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SEC Filings

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

 

Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the nine months ended September 30, 2017 and 2016.

 

 

 

U.S. Operating Segment

 

 

International Operating Segment

 

 

Consolidated

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Constant

Currency

2017 (1)

 

 

2017

 

 

2016

 

Film rentals and advertising

 

$

558.3

 

 

$

578.2

 

 

$

167.3

 

 

$

154.9

 

 

$

162.2

 

 

$

725.6

 

 

$

733.1

 

Concession supplies

 

 

82.1

 

 

 

79.9

 

 

 

42.0

 

 

 

37.1

 

 

 

40.8

 

 

 

124.1

 

 

 

117.0

 

Salaries and wages

 

 

194.5

 

 

 

183.1

 

 

 

66.8

 

 

 

60.7

 

 

 

65.9

 

 

 

261.3

 

 

 

243.8

 

Facility lease expense

 

 

181.1

 

 

 

179.7

 

 

 

67.5

 

 

 

62.2

 

 

 

64.9

 

 

 

248.6

 

 

 

241.9

 

Utilities and other

 

 

185.1

 

 

 

188.0

 

 

 

86.7

 

 

 

77.5

 

 

 

84.4

 

 

 

271.8

 

 

 

265.5

 

 

(1)

Constant currency expense amounts, which are non-GAAP measurements were calculated using the average exchange rate for the corresponding month for 2016. 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 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. Film rentals and advertising costs were $558.3 million, or 55.6% of admissions revenues for the 2017 period compared to $578.2 million, or 55.7% of admissions revenues for the 2016 period. The decrease in the film rentals and advertising rate was primarily due to a higher concentration of blockbuster films during the 2016 period. Concession supplies expense was $82.1 million, or 14.1% of concession revenues, for the 2017 period compared to $79.9 million, or 13.9% of concession revenues, for the 2016 period. The increase in the concession supplies rate was primarily due to the impact of our expanded concession offerings.

Salaries and wages increased to $194.5 million for the 2017 period from $183.1 million for the 2016 period primarily due to staffing at new and recently remodeled theatres, increases in minimum wages and staffing for food and beverage initiatives. Facility lease expense increased to $181.1 million for the 2017 period from $179.7 million for the 2016 period due to the impact of new theatres. Utilities and other costs decreased to $185.1 million for the 2017 period from $188.0 million for the 2016 period primarily due to decreases in equipment lease expenses for 3-D presentations, partially offset by increased utilities, repairs and maintenance, and janitorial services expenses.  

International. Film rentals and advertising costs were $167.3 million ($162.2 million in constant currency), or 48.1% of admissions revenues, for the 2017 period compared to $154.9 million, or 47.4% of admissions revenues, for the 2016 period. The increase in the film rentals and advertising rate was primarily due to higher advertising costs during the 2017 period.  Concession supplies expense was $42.0 million ($40.8 million in constant currency), or 21.5% of concession revenues, for the 2017 period compared to $37.1 million, or 20.9% of concession revenues, for the 2016 period. The increase in the concession supplies rate was primarily due to the mix of concession products sold.

Salaries and wages increased to $66.8 million ($65.9 million in constant currency) for the 2017 period compared to $60.7 million for the 2016 period.  The as reported increase was due to new theatres, increased local currency wage rates, limited flexibility in scheduling staff caused by shifting government regulations and the impact of changes in foreign currency exchange rates in certain countries in which we operate.  Facility lease expense increased to $67.5 million ($64.9 million in constant currency) for the 2017 period compared to $62.2 million for the 2016 period.  The as reported increase was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate and new theatres.  Utilities and other costs increased to $86.7 million ($84.4 million in constant currency) for the 2017 period compared to $77.5 million for the 2016 period.  The as reported increase was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate, increases in repairs and maintenance expenses and utility expenses and the impact of new theatres.    

General and Administrative Expenses. General and administrative expenses increased to $113.0 million for the 2017 period from $109.2 million for the 2016 period. The increase was primarily due to increased salaries and wages, professional fees and the impact of changes in foreign currency exchange rates in certain countries in which we operate, partially offset by a decrease in share based award compensation expense.  

Depreciation and Amortization. Depreciation and amortization expense was $174.5 million for the 2017 period compared to $155.9 million for the 2016 period. 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 $9.6 million for the 2017 period compared to $2.3 million for the 2016 period. 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

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