the third quarter of 2021 were 16.1% of concessions revenue. The concession supplies rate for the third quarter of 2021 reflected the impact of our retail price increases and favorable product mix, which offset certain supply chain cost pressures. Salaries and wages increased to$58.0 million for the third quarter of 2021 as all of our theatres were open compared to only 252 theatres opened at the end of the third quarter of 2020. We also began extending operating hours to accommodate the release of new films while maintaining our focus on efficient staffing levels. Facility lease expense, which is primarily fixed in nature, reflects a slight increase in percentage rent expense and common area maintenance costs as volumes increased, partially offset by the impact of the permanent closure of certain theatres. Utilities and other costs increased to$68.1 million , as many of these costs, such as credit card fees, electricity costs, janitorial costs, repairs and maintenance and security expense are variable in nature and have increased with the improved attendance from new film content. ? International. Film rentals and advertising costs for third quarter of 2021 were 50.0% of admissions revenue. Concession supplies expenses, which included a higher mix of retail and premium concession products, were 24.1% of concessions revenue. Salaries and wages increased to$9.6 million as reported for the third quarter of 2021 as many of our theatres reopened during the quarter. Facility lease expense increased to$10.0 million for the third quarter of 2021 reflecting payment of rent under alternative structures, such as percentage rents in place of minimum fixed rents, as theatres recover, partially offset by the impact of the permanent closure of certain theatres. Utilities and other costs increased to$13.6 million , as many of these costs are variable in nature and have increased with the improved attendance from new film content and theatre reopenings. 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$38.6 million for the third quarter of 2021 compared to$30.4 million for the third quarter of 2020. The increase is primarily due to temporary salary reductions for corporate office staff during the third quarter of 2020 and increased incentive and share based award compensation expense as a result of certain retention measures during the third quarter of 2021. Depreciation and Amortization. Depreciation and amortization expense increased to$67.2 million for the third quarter of 2021 compared to$62.6 million for the third quarter of 2020 primarily due to the digital projectors received in a non-cash distribution from DCIP during the fourth quarter of 2020. See Note 10 to the condensed consolidated financial statements for discussion of the non-cash distribution from DCIP. (Gain) Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of$1.0 million during the third quarter of 2021 compared to a gain of$13.3 million during the third quarter of 2020. Activity for the third quarter of 2021 was primarily related to the removal and disposal of assets at closed theatres. Activity for the third quarter of 2020 was primarily related to a favorable litigation outcome for a case that was previously accrued. Interest Expense. Interest expense, which includes amortization of debt issue costs and amortization of accumulated losses for swap amendments, increased to$38.0 million during the third quarter of 2021 compared to$36.6 million the third quarter of 2020. The increase was primarily due to the issuance of notes discussed at Note 7 to our condensed consolidated financial statements. Distributions from DCIP. We recorded distributions from DCIP of$6.5 million during the third quarter of 2021. These distributions were in excess of the carrying value of our investment in DCIP, which was zero. See Note 10 to our condensed consolidated financial statements for discussion of our investment in DCIP. Equity in Loss of Affiliates. We recorded equity in loss of affiliates of$7.1 million during the third quarter of 2021 compared to$16.1 million during the third quarter of 2020. Our equity method investees are also recovering from the impacts of the COVID-19 pandemic. See Note 2 to our condensed consolidated financial statements for additional discussion of the COVID-19 pandemic. See Notes 9 and 10 to our condensed consolidated financial statements for information about our equity investments. Income Taxes. An income tax benefit of$(8.9) million was recorded for the third quarter of 2021 compared to an income tax benefit of$(121.1) million for the third quarter of 2020. The effective tax rate was approximately 10.3% for the third quarter of 2021 compared to 45.0% for the third quarter of 2020. The effective tax rate for the third quarter of 2021 was negatively impacted by valuation allowances related to deferred tax assets for which the ultimate realization is uncertain. The effective tax rate for third quarter of 2020 was favorably impacted by the carryback of 2020 losses to tax years that had a 35% federal tax rate under the provisions of the CARES Act. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the 35
--------------------------------------------------------------------------------
effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.
Nine months ended
All of our domestic and international theatres were open as ofSeptember 30, 2021 . Certain of our international theatres were temporarily closed for portions of the 2021 period. U.S. Operating Segment International Operating Segment Consolidated Constant Currency (3) % % % % 2021 2020 Change 2021 2020 Change 2021 Change 2021 2020 Change Admissions revenues (1)$ 384.4 $ 247.2 55.5 %$ 50.7 $ 60.2 (15.8 )%$ 54.1 (10.1 )%$ 435.1 $ 307.4 41.5 % Concession revenues (1)$ 275.0 $ 161.7 70.1 %$ 38.5 $ 37.9 1.6 %$ 40.8 7.7 %$ 313.5 $ 199.6 57.1 % Other revenues (1)(2)$ 82.5 $ 61.2 34.8 %$ 12.7 $ 19.9 (36.2 )%$ 13.9 (30.2 )%$ 95.2 $ 81.1 17.4 % Total revenues (1)(2)$ 741.9 $ 470.1 57.8 %$ 101.9 $ 118.0 (13.6 )%$ 108.8 (7.8 )%$ 843.8 $ 588.1 43.5 % Attendance (1) 41.8 29.8 40.3 % 15.7 17.9 (12.3 )% 57.5 47.7 20.5 % Average ticket price (1)$ 9.20 $ 8.30 10.8 %$ 3.23 $ 3.36 (3.9 )%$ 3.45 2.7 %$ 7.57 $ 6.44 17.5 % Concession revenues per patron (1)$ 6.58 $ 5.43 21.2 %$ 2.45 $ 2.12 15.6 %$ 2.60 22.6 %$ 5.45 $ 4.18 30.4 % (1) Revenues and attendance amounts in millions. 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 2020. We translate the results of our international operating segment from local currencies intoU.S. dollars using currency rates in effect at different points in time in accordance withU.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. We showed many new releases during the 2021 period, including new releases Shang-Chi and the Legend of the Ten Rings, Black Widow, F9: The Fast Saga, A Quiet Place Part II, Jungle Cruise, Free Guy, Godzilla vs. Kong, Cruella, Space Jam: A New Legacy and The Conjuring: The Devil Made Me Do It and also showed some library content. Additionally, we continued to offer PrivateWatch Parties to our patrons. Average ticket price increased 10.8% to$9.20 during the 2021 period compared to$8.30 during the 2020 period, primarily as a result of the mix of fewer matinee and weekday showtimes, the impact of PrivateWatch Parties and recognition of previously deferred loyalty revenues. Concession revenues per patron increased 21.2% to$6.58 during the 2021 compared to$5.43 during the 2020 period, driven by an increase in overall purchase incidence across core concession items, price increases and the recognition of previously deferred loyalty revenues. Other revenues for the 2021 and 2020 periods included the amortization of NCM screen advertising advances. Other revenues for the 2021 period also included screen rental revenue, promotional and trailer placement income related to the recent new film releases and transactional fees, which were lower in the 2020 period as a result of reduced attendance. ? International. We showed new releases and some library content in our international theatres during the 2021 period, resulting in 15.7 million in attendance,$50.7 million of admissions revenues and$38.5 million of concession revenues. Our average ticket price was$3.23 as reported,$3.45 in constant currency, compared to the 2020 period of$3.36 . Concession revenues per patron was$2.45 as reported,$2.60 in constant currency, for the 2021 period compared to$2.12 in the 2020 period. The increase in concession revenues per patron was a result of increased purchase incidence of our core concession items, the impact of inflation, new premium combo offerings, and increased retail concession sales. Other revenues primarily included screen advertising and loyalty membership revenues and were impacted by reduced attendance. Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the nine months endedSeptember 30, 2021 and 2020. U.S. Operating Segment International Operating Segment Consolidated Constant Currency (1) 2021 2020 2021 2020 2021 2021 2020 Film rentals and
advertising$ 191.5 $ 136.3 $ 25.3 $ 28.9 $ 27.2$ 216.8 $ 165.2 Concession supplies$ 44.6 $ 29.4 $ 9.6 $ 10.5 $ 10.2$ 54.2 $ 39.9 Salaries and wages$ 126.4 $ 90.5 $ 22.8 $ 26.1 $ 24.5$ 149.2 $ 116.6 Facility lease expense$ 177.7 $ 186.0 $ 23.1 $ 28.5 $ 24.0$ 200.8 $ 214.5 Utilities and other$ 161.0 $ 140.3 $ 31.0 $ 38.4 $ 33.4$ 192.0 $ 178.7 (1) Constant currency expense amounts, which are non-GAAP measurements, were calculated using the average exchange rate for the corresponding month for 2020. We translate the results of our international operating segment from local currencies intoU.S. dollars using currency rates in effect at different points in time in accordance withU.S. GAAP. Significant changes in foreign currency exchange rates from one period to the next can result in meaningful variations in reported 36
-------------------------------------------------------------------------------- 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 2021 period were 49.8% of admissions revenue compared to 55.1% for the 2020 period. The rate for the 2021 period reflected the release of new films which skewed lower on our negotiated film rental scales, and the impact of library content. Concession supplies expenses for the 2021 period was 16.2% of concessions revenue compared to 18.2% of concession revenues for the 2020 period. The concession supplies rate for the 2021 period reflected our retail price increases and the impact of a favorable product mix, partially offset by the disposal of perishable goods related to prior theatre closures. Salaries and wages increased to$126.4 million for the 2021 period as theatre operating hours continue to expand to service growing attendance demand. Facility lease expense, which is primarily fixed in nature, decreased$8.3 million primarily due to a decline in percentage rent expense and common area maintenance costs, as well as the permanent closure of certain theatres. Utilities and other costs increased$20.7 million , as many of these costs, such as janitorial costs, electricity costs, credit card fees and repairs and maintenance, are variable in nature and were impacted by lower attendance as a result of the temporary closures during the 2020 period. ? International. Film rentals and advertising costs for the 2021 period were 49.9% of admissions revenue compared to 48.0% for the 2020 period. The increase in the film rentals and advertising rate was a result of increased promotional and advertising costs as a percentage of revenue as well as a decrease in virtual print fees collected from studios as cost recoupment is attained on the digital equipment. Concession supplies expenses were 24.9% of concessions revenue compared to 27.7% of concession revenues for the 2020 period, driven by a higher mix of retail and premium concession products, partially offset by the disposal of perishable goods due to temporary theatre closures. Salaries and wages decreased$3.3 million as reported for the 2021 period as compared to the 2020 period as a result of temporary theatre closures and limited operating hours for those theatres that were open. Facility lease expense decreased$5.4 million as reported due to our negotiations with certain landlords to shift from a minimum rent structure to percentage rent while we recover from the pandemic, as well as lower percentage rent at other locations. Utilities and other costs decreased$7.3 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 limited operating hours of our theatres as well as periodic closures during the 2021 period. 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$111.8 million for the 2021 period compared to$99.4 million for the 2020 period. The increase is primarily due to the temporary salary reductions and furloughs for our corporate workforce during the 2020 period and increased incentive and share based award compensation expense as a result of certain retention measures during the 2021 period. Depreciation and Amortization. Depreciation and amortization expense increased to$202.3 million for the 2021 period compared to$191.4 million for the 2020 period primarily due to the digital projectors received in a non-cash distribution from DCIP during the fourth quarter of 2020. See Note 10 to the condensed consolidated financial statements for discussion of the non-cash distribution from DCIP. Impairment of Long-Lived Assets. We recorded asset impairment charges of$7.5 million during the 2021 period. We recorded asset impairment charges of$41.2 million during the 2020 period. The asset impairment charges recorded during the 2021 and 2020 periods were primarily a result of the prolonged impact of the COVID pandemic on our operations, as some theatres remained closed and film content continued to shift into future periods, both of which impacted our estimated future cash flows for theatres. Impairment charges for the 2021 period impacted two countries. Impairment charges for the 2020 period impacted eight countries. See Note 13 to our condensed consolidated financial statements. Restructuring Costs. Restructuring costs were$(1.3) million during the 2021 period compared to$20.1 million during the 2020 period. The credit recorded during the 2021 period was primarily the result of settlements of lease obligations below the original estimated amounts. Charges recorded during the 2020 period related to a restructuring plan implemented during the second quarter of 2020. See Note 2 to our condensed consolidated financial statements for further discussion. (Gain) Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of$7.9 million during the 2021 period compared to a gain of$11.0 million during the 2020 period. Activity for the 2021 period was primarily related to the write-off of certain digital projectors recently received from DCIP in a non-cash distribution that were replaced with laser projectors, partially offset by gains on the sales of excess land parcels. See Note 10 for discussion of the distribution of digital projectors from DCIP. Activity for the 2020 period was primarily due to a favorable litigation outcome for a case that was previously accrued, partially offset by the retirement of assets related to theatre remodels. 37
-------------------------------------------------------------------------------- Interest Expense. Interest expense, which includes amortization of debt issue costs and amortization of accumulated losses for swap amendments, increased to$111.6 million during the 2021 period compared to$92.3 million for the 2020 period. The increase was primarily due to the issuance of notes discussed at Note 7 to our condensed consolidated financial statements. Loss on Extinguishment of Debt. We recorded a loss on extinguishment of debt of$6.5 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. See Note 7 to our condensed consolidated financial statements. Distributions from NCM. We recorded distributions from NCM of$0.1 million during the 2021 period compared to$7.0 million recorded during the 2020 period. These distributions were in excess of the carrying value of our Tranche 1 investment. The decrease in distributions from NCM is primarily due to the impact of theatres being temporarily closed as a result of the COVID-19 pandemic as discussed at Note 2. See Note 9 to our condensed consolidated financial statements for discussion of our investment in NCM. Distributions from DCIP. We recorded distributions from DCIP of$6.5 million during the 2021 period. These distributions were in excess of the carrying value of our investment in DCIP, which was zero. See Note 10 to our condensed consolidated financial statements for discussion of our investment in DCIP. Equity in Loss of Affiliates. We recorded equity in loss of affiliates of$22.1 million during the 2021 period compared to$27.7 million during the 2020 period. Our equity method investees are also recovering from the impacts of the COVID-19 pandemic. See Notes 9 and 10 to our condensed consolidated financial statements for information about our equity investments. Income Taxes. An income tax benefit of$(15.6) million was recorded for the 2021 period compared to income tax benefit of$(222.4) million for the 2020 period. The effective tax rate was approximately 3.5% for the 2021 period compared to 37.0% for the 2020 period. As a result of continued projected losses in 2021, the effective tax rate was negatively impacted by valuation allowances related to certain foreign tax credits and deferred tax assets for which the ultimate realization is uncertain. The effective tax rate for the 2020 period was favorably impacted by the carryback of 2020 losses to tax years that had a 35% federal tax rate under the provisions of the CARES Act. 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.
Liquidity and Capital Resources
Operating Activities
We primarily collect our revenues in cash, mainly through box office receipts and the sale of concessions. Our revenues are 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. However, as we reopened our theatres that were temporarily closed duringMarch 2020 , we have funded operating expenses with cash on hand and recent additional financing discussed below under Financing Activities. Cash used for operating activities was$42.2 million for the nine months endedSeptember 30, 2021 compared to$167.7 million for the nine months endedSeptember 30, 2020 . The decrease in cash used for operating activities was primarily a result of$136.8 million of tax refunds received duringApril 2021 , the timing and level of revenues earned during each period and the timing of payments to vendors for expenses incurred during each period, partially offset by payments of previously deferred rent. 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. Approximately$43.0 million in deferred lease payments remain as ofSeptember 30, 2021 . Approximately$37.6 million will be repaid within one year and the remaining$5.4 million will be repaid in subsequent years. 38 --------------------------------------------------------------------------------
Investing Activities
Our investing activities have been principally related to the development, remodel and acquisition of theatres. New theatre openings 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$55.1 million for the nine months endedSeptember 30, 2021 compared to$67.5 million for the nine months endedSeptember 30, 2020 . The decrease in cash used for investing activities was primarily due to reduced capital expenditures as we continue to limit spend to essential projects. Capital expenditures for the nine months endedSeptember 30, 2021 and 2020 were as follows (in millions): Period New Theatres Existing Theatres Total Nine Months Ended September 30, 2021 $ 24.1 $ 33.1$ 57.2 Nine Months Ended September 30, 2020 $ 18.7 $
48.9
We operated 524 theatres with 5,897 screens worldwide as ofSeptember 30, 2021 . Theatres and screens acquired, built and closed during the three months endedSeptember 30, 2021 were as follows: January 1, 2021 Built Closed September 30, 2021U.S (42 states) Theatres 331 1 (8 ) 324 Screens 4,507 14 (81 ) 4,440 International (15 countries) Theatres 200 3 (3 ) 200 Screens 1,451 25 (19 ) 1,457 Worldwide Theatres 531 4 (11 ) 524 Screens 5,958 39 (100 ) 5,897 As ofSeptember 30, 2021 , we had the following signed commitments (costs in millions): Estimated Theatres Screens Cost (1) Remainder of 2021 U.S. 2 28$ 16.1 International - 5 3.7 Total 2 33$ 19.8 Subsequent to 2021 U.S. 5 62$ 41.0 International 7 50 22.4 Total 12 112$ 63.4
Total commitments at
(1)
We expect approximately$19.8 million during the remainder of 2021 and$26.0 million ,$31.5 million and$5.9 million to be paid during 2022, 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. We may fund capital expenditures for our continued development with cash flow from operations, borrowings under our senior secured credit facility, and proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate. Financing Activities Cash used for financing activities was$12.9 million for the nine months endedSeptember 30, 2021 compared to cash provided by financing activities of$577.5 million for the nine months endedSeptember 30, 2020 . During the nine months endedSeptember 30, 2021 , we issued 5.875% Senior Notes and 5.25% Senior Notes, the proceeds of which were used to redeem the 5.125% Senior Notes and the 4.875% Senior Notes, respectively, as discussed further below. We paid approximately$17.3 million in debt issuance costs and 39 --------------------------------------------------------------------------------$2.1 million in fees related to these transactions and an amendment to our Senior Secured Credit Facility during the nine months endedSeptember 30, 2021 . During the nine months endedSeptember 30, 2020 , we borrowed$98.8 million on our revolving line-of-credit, which was repaid during the third quarter of 2020, issued the 8.750% Secured Notes discussed below and paid dividends to stockholders of$42.3 million . 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 ofSeptember 30, 2021 (in millions):
460.0
Cinemark USA, Inc. term loan $
634.8
Cinemark USA, Inc. 8.750% senior secured notes due 2025
250.0
Cinemark USA, Inc. 5.875% senior notes due 2026
405.0
Cinemark USA, Inc. 5.250% senior notes due 2028 765.0 Other debt 28.3 Total long-term debt $ 2,543.1 Less current portion 20.3 Subtotal long-term debt, less current portion $
2,522.8
Less: Debt issuance costs, net of accumulated amortization
45.5
Long-term debt, less current portion, net of unamortized debt issuance costs $ 2,477.3
As of
Contractual Obligations During the nine months endedSeptember 30, 2021 ,Cinemark USA, Inc. issued the 5.875% Senior Notes and the 5.25% Senior Notes and redeemed the 5.125% Senior Notes and the 4.875% Senior Notes. Included below is an updated summary of long-term debt obligations and related estimated scheduled interest payment obligations as ofSeptember 30, 2021 , reflecting these changes. Payments Due by Period (in millions) Less Than After Contractual Obligations Total One Year 1 - 3 Years 3 - 5 Years 5 Years Long-term debt (1)$ 2,543.1 $ 20.3 $ 21.1 $ 1,730.2 $ 771.5 Scheduled interest payments on long-term debt (2)$ 605.1 $ 129.2 $ 255.8 $ 151.3 $ 68.8 (1) Amounts are presented before adjusting for unamortized debt issuance costs. (2) Amounts include scheduled interest payments on fixed rate and variable rate debt agreements. Estimates for the variable rate interest payments were based on interest rates in effect onSeptember 30, 2021 .
There have been no other 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
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 throughDecember 31, 2024 , with a final principal payment of$613.4 million due onMarch 29, 2025 .Cinemark USA, Inc. had$100.0 million available borrowing capacity on the revolving credit line as ofSeptember 30, 2021 . Interest on the term loan accrues atCinemark 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 aFederal 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 40
-------------------------------------------------------------------------------- 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 aFederal 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 byCinemark Holdings, Inc. and certain ofCinemark USA, Inc.'s domestic subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all ofCinemark USA, Inc.'s and the guarantors' personal property, including, without limitation, pledges of all ofCinemark USA, Inc.'s capital stock, all of the capital stock of certain ofCinemark 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 onCinemark 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. IfCinemark 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 causeCinemark 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 sinceDecember 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 byCinemark Holdings, Inc. orCinemark USA, Inc. as common equity sinceDecember 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 (collectively the "Applicable Amount"). OnApril 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 endingSeptember 30, 2020 andDecember 31, 2020 . The waiver is subject to certain liquidity thresholds, restrictions on investments and the use of the Applicable Amount. OnAugust 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 endingSeptember 30, 2021 . The amendment also i) modifies the leverage covenant calculation beginning with the calculation for the trailing twelve-month period endedDecember 31, 2021 , ii) for purposes of testing the consolidated net senior secured leverage ratio for the fiscal quarters ending onDecember 31, 2021 ,March 31, 2022 andJune 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. OnJune 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 fromNovember 28, 2022 toNovember 28, 2024 . We have four 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. AtSeptember 30, 2021 , there was$634.8 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 ofSeptember 30, 2021 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed above.
5.875% Senior Notes
OnMarch 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 ofCinemark 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 onMarch 15 andSeptember 15 of each year, beginningSeptember 15, 2021 . The 5.875% Senior Notes mature onMarch 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 consolidated balance sheet. 41 -------------------------------------------------------------------------------- The 5.875% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain ofCinemark USA, Inc.'s subsidiaries that guarantee, assume or become liable with respect to any ofCinemark 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 ofCinemark USA, Inc.'s and its guarantor's existing and future senior debt and senior in right of payment to all ofCinemark 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 ofCinemark 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 underCinemark 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 ofCinemark USA, Inc.'s subsidiaries that do not guarantee the 5.875% Senior Notes. Prior toMarch 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. AfterMarch 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 toMarch 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 OnJune 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 ofCinemark 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 onJanuary 15 andJuly 15 of each year, beginningJanuary 15, 2022 . The 5.25% Senior Notes mature onJuly 15, 2028 . The 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain ofCinemark USA, Inc.'s subsidiaries that guarantee, assume or become liable with respect to any ofCinemark USA, Inc.'s or a guarantor's debt. The 5.25% Senior Notes and the guarantees will beCinemark USA's and the guarantors' senior unsecured obligations and (i) rank equally in right of payment toCinemark USA's and the guarantors' existing and future senior debt, including borrowings underCinemark USA's Credit Agreement (as defined below) andCinemark USA's existing senior notes, (ii) rank senior in right of payment toCinemark USA's and the guarantors' future subordinated debt, (iii) are effectively subordinated to all ofCinemark USA's and the guarantors' existing and future secured debt, including all obligations under theCredit Agreement andCinemark 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 ofCinemark USA's non-guarantor subsidiaries, and (v) are structurally senior to the 4.50% convertible senior notes due 2025 issued byCinemark Holdings . Prior toJuly 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 afterJuly 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 toJuly 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
OnApril 20, 2020 ,Cinemark USA, Inc. issued$250 million 8.750% senior secured notes (the "8.750% Secured Notes"). The 8.750% Senior Notes will mature onMay 1, 2025 ; provided, however, that if (i) onSeptember 13, 2022 , the aggregate outstanding principal amount of the 5.125% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds$50 million , the 8.750% Senior Notes will mature onSeptember 14, 2022 and (ii) onFebruary 27, 2023 , the aggregate outstanding principal amount of the 4.875% Senior Notes that shall not have been purchased, repurchased, redeemed, defeased or otherwise acquired, retired, cancelled or discharged exceeds$50 million , the 8.750% Senior Notes will mature onFebruary 28, 2023 . Interest on the 8.750% Senior Notes will be payable onMay 1 andNovember 1 of each year, beginning onNovember 1, 2020 . 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
OnAugust 21, 2020 ,Cinemark Holdings, Inc. issued$460 million 4.50% convertible senior notes (the "4.50% Convertible Senior Notes"). The notes will mature onAugust 15, 2025 , unless earlier repurchased or converted. Interest on the notes will be payable onFebruary 15 andAugust 15 of each year, beginning onFebruary 15, 2021 . 42
-------------------------------------------------------------------------------- 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 precedingMay 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. BeginningMay 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 onSeptember 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 conversion rate will initially be 69.6767 shares of our common stock perone 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 will be 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 will be structurally subordinated to all existing and future debt and other liabilities, including trade payables, includingCinemark USA's 5.125% senior notes due 2022, 4.875% senior notes due 2023 and the 8.750% Secured Notes due 2025, or, collectively,Cinemark USA's senior notes (but excluding all obligations under the Credit Agreement which are guaranteed byCinemark 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 theCinemark USA, Inc. Credit Agreement, which such Credit Agreement is guaranteed byCinemark 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 ofCinemark Holdings, Inc.'s subsidiaries.
Additional Borrowings of International Subsidiaries
As of
Interest
USD Balance as of Rates as of
September 30,
Loan Description September 30, 2021 2021 Covenants Maturity
Peru loans$5.0 million 1.0% to 4.8% Negative covenants June 2023 and December 2023 November 2021, Brazil loans$15.1 million 3.6% to 8.1% Negative covenants
January 2029
Colombia loans $3.2 million 3.3% to 5.9% Negative and
maintenance covenants and September 2025
Chile loans $5.0 million 3.5% Negative and November 2023
maintenance covenants
Additionally, we deposited cash into a collateral account to support the
issuance of bank letters of credit to the lenders for the international loans
noted above. The total amount deposited during the nine months ended September
30, 2021 was $7.3 million . Total deposits to support bank letters of credit for
the outstanding loans of our international subsidiaries is $21.1 million and is
considered restricted cash as of September 30, 2021 . These restricted cash
amounts do not impact the Applicable Amount as defined under the Credit
Agreement or the restricted payments as defined in the indentures to the notes
as described above.
5.125% Senior Notes
On March 16, 2021 , Cinemark USA, Inc. completed a tender offer to purchase it's
previously outstanding 5.125% Senior Notes, of which $334 million was tendered
at the expiration of the offer. On March 16, 2021 , Cinemark USA, Inc. also
issued a notice of optional redemption to redeem the remaining $66 million
principal amount of the 5.125% Senior Notes. In connection therewith, on March
16, 2021 , Cinemark USA deposited with Wells Fargo Bank, N.A. , as trustee for the
5.125% Senior Notes (the "Trustee"), funds sufficient to redeem all 5.125% Notes
remaining outstanding on April 15, 2021 (the "Redemption Date"). The redemption
payment (the "Redemption Payment") included approximately $66 million of
outstanding principal at the redemption price equal to 100% of the principal
amount plus accrued and unpaid interest thereon to the Redemption Date. Upon
deposit of the Redemption Payment with the Trustee on March 16, 2021 , the
indenture governing the 5.125% Senior Notes was fully satisfied and discharged.
43
--------------------------------------------------------------------------------4.875% Senior Notes
OnMay 21, 2021 ,Cinemark USA, Inc. issued a conditional notice of optional redemption to redeem the$755 million outstanding principal amount of the 4.875% Senior Notes. In connection therewith,Cinemark USA deposited withWells Fargo Bank, N.A. , as Trustee for the 4.875% Senior Notes (the "Trustee"), funds sufficient to redeem all 4.875% Senior Notes remaining outstanding onJune 21, 2021 (the "Redemption Date"). The redemption payment (the "Redemption Payment") included$755 million of outstanding principal at the redemption price equal to 100.000% of the principal amount plus accrued and unpaid interest thereon to the Redemption Date. Upon deposit of the Redemption Payment with the Trustee onJune 15, 2021 , the indenture governing the 4.875% Senior Notes was fully satisfied and discharged. 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 ofCinemark 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 ofSeptember 30, 2021 ,Cinemark USA, Inc. could have distributed up to approximately$2.9 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 allowCinemark 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 ofSeptember 30, 2021 was below zero.
As of
44--------------------------------------------------------------------------------
© Edgar Online, source
