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SEC Filings

10-Q
CINEMARK HOLDINGS, INC. filed this Form 10-Q on 11/03/2017
Entire Document
 

 

U.S. Film rentals and advertising costs were $171.5 million, or 54.9% of admissions revenues, for the third quarter of 2017 compared to $193.6 million, or 54.6% of admissions revenues, for the third quarter of 2016. The increase in the film rentals and advertising rate was primarily due to a higher box office concentration of top performing films during the third quarter of 2017. Concession supplies expense was $26.2 million, or 14.4% of concession revenues, for the third quarter of 2017 compared to $28.2 million, or 14.3% of concession revenues, for the third quarter of 2016.

Salaries and wages increased to $64.6 million for the third quarter of 2017 from $63.2 million for the third quarter of 2016 primarily due to staffing at new and recently remodeled theatres, increases in minimum wages and staffing for food and beverage initiatives. Facility lease expense decreased to $59.8 million for the third quarter of 2017 from $60.5 million for the third quarter of 2016 due to decreased percentage rent due to the decline in revenues. Utilities and other costs decreased to $64.0 million for the third quarter of 2017 from $66.9 million for the third quarter of 2016 primarily due to decreased equipment lease expenses for 3-D presentations.

International. Film rentals and advertising costs were $54.7 million ($56.2 million in constant currency), or 48.5% of admissions revenues, for the third quarter of 2017 compared to $56.2 million, or 47.6% of admissions revenues, for the third quarter of 2016. The increase in the film rental and advertising rate was primarily due to the mix of film product during the third quarter of 2017 compared to the third quarter of 2016 and increased advertising costs during the third quarter of 2017.  Concession supplies expense was $14.0 million ($14.2 million in constant currency), or 21.3% of concession revenues, for the third quarter of 2017 compared to $13.7 million, or 21.4% of concession revenues, for the third quarter of 2016.

Salaries and wages increased to $22.7 million ($23.5 million in constant currency) for the third quarter of 2017 compared to $21.2 for the third quarter of 2016.  The as reported increase was due to new theatres and growth in wages as a result of inflation.  Facility lease expense decreased to $22.2 million (increased to $22.4 million in constant currency) for the third quarter of 2017 compared to $22.3 million for the third quarter of 2016.  The as reported decrease was due to decreased percentage rent due to the decline in revenues.  Utilities and other costs increased to $28.4 million ($29.0 million in constant currency) for the third quarter of 2017 compared to $28.1 million for the third quarter of 2016.  The as reported increase was due to increases in utility expenses and the impact of new theatres.    

General and Administrative Expenses. General and administrative expenses increased to $36.9 million for the third quarter of 2017 from $35.3 million for the third quarter of 2016. The increase was primarily due to increased salaries, professional fees and share based award compensation expense.

Depreciation and Amortization. Depreciation and amortization expense increased to $58.1 million during the third quarter of 2017 compared to $54.2 million during the third quarter of 2016. The increase was primarily due to theatre remodels and new theatres.

Impairment of Long-Lived Assets.  We recorded asset impairment charges on assets held and used of $5.0 million during the third quarter of 2017 compared to $0.4 million during the third quarter of 2016. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. Impairment charges for the third quarter of 2017 impacted nine of our twenty-six reporting units. See Note 10 to our condensed consolidated financial statements.

Loss on Sale of Assets and Other. We recorded a loss on sale of assets and other of $8.6 million during the third quarter of 2017 compared to $7.0 million during the third quarter of 2016. Activity for the third quarter of 2017 and the third quarter of 2016 was primarily due to the retirement of assets related to theatre remodels.  

Interest Expense.  Interest costs incurred, including amortization of debt issue costs, were $26.3 million during the third quarter of 2017 compared to $26.7 million during the third quarter of 2016.  The decrease was due to amendments to our senior secured credit facility completed during June and December of 2016 and June of 2017 which, in the aggregate, reduced the rate at which our term loan accrues interest by 100 basis points.  

Distributions from NCM.  We recorded a distribution from NCM of $2.1 million during the third quarter of 2017 compared to $1.4 million recorded during the third quarter of 2016, which were in excess of the carrying value of our Tranche 1 investment. See Note 6 to our condensed consolidated financial statements.  

Equity in Income of Affiliates. We recorded equity in income of affiliates of $10.9 million during the third quarter of 2017 compared to $12.4 million during the third quarter of 2016. See Notes 6 and 7 to our condensed consolidated financial statements for information about our equity investments.

Income Taxes. Income tax expense of $24.6 million was recorded for the third quarter of 2017 compared to $40.9 million recorded for the third quarter of 2016. The effective tax rate was approximately 39.0% for the third quarter of 2017 compared to

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